Mark Dampier: Long-term investing never goes out of fashion

The Analyst

Never judge a book by its cover – a phrase heard so often it is easy to ignore, but do so at your peril. It can be applied to almost any aspect of life, including investments. Take the Standard Life UK Smaller Companies Fund. Far from being a generic smaller company fund, it is really the story of an individual: Harry Nimmo, the fund's manager.

It is difficult to pinpoint exactly what makes a good fund manager great, but in Mr Nimmo's case I can certainly put forward some reasons. In fact, we had first-hand experience of his forensic approach prior to the flotation of Hargreaves Lansdown. He was one of the managers we met and we found he is not afraid of asking management challenging questions.

In my view, he is the Neil Woodford of the smaller company world. They run very different funds but approach management with a similar philosophy. Both tend to avoid companies that are highly sensitive to economic conditions, preferring firms with resilient business models and predictable earnings. This might sound rather dull, but it is a sound, long-term investment strategy.

Indeed, Mr Nimmo is a true long-term investor. Unlike some managers, he doesn't set price targets above which he will sell a stock. If a company is doing well he is happy to hold on, riding its success as it grows, only trimming the position if it exceeds 5 per cent of the portfolio to avoid taking excessive risk in a single stock. Holdings can therefore range from small Aim-listed companies right up to medium-sized companies in the FTSE 250.

This necessitates a disciplined approach and another of Mr Nimmo's virtues is sticking to his guns. Rather than chase short-term profits in a strong bull market, led by highly indebted companies (such as the one seen in 2009), he remains steadfast. Only investing in good quality companies means the portfolio is well placed to outperform over the long term, a strategy that has seen the fund excel against its peers.

In terms of his current views, Mr Nimmo does not see the UK economy slipping into a double-dip recession. Rather, he believes we are entering the next phase of recovery, characterised by an extended period of slow economic growth. Far from being concerned or daunted by this prospect, he believes the companies he holds in the portfolio will thrive. Many of his holdings still have the founders at the helm, often with significant stakes in the businesses. Not only are they passionate but they are highly incentivised to do well. A good example is Abcam, a biotechnology firm whose founder still has a 17 per cent stake in the company. Another one is the company I work for, Hargreaves Lansdown, the fund's third-largest holding.

Mr Nimmo also targets companies that are world leaders in their fields and who he believes are best placed to evolve into the successful companies of tomorrow, even in times of weak growth. Engineering and software firms able to provide high-tech solutions are an example; so too companies embracing the internet to cut costs and reach a wider audience. For instance, ASOS, the UK's largest online-only fashion retailer, is currently the biggest holding within the portfolio.

It is a popular misconception that smaller companies are UK-centric and only reliant on their home market to drive growth. Mr Nimmo is keen to dispel this myth, estimating that 50 per cent of his portfolio earnings derive from overseas markets. So do not fall into the trap of pigeon-holing this fund or thinking that because Britain's economy is likely to struggle it cannot perform.

The fund is far more than just a call to buy smaller companies. It is diversified across businesses of varying sizes, operating in many different geographical areas and sectors. With Mr Nimmo as manager this is very much a core holding and investors should buy it for exposure to him rather than to the sector.

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

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

Teeth should be brushed twice a day to prevent tooth decay
Bryan Cranston as Walter White, in the acclaimed series 'Breaking Bad'
footballChelsea 6 Maribor 0: Blues warm up for Premier League showdown with stroll in Champions League - but Mourinho is short of strikers
Those who were encouraged to walk in a happy manner remembered less negative words
Arts and Entertainment
Princess Olga in 'You Can't Get the Staff'
tvReview: The anachronistic aristocrats, it seemed, were just happy to have some attention
Renee Zellweger as Bridget Jones
Life and Style

Board creates magnetic field to achieve lift

There have been various incidents of social media users inadvertently flouting the law

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
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

    Helpdesk Analyst

    £23000 per annum + pension and 22 days holiday: Ashdown Group: An established ...

    Senior Helpdesk Analyst / Service Desk Co-ordinator

    £27000 per annum + pension, 22 days holiday: Ashdown Group: An established ind...

    Senior Pensions Administrator

    £23000 - £26000 Per Annum: Clearwater People Solutions Ltd: Our client is curr...

    Corporate Actions Administrator / Operations Administrator

    £25 - 30k: Guru Careers: A Corporate Actions Administrator / Operations Admini...

    Day In a Page

    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
    Ed Sheeran hits back after being labelled too boring to headline festivals

    'You need me, I don’t need you'

    Ed Sheeran hits back after being labelled too boring to headline festivals
    How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

    How to Get Away with Murder

    Shonda Rhimes reinvents the legal drama
    A cup of tea is every worker's right

    Hard to swallow

    Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
    Which animals are nearly extinct?

    Which animals are nearly extinct?

    Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
    12 best children's shoes

    Perfect for leaf-kicking: 12 best children's shoes

    Find footwear perfect to keep kids' feet protected this autumn
    Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

    Arsenal’s ray of light ready to shine again

    Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
    Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

    Moyes’ show of sensitivity thrown back in his face... by Ferguson

    Manchester United legend tramples on successor who resisted criticising his inheritance
    Two super-sized ships have cruised into British waters, but how big can these behemoths get?

    Super-sized ships: How big can they get?

    Two of the largest vessels in the world cruised into UK waters last week
    British doctors on brink of 'cure' for paralysis with spinal cord treatment

    British doctors on brink of cure for paralysis

    Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
    Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

    Lonely Planet’s Best in Travel 2015

    UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London