16 June 2016
Weather-proofing a portfolio and making new flavours for ice-cream
Research analyst Ryan Lightfoot-Brown speaks with Rathbone Global Opportunities manager James Thomson
“The global economy is unpredictable,” said James Thomson, manager of the Elite Rated Rathbone Global Opportunities fund when I met him a couple of weeks ago. “Growth is close to 'stall' speed, even in the US where, as an example, 50% of retail growth is down to Amazon alone. Any and all bad news is causing a spike down in markets. This does create opportunities though and I've never had as many buy ideas as I do right now.
“The fund has around 10% invested in medium-sized companies and 85% invested in larger companies – although most of these are the 'smaller' large companies not the mega-sized ones. And I've got around 5% in cash, waiting to be invested.
“The companies in which I'm already invested are doing well and producing good underlying numbers, but as I am avoiding commodities and telecommunications stocks, which have rallied this year, the fund is lagging the index by around 2%.”
2008 was a bad year for the fund as it was biased towards companies quite sensitive to the economic environment. But James learned a few good lessons and 'weatherproofed' the portfolio for the future, giving it less economic correlation and adding a 'quality' bucket of holdings. The fund still has a strong growth element, but with some downside protection.
As a result, James has focused his investments on technology, healthcare, media and consumer specialist companies. Betfair is a company he likes, as he thinks it is competing in a sleepy industry and, with an innovative edge, he expects it to continue to grow market share. He also likes the Kerry Group which, among other things, is helping Ben & Jerry's make new innovative ice cream flavours. Approximately half of the fund is invested in US names.
“When it comes to the UK, the Brexit situation is wildly overblown in my view,” continued James. “Considering the odds, the market reaction seems to have gone too far. Further afield, I'm mildly concerned about Abenomics (the name given to the Prime Ministers' reforms) due to corporates being very slow to make decisions at the moment, or simply walking away from controversial ones. I believe in the concept up to a point, but don't feel the third arrow (the third phase of reforms) will hit the target. I don't currently invest in any Japanese companies. I also dislike China because the fundamentals are continuing to deteriorate.”
Ryan commented: "I always like meeting with James – he's an honest and straightforward manager. He likes what he likes and can be brazenly dismissive of some sectors. The quality segment that was added after the global financial crisis has provided good support to the portfolio, and also demonstrates James's talent of reflecting on and improving his strategy. There will be times where the fund will underperform, but as a long-term, all-weather option, it is a great choice for investors."
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. Ryan's and James' views are their own and do not constitute financial advice.