Mark Dampier: High-flying financier is one to watch for future

The Analyst

I am always on the lookout for younger fund managers who might become the Nigel Thomas or Neil Woodford of tomorrow. Alex Savvides, manager of the JO Hambro UK Dynamic Fund, could be a contender. Few people will have of heard of him, yet he has been running this fund for four years with considerable success, returning around 27 per cent against about 7 per cent for the sector.

At around £12m the fund is small, though this can be advantageous as Mr Savvides should have no problems moving in and out of positions quickly. That said, if the fund was larger the process would largely be unaltered. He focuses on investing in companies that have experienced declining fortunes – perhaps where growth has disappointed or dividends haven't met expectations, but where there is scope for a turnaround. It is what might be classified as a "special situations" approach.

The twist is that to be considered for the portfolio a share must pay a dividend. There is no minimum level, and there is no yield target for the fund; it's just Mr Savvides prefers companies with the discipline of paying a dividend because it has to come out of cash flow. Dividends can't be faked, and if payouts fall it's a sign things are going wrong.

Mr Savvides identifies three types of opportunity. First, the company has underperformed due to over-investment or mismanagement that can be turned around. Second, firms seeing a change in fortune due to developments in their particular industry investors have not fully understood – classic recovery stocks. Finally, those with easily identifiable balance-sheet problems and need extra capital. In these instances, much of the bad news is often already priced in, and you have a good chance of making a lot of money over the long term if the company survives.

Probably the best way to illustrate the fund is through some of the holdings. Of the 700 or so companies Mr Savvides screens, around 150 make it through to face serious scrutiny.

Around a third of these are chosen, producing a concentrated portfolio. He looks for good-quality firms, with a long track record capable of self-help.

3i, the private equity company, is one example. Shares trade at a 35 per cent discount to the net asset value of its portfolio, though Mr Savvides believes this is more like 55 per cent once the listed companies are stripped out. This offers a large margin of safety when buying the shares. 3i's problems stem from having high level of gearing during troubled periods. However, this has been reduced under a change of management. It is a high conviction stock for him and one of his biggest positions at 3.5 per cent.

Another stock where he anticipates recovery is QinetiQ. Here, expensive debt to fund acquisitions to diversify the business has been a headwind to performance. New management has slashed debt, but so far Mr Savvides believes the market has taken time to notice, and today's share price undervalues the company significantly.

Although Mr Savvides may be relatively new to fund management, he has 15 years' experience under his belt, of which eight is with JO Hambro.

I believe he is an exciting prospect. However, the one aspect of the fund I don't like is the performance fee calculated as 15 per cent of any outperformance of the FTSE All Share index. Not an unreasonable benchmark – I just dislike performance fees. The fund does have a relatively low annual management charge to help compensate though, and I think it is one to look out for.

Given recent falls in the stock market it should benefit from an eventual turnaround in sentiment.

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

Suggested Topics
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

    Recruitment Genius: Operations Manager

    £30000 - £38000 per annum: Recruitment Genius: They are a financial services c...

    Guru Careers: Stockbroker

    £Basic (OTE) + Uncapped Commission: Guru Careers: A Stockbroker (qualified / p...

    Recruitment Genius: Financial Adviser

    £20000 - £60000 per annum: Recruitment Genius: Are you recently QCA Level 4 qu...

    SThree: Graduate Recruitment Resourcer

    £20000 - £22500 per annum + OTE £30K: SThree: SThree Group have been well esta...

    Day In a Page

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence