The Analyst: Be aggressive now and profit in future
Saturday 09 February 2008
I really can't remember such a long period of unremitting gloom for the finance sections of newspapers and radio or television programmes.
Global markets have got off to their worst start for any year, just about ever. Banks in the United States are continually writing off vast amounts of money, the UK housing market is starting to fall and to top it all off, a rogue trader has lost a king's ransom for one of France's flagship banks.
You might think it is logical not to invest any money at all right now, but these are the times when investors can sow the seeds for future profits. This is what Ed Burke, the manager of the Invesco Perpetual UK Aggressive Fund, has been doing.
Mr Burke says that market sentiment is worse now than he can remember for a very long time. He agrees that the overall picture isn't especially good, but crucially he is finding compelling value in individual companies when the FTSE 100 index falls back below the 6,000 level.
The Invesco Perpetual UK Aggressive Fund is set up for a short, sharp recession, so if you don't believe that's what will happen then this clearly isn't the fund for you. However, if it does happen, then I would expect to see this fund at the top of the performance tables.
Ed Burke's long-term record speaks for itself; he has often been the person to buy when markets have hit the skids. He runs an aggressive portfolio where the largest 10 stock positions sometimes account for over 50 per cent of the fund.
This strategy relies on his stock-picking ability for success, and in this regard he has proved himself exceptionally able. Since the fund was launched in July 2001, it is ranked first out of 216 funds in the highly competitive UK All Companies sector – the fund has risen by 131 per cent during that time, compared to a gain of just 37 per cent for the sector average.
Mr Burke admits that the last year has been rather more difficult. He has moved the fund up the capitalisation scale into the large companies of the FTSE 100, which is where he is finding the best bargains. The market falls of recent months have prompted him to move aggressively into the most beaten-up areas, such as financial companies and housebuilders.
His move into housebuilders such as Persimmon and Bellway might appear odd given the outlook for the housing market in the UK. However, Mr Burke points out that these two companies have strong balance sheets with long land banks. This means that they don't necessarily have to buy land every year, and if they stopped buying land for just one year, it would save them some £500m.
On banks – and unlike his colleague Neil Woodford – Mr Burke feels that the exposure of UK banks to the sub-prime problems is not as bad as the market fears. He has bought into Bradford & Bingley, the share price of which has suffered due to the fallout at Northern Rock. However, Mr Burke is convinced that Bradford & Bingley is far more robustly financed and has a much more varied business than Northern Rock. It recently raised more than £6bn of cash and is one of the most liquid banks in the UK. Despite this, hedge funds are still betting that the share price will fall; if they change their minds and unwind these positions, Bradford & Bingley shares could move back upwards abruptly.
All things considered, Mr Burke believes that UK companies are in far better shape now than during previous economic slowdowns. For example, British Airways' debt is very low (£250m) compared to where it was in the 1991 recession (£4.5bn).
I always like to ask a fund manager about shares that have performed poorly for them – sometimes spectacularly so. Some managers squirm in their seats and try to change the subject, but Ed Burke is a different breed. He was forthright in admitting the mistakes he made in buying Northern Rock last year when its share price was around 700p. I like the fact that he quickly realised that had been a bad move and sold his holding at about 500p – I'm sure that lesser managers would have stubbornly held on and watched the price plummet down to the bottom at 63p. Choosing when to sell is probably a more important decision for a fund manager than when to buy.
Mark Dampier is the head of research at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information about the funds included in this column, visit www.h-l.co.uk/independent
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
- 2 Christians: The world's most persecuted people
- 3 The secret report that helps Israelis to hide facts
- 4 Danish TV reporter is all business up top, all party down below
- 5 Denmark bans kosher and halal slaughter as minister says ‘animal rights come before religion’
The secret report that helps Israelis to hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Opponents of Israel's military operation in Gaza are the real enemies of Middle Eastern peace
iJobs Money & Business
Data Governance Manager (Solvency II) – Contract – Up to £450 daily rate, 6 month (may go Permanent)
£350 - £450 Per Day: Clearwater People Solutions Ltd: We are currently looking...
£500 - £560 per day: Orgtel: Java Developer FX - Banking - London - Up to £560...
£350 - £400 per day + competitive: Orgtel: My client, a leading bank, is curre...
£26000 - £30000 per annum + Benefits: Ashdown Group: Account Manager - (Produc...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000