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
Crowd-to-let: How crowdfunding sites can give investors a slice of the property market for £500
After the election: What will Britain's financial future look like on 8 May?
General Election 2015: How you vote next week could affect your finances
Beware credit card firms’ odious tricks
Five Questions On: GB Energy's new tariff
- 2 Italian police 'reveal' what Jesus looked like as a young boy
- 3 General Election 2015: 14-year-old boy asks Nick Clegg – 'can you kill Katie Hopkins?'
- 4 University student in court for allegedly covering housemates' food in window cleaner and spit
- 5 Ryan Gosling posts tribute to 'Ryan Gosling Won't Eat His Cereal' creator Ryan McHenry
In defence of liberal democracy
Over 50,000 families shipped out of London boroughs in the past three years due to welfare cuts and soaring rents
EU asylum policy is 'a direct threat to our civilisation', says Nigel Farage
The Rothschild Libel: Why has it taken 200 years for an anti-Semitic slur that emerged from the Battle of Waterloo to be dismissed?
General Election 2015: UK will be 'run for the wealthy and powerful' if Tories retain power, Labour warns
General election live: SNP suspends two members for disrupting Labour rally
iJobs Money & Business
£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...
£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...
£215 per day: Ashdown Group: Junior Project Manager (website, web application ...
£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...
Day In a Page
Only a few minutes' drive from the charming town of Marlow, this two-bedroom home sits on the private riverside estate of Harleyford.
This detached four-bedroom home in Middleyard is arranged over two floors, with features that include a wood-burning stove and bespoke oak staircase.
In a row of eight detached Georgian residences, this five-bedroom home offers views of The Sound, Mount Edgcumbe and Cornwall from its impressive veranda and full-length balcony.
If you love cooking for friends this two-bedroom flat - complete with views of the iconic Battersea Power Station and an open-plan kitchen/dining area - will go down a treat.
Located above Grasmere village, this five-bedroom home is arranged over three floors and offers countryside views across Grasmere Lake towards Silver Howe.
Surrounded by the Western fells, this five-bedroom Georgian home retains many original features including panel-plastered ceilings, sash windows and fireplaces.
This six-bedroom home is set amongst three acres of grounds. Currently a large family home, Clift Hill has potential to make a B&B, subject to change of use permissions.
A former period coach house, Glebe Farm Stable is now a three-bedroom cottage with a double car barn, office, kennels and an outbuilding that's currently used as a gym.
Set sail for this four-bedroom farmhouse in Cowes. With five acres of land and an indoor pool, this home oozes character. There is even potential to let a one-bedroom annexe.
Surrounded by woodland, this five-bedroom manor house has plenty of outdoor storage space in the form of three converted loose boxes, two smaller outhouses and a woodstore.
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings