Mark Dampier: Good value options for growth prospects
Saturday 18 June 2011
It is not difficult to be bearish on the economy. There seem to be more problems than I can remember at any time during my career in financial services. Fundamentally the problem is the financial crisis of 2008 isn't really over. Although companies have generally sorted themselves out, the same cannot be said of governments or consumers, which remain indebted. It seems politicians are only interested in kicking the can further down the road in order to suit the electoral cycle, but the can is getting heavier each time.
Debt becomes a problem when combined with anaemic growth, and this is exactly what we have in the UK. The bear case is that this continues, perhaps with short periods of economic contraction; a poor backdrop for businesses. Yet despite these issues companies have had to get on with it, and although the West is hardly firing on all cylinders, the picture could not be more different in emerging markets. Here a huge trend of urbanisation is taking place – and many British firms continue to reap the rewards.
Despite negative headlines, the dynamics haven't changed. Many companies exposed to emerging markets, technology and other long-term growth stories have the ability to ride through this rough economic time. One fund manager taking advantage is Nigel Thomas who runs AXA Framlington's UK Opportunities Fund, and is one of the longest-serving fund managers in the UK. He has an enviable track record, and when I met him the other day he had lost none of his enthusiasm for investing.
When constructing his portfolio Nigel Thomas always looks to the future. The fund contains a large number of companies outside the FTSE 100 as he believes the most exciting long-term opportunities will come from the next tier down. Interestingly, he is light on mining firms, partly because he feels there is a lack of corporate governance with many firms. The strength of mining stocks has not prevented the fund performing well, though, as he has benefited from other areas such as technology, energy and consumer stocks.
He particularly likes Pearson, the media and publishing firm set to capitalise on the digitisation of books and consumption via devices such as Amazon's Kindle. Other large holdings in the fund include Premier Oil, which is benefiting from rising demand for liquefied natural gas (LNG). This is partly a result of extra demand from Japan where imports of LNG are growing very rapidly as a result of the damage inflicted by the tsunami in March.
Mr Thomas is constantly looking at what he calls "reasonable growth prospects" and what price he has to pay for them – and despite the economic problems he thinks there is still plenty of good value around. Imagination Technologies, whose component designs are found in smart phones and other mobile devices, is a company he first saw in 1999, and one whose growth has seen it become a large holding in the fund. Mr Thomas believes there is more to come, and expects it to be re-rated further. His rationale is that we will see a similar situation to the 1950s: a low-growth, low-inflation environment where companies displaying growth characteristics will be highly prized and should trade on high multiples.
He doesn't necessarily always look to internationally-facing firms, though. Another of his favourites is Next, which is on an undemanding price-to-earnings ratio of nine. Growth is coming from online orders and the Next Directory rather than from the high street. He also believes M&S, a firm on a similar valuation, can do much to improve its offering and provide growth for shareholders.
In conclusion, a good, old-fashioned stock picker like Nigel Thomas has exactly what it takes to outperform in difficult conditions. While there still are plenty of problems in the UK economy and globally, his experience, enthusiasm and understanding of the macro-economic trends and issues affecting individual stocks should help investors profit. Although he is an old hand, it would appear he is not ready to retire any time soon.
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 www.h-l.co.uk/independent
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Shock poll shows voters believe Ukip is to the left of the Tories
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Ukip candidate jokes about 'shooting peasants' in racist and homophobic rant
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
iJobs Money & Business
$200 - $350 per annum: Carlton Senior Appointments: Managing Producer Office...
$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...
Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens