Mark Dampier: Put your time and energy into a global growth fund
Saturday 10 July 2010
If like me you are an avid reader of economic and stock market bulletins or opinion pieces, you are in danger of being rather like the proverbial rabbit caught in the headlights, not knowing which way to move. Lately economic news has hardly been very favourable, helping to push the stock markets into a tailspin. While it is hardly difficult to make a bearish case, perhaps this is the light at the end of the tunnel. The very fact that it is so easy to be bearish often means the worst-case scenario doesn't happen.
If you have taken the decision to invest your money yet remain unsure exactly where to invest it, one option is a global fund. Many global funds are ignored by investors who prefer to make their own country selection decisions. Yet I feel investors thinking in such a way miss out. I have always thought the ideal investment is something you can buy and hold, not touching it for years and years. This also means you can let the fund manager get on and make the critical decisions on country and stock selection, letting him have trouble sleeping at night. It does however mean that you need to find a real free thinker and someone who isn't constrained by benchmarks.
I think James Thomson of Rathbone Global Opportunities is just such a manager. Now it is fair to say that if you look at his record you will see that 2008 did him no favours. However, he believes this taught him a valuable lesson in trying to "weatherproof" the portfolio and this is no longer just a bull market fund that will subsequently underperform in a bear market. The careful management of risks and outperforming whenever possible in all market conditions are at the forefront of his approach.
Running a growth fund means that traditionally Mr Thomson wouldn't buy classic value type stocks. Indeed, he hasn't gone out of his way to do so now, but in an excellent demonstration of lateral thinking he believes he has found a route into traditionally defensive sectors while retaining the prospect of significant growth.
Virbac, a French pet pharmaceutical company, is a good example. It does not have the same clinical risks as human pharmaceutical companies and many of its drugs are simply modified versions of those already approved for human use. So it has similar characteristics to a normal pharmaceutical, but with less downside in terms of patent expiries and R&D costs. Another example is Swedish Match, a tobacco company with a difference. It has no exposure to cigarettes and actually specialises in snuff, snus and chewing tobacco. Nothing I particularly like, but it has an 87 per cent market share for snus in Sweden and 80 per cent in Norway. Snus is a moist tobacco powder that originates from a variant of dried snuff and is consumed by placing it under the lip. The company has experienced 18 per cent earnings growth every year since 2005.
A growing theme within the portfolio is exposure to Middle East energy development. This is gained through construction and engineering companies such as Petrofac which is benefiting from expansion in the region. Elsewhere, the fund has benefited from emerging markets commodities, though exposure is gained indirectly through Singaporean listed companies. Ultimately, as you might expect from an unconstrained growth fund holding 50 dynamic companies, much of the performance has been driven by individual stock ideas like the property website Right Move, which has seen significant strength in its share price.
This is very much a fund driven by the manager's best ideas, and he looks to identify businesses with superior growth prospects that remain undiscovered. The fund is £80m in size and tends to have a bias towards medium-sized and smaller companies, the traditional hunting ground for tomorrow's winners. While there may be some short-term volatility I firmly believe this is a fund you can tuck away for the long-term, letting James Thomson worry about country allocation and stock selection.
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
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