It’s a marathon, not a sprint! Investing for the long term

From park runs with all the family through to the Marathon de Sables in the Sahara Desert, running is becoming ever most popular.

And some parallels can be drawn between the sport and investing, especially if you are going the distance.

Fund management styles can differ considerably: some will buy and sell companies quite regularly, while others will buy and hold for the long term.

We hear from four managers of Elite Rated funds, who tend towards the latter. They give us examples of stocks they have held for notably long time horizons – and why they have decided that these companies will reward patience.

Liontrust UK Smaller Companies: Renishaw

Anthony Cross, who co-manages the Liontrust UK Smaller Companies fund alongside Julian Fosh Victoria Stevens and Matthew Tonge, said: “Renishaw was one of the first stocks we bought for the Liontrust UK Smaller Companies fund 20 years ago. The company designs, develops, manufactures and sells high-tech measuring and calibration equipment for medical diagnostics and neurosurgery firms, among other sectors.

“Renishaw has excellent levels of intellectual property. It has also built a global distribution network and this has helped cement the company’s strong customer relationships. It also has high recurring income.

“While Renishaw enjoys reasonable levels of repeat orders, they are not contracted. However, the company has delivered significant long-term growth by helping its customers improve the accuracy and quality of their manufacturing processes and products.”

Lowland Investment Company: Wadworth

When talking to the AIC recently, Lowland Investment Company’s James Henderson said: “Wadworth has been in Lowland’s portfolio since 1968. The value of the holding has increased 100 times and there have been dividend payments along the way as well.

“The company is a brewery and pub company based in Devizes in Wiltshire. The brewery produces great beers such as 6X and has a quality estate of managed pubs which gives it a substantial asset value.

“It is the only unquoted operating company in Lowland’s portfolio and it is valued at a discount to the most recent substantial traded price. Wadworth is a family-controlled company run on a long-term basis – the company started in 1852. It has been a very worthwhile long term holding for Lowland.”

M&G Global Dividend: Microsoft

Stuart Rhodes, manager of the M&G Global Dividend fund, said: “Microsoft has been a core holding in the M&G Global Dividend Fund since 2008, during which time the software company has made a successful transition from a business perceived as mature because of its reliance on the Windows operating system, to a dynamic business driven by the strong growth in cloud services.

“The technology sector has not been renowned for rewarding investors with generous dividends in the past, but Microsoft’s dividend has more than trebled since our initial purchase and the share price has increased fivefold, comfortably outpacing global equities overall.”

Scottish Mortgage Investment Trust: Copco

“Scottish Mortgage’s longest holding has been the Swedish industrial company, Atlas Copco, which has been continuously held in the portfolio since 1995,” said Catherine Flood, client service director of the Scottish Mortgage Investment Trust, also to the AIC. “Its flagship segments are its industrial compressors and vacuum businesses and it also has a leading position in construction and mining equipment; these are combined with a strong after-sales service business.

“Atlas Copco has an excellent record of generating returns, backed by strong cash flow generation and cost controls throughout the economic cycle. It has been a strong contributor to performance, generating a cumulative return of 4,370% for Scottish Mortgage, or 18% on an annualised basis, over the more than two decades for which it has been held*.”

*Source: The AIC. Returns to the end of February 2018