Fund Management Equity Index 2019
Each year, we conduct research to identify the asset management companies that have the most...
With the football season now ended, clubs are starting to think about how they can strengthen their teams over the summer. If last year’s stats are anything to go by, it could be an exciting few months for football fans: 13 out of 20 sides broke their own club record fees last year, with a total of more than £1.1bn exchanging hands.
While financial services intermediary fees are still in the spotlight, they are nowhere near as high as those of football agents, if the £41m received from Paul Pogba’s fee is anything to go by.
But fund portfolio adjustments could be (almost!) as rewarding. So we asked a handful of our favourite managers what their best buys and sells have been over the past 12 months.
I bought cruise liner business Carnival on June 2016 at 3361p per share and added to the holding after Brexit. At a time of irrational market anxiety towards consumer stocks, we had conviction in Carnival’s demand outlook, particularly in the US, where disposable income was showing signs of improving. The share price today (10th May) is 4812p.
I progressively exited the holding in online property portal Rightmove during the second half of 2016 at between 4052p and 4207p per share. The stock’s high valuation reflected the market’s confidence in its ability to use its dominant market position to increase prices over a prolonged period of time, in contrast to the market’s scepticism at the time of my initial purchase in 2014 when worries about a new competitor, OnTheMarket.com, had created a buying opportunity.
Luceco, which manufactures and distributes electrical products. It has strong brands that are differentiated through vertical integration and rising gross margins. It is entering new product segments and geographies and has double digit earnings growth supported by a very strong balance sheet. It’s an excellent sustainability story through energy efficiency and low carbon. The share price is up 90% since we bought at IPO.
Hayward Tylee, which develops, manufactures and supplies high end industrial pumps and motors. We sold after a company meeting at the facilities in Luton, during which it became apparent that the company’s revenue line was going to be impacted by a delay in orders for one of their divisions. Shares have fallen off by a third since we sold off the position.
YouGov is a market research business, providing important information to corporate clients and media agencies about their end customers and markets. The company operates a panel of more than four million members around the world, giving it ‘economic advantage’ primarily via a data-driven distribution network. It has gone on to make double-digit percentage share price gains.
NCC. Portfolio turnover on the fund is low. We tend to stick with companies for the long term. However, on occasion we are forced to reassess whether a company has the type of intangible asset that we seek out. One company we sold last year is cyber security specialist NCC Group. The growth opportunity for the company had looked very promising but the pace of its acquisitive expansion proved to be its downfall as it began to suffer integration difficulties. This led us to question the returns it could generate from its intellectual property and software distribution network.
Activision Blizzard. Some 155 million Americans play video games regularly and a wave of new revenue opportunities is driving a supercycle. This is the world’s largest video games company delivering a string of hits including Call of Duty, Overwatch, Guitar Hero and Candy Crush.
Travis Perkins. The UK’s largest builders merchant has been struggling with cut-throat competition and the ever-present fear of a weakening appetite for renovation, maintenance and improvement work.
Hays Plc. When we first invested in this UK-based recruitment firm, a year or so ago, it was around 130p per share, which seemed to discount a recession already so we felt it should be robust if a recession did actually occur. The share price then collapsed after the Brexit vote, which surprised us given that the firm earned much of its profits outside the UK. We were buyers all the way down to about 90p. Eventually, the shares recovered and now trade around 170p. It did of course help if you didn’t panic in the middle, but instead did the opposite and bought more.
Under Armour Inc, the US-based apparel and accessories firm. Under Armour is a stock is for football aficionados (well, for fans of American football, at least). We found the stock over-priced under most scenarios. Perhaps shareholders were excited about global growth and expansion into other sports and sportswear niches. The stock also had many fragilities: aggressive accounting and rapid asset growth. The stock proceeded to disappoint on sales and earnings growth, relative to high expectations in the market. The share price has halved in the past year, even as the firm grew.