James Thomson of Rathbone Unit Trust Management is steering his £84m (€99m, $122m) Global Opportunities fund towards recovery opportunities further down the market capitalisation spectrum.
Mr Thomson, who is also a board director at the group, has been attempting to “weatherproof” his portfolio, with a bias towards the US and UK – at 27.2 per cent and 24 per cent, respectively.
The manager is a steadfast stock picker, claiming this approach has the fewest variables, but he concedes the top-down macro factors cannot be ignored.
“Agriculture is one sector I have completely sold out of, despite having held some companies I was still keen on. I have now sold all my exposure, about three months ago.”
The companies he held were largely related to grains and fertilisers but he foresaw some overcapacity in the sector.
Despite his bias to the UK and US, Mr Thomson insists this is not deliberate.
His UK position is bolstered by growth stories such as Rightmove. Mr Thomson says the property site– which is responsible for a third of all properties, rented or purchased, when they are initially viewed – has one “of the best business models I have ever seen”.
The manager has also been buying specialist financials. He cites two merger and acquisition advisory companies he has brought into the portfolio, “because M&A activity tends to go up in a bear economy”.
He has no standard financials exposure, but says he did own a Greek bank until recently. “That was my only real exposure to the [peripheral economies], but I have sold it now.
“It seems to be a bit of a race to the bottom at the moment. There are a number of headwinds from an economic perspective but not necessarily from a stock point of view.”
While conscious of the decline of Greece and its European counterparts, Mr Thomson is more strongly averse to Japan, outlining several concerns quite specific to the country, adding he has never held Japanese stock in the fund.
“There doesn’t seem to be as much existing entrepreneurship over there. I tend to like pure play companies and in the 1980s, in a bid for greater diversification, a number of mini conglomerates were formed.
“There seems to be almost a fear of foreign investors, which is hard to admit to shareholders, often leading to forced structural changes in both company management and at board level.”
Recent “weatherproofing” additions to the portfolio include companies in the smokeless tobacco and fish farming businesses.
Swedish Match, which produces snus, snuff and chewing tobacco in Scandinavia, saw earnings per share grow at 14 per cent a year from 2003 to 2008.
Mr Thomson has also bought into a salmon farming business, pointing out that an outbreak of salmon anaemia that hurt the Atlantic salmon supplies in Chile is proving beneficial to the other big producing regions of Norway, Canada and Scotland.
Turning to the economic outlook, Mr Thomson is not expecting a double-dip recession, describing such an event as “very unlikely”.
Global Opportunities has delivered 32.3 per cent over one year to May 17, according to Morningstar, against the IMA Global Growth sector average of 30.6 per cent.
Sam Shaw and Bradley Gerrard are respectively editor and news reporter of Investment Adviser
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