Mark Dampier: Dig deep now for a slick high-flyer

The Analyst

It was in July 2007 that I first mentioned the Junior Oils Trust in this column. It is managed by Angelos Damaskos, who is the son-in-law of the legendary investor Jim Slater. The objective of the fund was to buy into small oil companies that have the potential to grow into giants.

In fact, some of these have done so. Tullow Oil, which is one of the biggest holdings in the fund is, in fact, a FTSE 100 company now. Many of the fund's smaller companies have been targets of takeovers, earning the fund a nice profit on its initial investment.

While this is a higher risk strategy, the manager will only buy shares in companies that are cash generative and have proven oil reserves. It is a concentrated portfolio where the top 20-odd stocks will account for nearly 50 per cent of the fund, so the performance of the individual stocks will have a significant impact on the performance of the fund.

Upon re-reading my article from 2007 I was interested to see that, in January of that year, a barrel of oil cost $49, but when I wrote the article it had hit a new record of $79. Funnily enough a year later it had rocketed up to a peak of $147. Since then it has fallen back to around $70 again, but now the reasons for investing in oil companies have, if anything, been reinforced.

Damaskos thinks that the market has become overextended in the recent rally and there may well be a setback in the short term. (That is probably true of most of the world's stock markets, particularly the emerging markets.) Crucially, however, the credit crunch has brought many oil exploration projects to a complete stop. This means that when demand for oil returns we will once again see a mismatch between supply and demand, which is the ideal environment for the price to surge upwards. For that reason, the fund remains attractive for high-risk investors, and I would look upon any fall in the next few months as a long-term buying opportunity.

Damaskos is also launching a new fund in September: Junior Mining. To some degree this is similar to the oil fund, except it is looking to buy into the smaller mining companies where the manager feels he can identify the winners of tomorrow. The fund will focus on gold mining shares, with 70% of the portfolio allocated to this sector.

There remains a huge disconnect between the price of physical gold and the price being paid for mining shares. In other words, gold mining shares are cheap relative to the gold price. Given the current huge economic uncertainty, I would not bet against a considerably stronger gold price, especially as many of the world's currencies don't look very attractive.

Some 10 per cent of the fund will include other precious metals such as silver and platinum, while a further 10 per cent will go into base metals like copper and iron ore. The final 10 per cent is allocated to uranium shares, an area which surely is going to enjoy a greater resurgence over the next few years as there is an increasing need (whether we like it or not) to build more nuclear power stations.

The fund will be geographically diverse, spreading across Africa, the Far East, Australia and Latin America but will tend to avoid areas such as Russia and the Middle East on the basis of political risk and corporate governance.

The fund is clearly a higher risk and volatile investment. It is not for widows and orphans. Since it is so specialised, I suspect you will find it either at the top of the table in terms of performance or at the bottom. I would certainly maintain that a small amount could make an interesting addition to the riskier elements of a diversified portfolio.

Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit

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

Suggested Topics
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Digital Optimisation Executive - Marketing

    £30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

    Recruitment Genius: Financial Reporting Manager

    £70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

    Recruitment Genius: Payments Operations Assistant

    £23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

    Recruitment Genius: Telephone Debt Negotiator

    £13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

    Day In a Page

    On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

    On your feet!

    Spending half the day standing 'reduces risk of heart attacks and cancer'
    Liverpool close in on Milner signing

    Liverpool close in on Milner signing

    Reds baulk at Christian Benteke £32.5m release clause
    With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

    The big NHS question

    Why are there so few new GPs when so many want to study medicine?
    Big knickers are back: Thongs ain't what they used to be

    Thongs ain't what they used to be

    Big knickers are back
    Thurston Moore interview

    Thurston Moore interview

    On living in London, Sonic Youth and musical memoirs
    In full bloom

    In full bloom

    Floral print womenswear
    From leading man to Elephant Man, Bradley Cooper is terrific

    From leading man to Elephant Man

    Bradley Cooper is terrific
    In this the person to restore our trust in the banks?

    In this the person to restore our trust in the banks?

    Dame Colette Bowe - interview
    When do the creative juices dry up?

    When do the creative juices dry up?

    David Lodge thinks he knows
    The 'Cher moment' happening across fashion just now

    Fashion's Cher moment

    Ageing beauty will always be more classy than all that booty
    Thousands of teenage girls enduring debilitating illnesses after routine school cancer vaccination

    Health fears over school cancer jab

    Shock new Freedom of Information figures show how thousands of girls have suffered serious symptoms after routine HPV injection
    Fifa President Sepp Blatter warns his opponents: 'I forgive everyone, but I don't forget'

    'I forgive everyone, but I don't forget'

    Fifa president Sepp Blatter issues defiant warning to opponents
    Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report

    Weather warning

    Extreme summer temperatures will soon cause deaths of up to 1,700 more Britons a year, says government report
    LSD: Speaking to volunteer users of the drug as trials get underway to see if it cures depression and addiction

    High hopes for LSD

    Meet the volunteer users helping to see if it cures depression and addiction
    German soldier who died fighting for UK in Battle of Waterloo should be removed from museum display and given dignified funeral, say historians

    Saving Private Brandt

    A Belgian museum's display of the skeleton of a soldier killed at Waterloo prompts calls for him to be given a dignified funeral