Mark Dampier: Investors lose faith but M&G is playing the field

The Analyst

Ironically, the M&G Recovery Fund seems to be hoping for recovery itself. In the past few weeks I have been struck by the number of people asking me if it is a "sell". My answer is a resounding "no".

It must be galling for Tom Dobell, the fund's manager, to hear stories like this. He assumed responsibility for the fund on 31 March 2000 and guided it through the fallout first from the dot-com bubble and the global financial crisis. Two years of weaker performance since then have led many investors to question his calibre or suggest the fund has grown too big.

Of course he fights his corner on both counts, and so he should. An active manager paying little attention to the composition of the benchmark index will experience periods of underperformance from time to time. Unfortunately, patience is often in short supply nowadays and this could prove to be a costly mistake for many investors.

I caught up with Mr Dobell last week for the first time in around a year. He reiterated that while he was not trying to pick out the next takeover candidate, M&A activity had historically been beneficial for the fund. Over the past few years, though, there has been little activity in this area, which has not helped performance. This probably has much to do with the financial crisis, as companies had a fit of jitters and weren't keen to grow. Indeed, the focus was at the other end of the scale – on cutting costs, rather than spending money on acquisitions and expansion.

Personally, I believe this might be changing. If M&A activity does pick up, it could provide a shot in the arm for the fund given the number of companies in Mr Dobell's portfolio that he believes are undervalued. He says there are many candidates that would ordinarily have been taken over by now, but have been hampered by the economic environment. I would stress again on his behalf, though, that Mr Dobell does not pick stocks on the basis that they might be subject to M&A activity. Rather, he invests in vulnerable companies that for a number of reasons, he believes, have been mispriced. He suggests financial ratios are generally looking low at companies of this type and they are as cheap as they have been in the past five years.

The fund's present position sees it with 50 per cent invested in companies listed on the FTSE 100. This is an investment decision based on where Mr Dobell sees the best value, not one made on the basis of liquidity. A further 20 per cent of the fund is held in other UK-listed companies, of which around half are quoted on AIM.

At the sector level, around 19 per cent of the fund is invested in 12 oil and gas companies, among them some larger firms. This includes an overweight position in Tullow Oil, which itself has had a difficult period. Indus Gas is a an AIM-listed company of which the fund owns 7.5 per cent. Indus has significant quantities of gas reserves that it hopes to turn into liquefied natural gas (LNG) for export. A new holding is Lamprell, an engineer in the energy sector where a new management team has come in after four profit warnings.

Elsewhere, Mr Dobell remains cautious on financial companies, holding 19 per cent in the sector. He admits being six months too slow in realising the recovery potential of Lloyds Banking Group, where he initiated a position at around 50p after it had already risen from its lows. Holdings in Prudential and the Lloyd's of London insurance market have been OK. A purchase of Aviva has also been made as a new chief executive came in.

Overall, I remain a fan of the fund. Under Mr Dobell, it has risen 152 per cent compared with 73 per cent for the FTSE All Share index and 69 per cent for the average fund in the IMA UK All Companies sector.

Such strong performance probably carries little weight with momentum investors who jump out at the first sign of underperformance. Mr Dobell quite rightly won't change his process, though. He is one of the most dedicated fund managers I know and I will look to top up my holding over the next few weeks on any further weakness.

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

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
Arts and Entertainment
Joel Edgerton, John Turturro and Christian Bale in Exodus: Gods and Kings
film Ridley Scott reveals truth behind casting decisions of Exodus
News
people
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
Jake Quickenden and Edwina Currie are joining the I'm A Celebrity...Get Me Out Of Here! camp
tv
News
Albert Camus (left) and Jean-Paul Sartre fell out in 1952 and did not speak again before Camus’s death
people
Arts and Entertainment
Roisin, James and Sanjay in the boardroom
tvReview: This week's failing project manager had to go
News
Ed Miliband visiting the Holocaust museum in Jerusalem. The Labour leader has spoken more openly of his heritage recently
newsAttacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But are the barbs more sinister?
Arts and Entertainment
'Felfie' (2014) by Alison Jackson
photographyNew exhibition shows how female creatives are changing the way women are portrayed in advertising
Life and Style
fashion
News
i100
Life and Style
Fright night: the board game dates back to at least 1890
life
Environment
The vaquita is being killed by fishermen trying to catch the totoaba fish, which is prized in China
environmentJust 97 of the 'world's cutest' sea mammals remain
Finacial products from our partners
Property search
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

    Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

    £16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

    h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

    £35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

    Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

    £Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

    Citifocus Ltd: Operational Risk Analyst

    £Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

    Day In a Page

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
    Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

    Sol Campbell cries foul at Labour's mansion tax

    The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
    Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

    Sarkozy returns

    The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
    Is the criticism of Ed Miliband a coded form of anti-Semitism?

    Is the criticism of Miliband anti-Semitic?

    Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
    Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

    Ouija boards are the must-have festive gift

    Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
    There's a Good Girl exhibition: How female creatives are changing the way women are portrayed in advertising

    In pictures: There's a Good Girl exhibition

    The new exhibition reveals how female creatives are changing the way women are portrayed in advertising
    UK firm Biscuiteers is giving cookies a makeover - from advent calendars to doll's houses

    UK firm Biscuiteers is giving cookies a makeover

    It worked with cupcakes, doughnuts and macarons so no wonder someone decided to revamp the humble biscuit
    Can SkySaga capture the Minecraft magic?

    Can SkySaga capture the Minecraft magic?

    It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
    The King's School is way ahead of the pack when it comes to using the latest classroom technology

    Staying connected: The King's School

    The school in Cambridgeshire is ahead of the pack when it comes to using the latest classroom technology. Richard Garner discovers how teachers and pupils stay connected
    Christmas 2014: 23 best women's perfumes

    Festively fragrant: the best women's perfumes

    Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
    Arsenal vs Borussia Dortmund: Alex Oxlade-Chamberlain celebrates century with trademark display of speed and intuition

    Arsenal vs Borussia Dortmund

    The Ox celebrates century with trademark display of speed and intuition
    Billy Joe Saunders vs Chris Eubank Jnr: When two worlds collide

    When two worlds collide

    Traveller Billy Joe Saunders did not have a pampered public-school upbringing - unlike Saturday’s opponent Chris Eubank Jnr
    Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

    Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

    Our partner charities help veterans on the brink – and get them back on their feet
    Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

    Putin’s far-right ambition

    Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
    Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

    Escape to Moominland

    What was the inspiration for Finland's most famous family?