Anyway, a huge (and Bold) THANK YOU on behalf of all WD readers to ‘you know who you are’.
It’s very much appreciated, WD.
There were four speakers at the event held at the Financial Times Building, Southwark Bridge, London. Two were representatives from Investment Trusts and two were writers from the Investors Chronicle.
1) Harry Nimmo - Standard Life Investments UK Smaller Companies (OEIC and Investment Trust)
This fund has an extremely impressive track record and has returned over 500% between 2003 and 2016.
The fund invests in companies with a market cap of less than £1.7bn. The fund believes that smaller companies have greater potential to grow than the already huge FTSE100 companies. The fund therefore consists of a mix of FTSE350 companies and AIM stocks.
Algy Hall from the Investors Chronicle has reposted a blog on the Investors Chronicle website: 'How to invest like a small-cap star' (28/9/2016) which explains Nimmo's investment strategy:
The fund identifies various themes which they believe are possible hot growth areas. These are currently:
- Companion animals (Dechra Pharmaceuticals, CVS)
- Listed IFAs (Brooks MacDonald, Mattioli Woods)
- Digitisation of Government processes (Kainos, Gamma)
- Internet security/Regulation (NCC, FDM)
- Premium food and drink (Fevertree and Cranswick)
- Global/UK brands (Ted Baker, Joules).
2) Algy Hall - Investors Chronicle
Algy Hall is the Tips Editor at the Investors Chronicle and also contributes the weekly stock screening article. He is a big fan of Jim Slater's book ‘The Zulu Principle’ [Editor's note: You can find a copy of this in ‘Wheelie’s Bookshop’ - ideal Xmas present to yourself !!] and spoke about the importance of the Price-Earnings -to-Growth (PEG) ratio.
The PEG ratio attempts to assess what investors are being asked to pay for both a company's current earnings today and for the anticipated growth of those earnings in the future.
According to The Zulu Principle if a company has a PEG ratio of less than 1 then it is worth researching further.
Two things to bear in mind:
- Similar to a low PE ratio, a low PEG ratio may also be an indication of a bombed out, poor performing company.
- Ensure you check that the company is not cyclical.
The PEG ratio should only form a small part of the overall investment case and these other factors should also be considered before reaching a purchasing decision:
- Cash conversion
- Strong return on capital
- Good margins
- Momentum (earnings and price)
- Director buying
- Confident outlook
- Attractive dividend yield and dividend record
- Sales growth driving earnings growth
- Balance sheet strength.
3) John Baron - Investors Chronicle Investment Trust columnist
John Baron spoke about the global economic environment and the current investment risks and opportunities.
He has six Investment Trust (IT) portfolios. The breakdown of two of the portfolios (income and growth) are published monthly in the Investors Chronicle.
His growth portfolio consists of 20 ITs split over the following areas:
- UK shares
- International shares
- Themes (Biotech, energy, mining, commodities, technology, private equity)
- Commercial Property.
He has returned 195% since 2009 and 13.9% so far this year.
His thoughts on current opportunities and threats:
- Reduce bond holdings.
- Go overweight into smaller companies.
- Be selective and add to commodities and precious metals - Golden Prospect Precious Metals (GPM).
- Biotech offers good long term opportunities - International Biotechnology Trust (IBT).
- Technology - Herald (HRI).
- Commercial property is good - Standard Life Property Income (SLI) and TR Property (TRY).
- Be careful geographically: USA is too expensive at the moment, Japan is ok - JPMorgan Japan Smaller Companies (JPS).
4) Catherine Flood - Scottish Mortgage Investment Trust PLC (Baillie Gifford)
Catherine Flood spoke about the Scottish Mortgage Investment Trust which attempts to identify excellent companies and then stick with them regardless of how big they get (a classic Warren Buffet buy and hold strategy). The Trust therefore holds companies like Amazon, Tesla and Facebook.
She identified the various areas that the Trust was looking to invest in. These are:
- Online retail
- Changing media habits
- Internet of things
- Transformational healthcare
- Great western brands
- Changing model of enterprise IT.
The trust has returned 92.2% over 5 years and 239.4% over 10 years.
Their biggest holdings are: Amazon, Illumina, Inditex, Tesla, Tencent, Baidu, Facebook, Alibaba, Alphabet, Atlas Copco, BASF, Netflix, Apple and ARM.
6 Things that I learnt from the event
- For an investor with limited funds Investment Trusts provide an ideal tool to invest in specific sectors of the market.
- Because Investment Trusts invest in many different companies they provide more diversification (and possibly less risk) than individual stock picking.
- The Investment Trusts mentioned above are actively managed and therefore they research every company they invest in so I do not have to.
- It is important to pay attention to the overall make up of my investment portfolio. In particular sector, geographical area and the weighting of each individual holding.
- I need to take care to ensure my future purchases are from a growth area of the market.
- Keep buying small companies.
Hope you found this helpful, regards Anon.
In Anon’s article above he mentions the PEG Ratio - the WheelieBlog below gives more detail about this: