Mark Dampier: Mining the winners despite the volatility

The Analyst

The economic backdrop has been dismal for five years, contributing to significant stock market volatility, and yet most major market indices have made good progress. The FTSE 100 has grown by 39 per cent with dividends reinvested, for example. I often refer to this as the impossible rally because so few investors and commentators believed it could happen.

Some fund managers have significantly outperformed the headline stock market index over this period, and interestingly, those who embraced the volatility have been among the best. Warren Buffett once famously exclaimed "I love volatility", as it allows him to take advantage of opportunities thrown up by "Mr Market".

Of all the fund managers I have met, Ed Legget, manager of Standard Life Investments' UK Equity Unconstrained fund, has navigated the economic and stock market environment of the past five years better than most. He has remained upbeat the whole time, using volatility to his advantage. He has exploited stock market falls to invest in quality companies at bargain prices, rotating out of them after a good spell and reinvesting profits in other areas that have performed poorly. As a result, the fund is one of the best-performing in the IMA UK All Companies sector, having risen 139 per cent over the past five years.

Remarkably, Mr Legget has achieved this with a wholly different approach to some other popular UK fund managers. Neil Woodford of Invesco Perpetual, for example, has positioned his funds in more defensive sectors and adopted a "buy and hold" approach. Mr Legget has tended to shun defensive sectors to invest in companies more reliant on stronger economic growth.

There have been times when the fund has struggled, particularly when economic concerns reared their head and markets fell. On balance, however, sticking to his guns has worked well for Mr Legget. He has felt the problems of the UK and global economy to be well discounted in share prices and has moved the portfolio around depending on where he sees the best value.

The banking sector remains a favoured area for Mr Legget. Much of the investing community remains sceptical, but valuations are low and he believes the change in leadership at the Bank of England will lead to a more pragmatic approach to financial regulation. Alongside positions in Barclays and Lloyds, Standard Chartered and HSBC have recently been introduced to the portfolio. These two banks are supported by solid balance sheets, sensible management teams and an increasing focus on returning cash to shareholders, he suggests.

His pragmatic approach is now leading him to take another look at the mining sector. Share prices have tumbled, partly in reaction to slowing economic growth in China, but he takes the view that growth will not implode and that the share price falls have been overdone. He cites BHP Billiton and Rio Tinto as interesting companies, noting that the latter offers a 4.5 per cent yield. He views this as safe even under the most pessimistic assumptions for commodity prices.

Some profits have recently been taken from domestically oriented sectors after a strong run of performance, but housebuilders, distributors and retailers remain well represented within the portfolio. He continues to focus on companies that he believes are trading on compelling valuations, such as Wincanton, Enterprise Inns and Pendragon. He also sees great value in companies generating revenue from emerging markets, particularly after recent stock market falls.

Mr Legget's approach could be described as investing in companies and sectors that have become unpopular and selling them once they become fashionable and you read about them in the financial pages. He sticks rigidly to his process, but his willingness to embrace market volatility and move the portfolio around to take advantage of opportunities has contributed to the blazing performance.

This contrarian approach could complement the policies of other fund managers who tend to buy and hold for the long term, or position their portfolios more defensively. I am surprised Mr Legget has not received more attention, but I am confident for the future and believe this fund could be a good addition to a diversified portfolio.

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

Arts and Entertainment
tvThe C-Word, TV review
Arts and Entertainment
The Ridiculous Six has been produced by Adam Sandler, who also stars in it
filmNew controversy after nine Native American actors walked off set
Danny Jones was in the Wales squad for the 2013 World Cup
rugby leagueKeighley Cougars half-back was taken off after just four minutes
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

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Claims Administrator

    £16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

    Recruitment Genius: Senior SEO Executive

    £24000 - £28000 per annum: Recruitment Genius: A Senior SEO Executive is requi...

    Recruitment Genius: Online Customer Service Administrator

    £16000 - £18000 per annum: Recruitment Genius: An Online customer Service Admi...

    Recruitment Genius: Digital Marketing Executive

    £18000 - £22000 per annum: Recruitment Genius: This global, industry leading, ...

    Day In a Page

    'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

    Bread from heaven

    Dutch survivors thank RAF for World War II drop that saved millions
    Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

    How 'the Axe' helped Labour

    UK will be 'run for the wealthy and powerful' if Tories retain power
    Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

    The price to be paid for challenging the rule of extremists

    A revolution now 'consuming its own children'
    Welcome to the world of Megagames

    Welcome to the world of Megagames

    300 players take part in Watch the Skies! board game in London
    'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

    Charlotte Gainsbourg on 'Nymphomaniac'

    Starring in one of the most explicit films ever
    Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

    Robert Fisk in Abu Dhabi

    The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
    Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

    Vince Cable exclusive interview

    Charging fees for employment tribunals was 'a very bad move'
    Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

    Iwan Rheon is returning to his Welsh roots

    Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
    Russell Brand's interview with Ed Miliband has got everyone talking about The Trews

    Everyone is talking about The Trews

    Russell Brand's 'true news' videos attract millions of viewers. But today's 'Milibrand' interview introduced his resolutely amateurish style to a whole new crowd
    Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

    It's time for my close-up

    Meet the man who films great whites for a living
    Increasing numbers of homeless people in America keep their mobile phones on the streets

    Homeless people keep mobile phones

    A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before
    'Queer saint' Peter Watson left his mark on British culture by bankrolling artworld giants

    'Queer saint' who bankrolled artworld giants

    British culture owes a huge debt to Peter Watson, says Michael Prodger
    Pushkin Prizes: Unusual exchange programme aims to bring countries together through culture

    Pushkin Prizes brings countries together

    Ten Scottish schoolchildren and their Russian peers attended a creative writing workshop in the Highlands this week
    14 best kids' hoodies

    14 best kids' hoodies

    Don't get caught out by that wind on the beach. Zip them up in a lightweight top to see them through summer to autumn
    Robert Fisk in Abu Dhabi: The acceptable face of the Emirates

    The acceptable face of the Emirates

    Has Abu Dhabi found a way to blend petrodollars with principles, asks Robert Fisk