The Analyst: Pursue the new industrial revolutions
Saturday 23 February 2008
Great Britain began the process of industrialisation in the 18th century, turning what had been a subsistence economy into a fully developed economy through technological innovation. This is the position in which some emerging nations, such as China and India, are today.
Industrialisation increases living standards, which in turn increases the demand for basic necessities. When the United States went through this period of change, the country's electricity consumption increased 124-fold, oil consumption rose 35-fold, and meat consumption rose by about 80 per cent as real incomes grew from $5,000 to $20,000. This rapid pace of advancement brings opportunity for investment.
There is now a race to meet the electricity, oil and food demands of China, India, Russia, Brazil and other emerging economies.
James Thomson, the manager of the Rathbone Global Opportunities Fund, has positioned the portfolio into companies likely to benefit from this 21st-century industrial revolution.
It is not an average global growth fund; it is a spicy portfolio containing 50 to 60 of Mr Thomson's best ideas. Ultimately, he is looking for companies he believes can grow significantly, but where this potential has not yet been recognised by the wider market.
Some of these may be companies that many investors haven't heard of, but this is precisely what he likes – to identify undiscovered growth companies across the world. This style often leads him into small and medium-sized companies, so it's not surprising to find that the fund has only 26 per cent invested in larger companies.
He typically invests in companies that are at an early stage of growth, preferring innovative businesses with entrepreneurial management and simple products. This is not a "recovery" fund; instead, he likes to invest in proven businesses that are already firing on all cylinders.
A classic example of a stock he likes is Accsys Technologies. It treats softwoods chemically to give them all the benefits and longevity of hardwood. The beauty of it is that the treated softwood should be significantly cheaper than hardwood once in full production. This is a simple and effective idea, and one that has yielded excellent returns for the fund so far.
Rather than investing directly in, for example, a big oil company, or agricultural produce such as wheat or corn, Mr Thomson harnesses these growth opportunities indirectly through mining equipment, agricultural equipment, oil services and fertiliser. He believes these companies are less dependent on the movements of commodity prices and should withstand price volatility.
If companies are vulnerable, Mr Thomson is not afraid to cut the position. The fund's cash position is currently 14 per cent. This is purely a function of selling stocks that he believes are at most risk of being downgraded by analysts.
There are thematic elements to this portfolio, but it is ultimately a stock-picking fund with companies chosen primarily on their individual merits. Examples include a Bollywood film studio, an aircraft seat manufacturer and an online gambling stock – so there is healthy diversification.
The geographical weightings are also well spread; the portfolio is currently 26 per cent in Europe, 20 per cent in the US, 19 per cent in the UK, 13 per cent in Asia, 8 per cent in Canada, and the rest in cash.
The fund does not own companies listed in emerging markets, but gets the exposure through the UK AIM market and Canadian listed companies, for example. This is quite unusual in that the fund has delivered superb returns without directly investing in emerging markets.
Since Mr Thomson has had day-to-day management of the fund, it is up by 128 per cent, while the MSCI World Index is up 42 per cent (Source; Lipper: from 31 October 2003 to 15 February 2008). It ranks as the third-best performing fund in its peer group over this period (although note that past performance is not a guide to future returns).
It surprises me that, with this record, the fund is only a minnow, at £67m. The advantage of being small and nimble is that it can invest further down into smaller companies, where higher growth opportunities can exist, but there is still plenty of room for the fund to grow without its size becoming a problem.
This is a high-octane fund that can be volatile over shorter periods, but it is one that deserves greater recognition. You only have to look at the calibre of the individual managing this fund. James Thomson is a rising star, in my view, and has the ability to deliver superior long-term returns.
Meera Patel is a senior analyst at Hargreaves Lansdown, the asset manager, financial adviser and stockbroker. For more information on the funds included in this column, visit www.h-l.co.uk/independent. Mark Dampier is away
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Questions of Cash: Bupa costs bore no relation to what I'd been quoted
Problem gambling: Amid heavy advertising and a surge in remote sports betting, more and more 16 to 24-year-olds are now seen as 'at risk'
The HiFX guide to managing corporate foreign exchange and international payments
How to start your own internet business
Be warned of the dirty tricks the bailiffs pull
- 1 'Women should not laugh in public,' says Turkey's Deputy Prime Minister in morality speech
- 2 The secret report that helps Israel hide facts
- 3 Is Ebola coming to Britain? UK health officials issue warning to doctors as outbreak fears grow
- 4 Richard Dawkins says 'date rape is bad, stranger rape is worse' on Twitter
- 5 Danish TV reporter is all business up top, all party down below
The secret report that helps Israel hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
Putin is 'thuggish, dishonest and reckless', says British ambassador to US
Boozy, ignorant, intolerant, but very polite – Britain as others see us
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
- < Previous
- Next >
iJobs Money & Business
£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...
£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...
£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...
£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...
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