Mark Dampier: Biotechnology could boost income fund

 

When Bill Mott launched the PSigma Income fund in 2007 I suggested it was a good choice for income and growth investors. Unfortunately performance has not lived up to expectations. It hasn't helped that the fund was launched at the peak of the stock market in 2007. Some initial holdings in the banks also didn't help, although to be fair to Mr Mott he soon changed this.

He has been wary and far from convinced we have fully recovered from the excesses of the early and mid-2000s, and preferred to invest in larger, more defensive companies which tend to be less reliant on strong economic growth for success. With hindsight it is plain to see small and medium-sized high yield companies were the best areas in which to invest.

Many investors question my continued faith in Mr Mott, but I believe PSigma's merger with Miton Investment Managers last year will be positive for the fund; I'm not ready to write it off yet. Gervais Williams, a highly successful small and medium-sized company fund manager, will support Mr Mott on a day-to-day basis. While not directly involved with this fund, the emerging talent of George Godber also adds strength to the wider team. This new structure should bring forward better stock ideas to complement Mr Mott's underlying, and usually correct, economic views.

The influence of Mr Williams is already being felt. He added Quindell; a consulting, software and outsourcing specialist, to the portfolio and initial results are encouraging. It is one of Mr Williams's top stocks from his other funds and while it is currently quoted on AIM it is expected to step up to the FTSE 250 index in due course.

The fund is not going to become small and mid-cap oriented. It is expected to have 10 to 15 per cent exposure to this area. Elsewhere, Mr Mott continues to focus on the pharmaceutical and biotechnology theme, where around 20 per cent of the fund is invested. He remains convinced these sectors will "embark on a multi-year opportunity". Key holdings are GlaxoSmithKline and AstraZeneca in the UK; and Novartis, Roche and Bristol-Myers Squibb overseas.

Overall, the team asks itself five simple questions: what are the prospects for a rise in turnover? Can corporate margins be sustained? Is the management team good enough? How much financial headroom is there in the balance sheet? Are there low expectations in the share price?

This system helps give the team an objective view on each company. Examples include SSE, which has a balance sheet that looks worse than first appears; and food retailers such as Tesco and Sainsbury's which are losing market share. These positions have now been sold.

New additions to the fund have included Royal Mail and Stobart Group.

I think its bias to larger companies might begin to pay off over the next few years, as this area is beginning to look good value relative to smaller and medium-sized companies which have had such a good run recently.

Mark Dampier is head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more details about the funds included in this column, visit hl.co.uk/independent

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Recruitment Genius: Administrator - IFA Based

    £22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

    Day In a Page

    Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

    Michael Calvin's Last Word

    Praise to Wenger for having the courage of his convictions
    Major medical journal Lancet under attack for 'extremist hate propaganda' over its coverage of the Israeli-Palestinian conflict

    Lancet accused of 'anti-Israel hate propaganda' over coverage of Gaza conflict

    Threat to free speech as publishers of renowned medical journal are accused of inciting hatred and violence
    General Election 2015: Tories and Lib Dems throw their star names west to grab votes

    All noisy on the Lib Dems' western front

    The party has deployed its big guns in Cornwall to save its seats there. Simon Usborne heads to the heart of the battle
    How Etsy became a crafty little earner: The online market has been floated for £1.2bn, but can craft and capitalism coexist?

    How Etsy became a crafty little earner

    The online market has been floated for £1.2bn, but can craft and capitalism coexist?
    Guy Ritchie is the latest filmmaker to tackle King Arthur - one of our most versatile heroes

    King Arthur is inspiring Guy Ritchie

    Raluca Radulescu explains why his many permutations - from folk hero to chick-lit hunk - never cease to fascinate
    Apple Watch: Will it live up to expectations for the man or woman on the street?

    Apple Watch: Will it live up to expectations?

    The Apple Watch has apparently sold millions even before its launch tomorrow
    Don't fear the artichoke: it's a good cook's staple, with more choice than you'd think

    Don't fear the artichoke

    Artichokes are scary - they've got spikes and hairy bits, and British cooks tend to give them a wide berth. But they're an essential and delicious part of Italian cuisine
    11 best men's socks

    11 best men's socks

    Make a statement with your accessories, starting from the bottom up
    Paul Scholes column: Eden Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo

    Paul Scholes column

    Hazard would be my Player of the Year – but I wonder if he has that appetite for goals of Messi or Ronaldo
    Frank Warren: Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal

    Frank Warren's Ringside

    Tyson Fury will be closely watching Wladimir Klitschko... when he wins it'll be time to do a deal
    London Marathon 2015: Kenya's brothers in arms Wilson Kipsang and Dennis Kimetto ready to take on world

    Kenya's brothers in arms take on world

    Last year Wilson Kipsang had his marathon record taken off him by training partner and friend Dennis Kimetto. They talk about facing off in the London Marathon
    Natalie Bennett interview: I've lost track of the last time I saw my Dad but it's not because I refuse to fly

    Natalie Bennett interview: I've lost track of the last time I saw my Dad

    Green leader prefers to stay clear of her 'painful' family memories but is more open about 'utterly unreasonable' personal attacks
    Syria conflict: Khorasan return with a fresh influx of fighters awaiting the order to start 'shooting the birds'

    Khorasan is back in Syria

    America said these al-Qaeda militants were bombed out of the country last year - but Kim Sengupta hears a different story
    General Election 2015: Is William Cash the man to woo Warwickshire North for Ukip?

    On the campaign trail with Ukip

    Is William Cash the man to woo Warwickshire North?
    Four rival Robin Hood movies get Hollywood go-head - and Friar Tuck will become a superhero

    Expect a rush on men's tights

    Studios line up four Robin Hoods productions