Chris Field is straightforward when I ask about the kind of companies he invests in - “anything we can make money from”.
Suffice to say, there is a lot of thinking behind that simple statement but it encapsulates the ethos of the £4.1bn Majedie UK Equity Fund, which Field co-manages with Richard Staveley, James de Uphaugh and Matthew Smith.
“We are pragmatic investors”, he says. “We don’t have any style bias. The kind of companies we’re looking for are those that other investors are misunderstanding. We invest where we can see a valuation gap that can narrow through a catalyst we can identify.”
To illustrate the approach Field gives the example of Ryanair. “We think Ryanair is a growth company with a value rating. Investors are missing the fact that this is a company that has a rich set of data to mine that it can use to optimise the prices of its products, which means flight fares and ancillaries.
“It also has high barriers to entry for competitors and this rises as its market share rises. Right now it has a 15% share but we think that could go to 23% or 24%.”
While Field rejects the idea that his fund has any style bias, he does explain that valuation plays an important part in his process.
He says: “For us, when we look across the market we’re sifting an enormous amount of information. It might be industry or company specific and we use it to build a jigsaw of information - the more bits we put together the higher conviction we can have.
“We operate as a team and we discuss these companies, trying to weed out the bad ideas and get the good ideas across. We occasionally come across an industry that’s going through a radical restructuring.
“Take food retailers, a few years ago we could see the sector was changing, with capacity being taken out of the industry by major supermarkets. We looked at those improving dynamics and tried to identify the best play. In the end we decided to buy all three of Tesco, Sainsbury’s and Morrison’s.”
A current overweight position is in the telecoms sector, which the managers believe is unfairly treated by investors. A regulation crackdown that removed many of the easy ways for telecoms companies to make money has put many off the sector, but Field and Co believe that this is now fully priced in. What’s more, the fundamentals for telecoms appears to be improving, they say, as governments recognise the important role that high speed broadband is to economies.
This is the sort of catalyst the fund looks for that will unlock the value in unloved stocks.
The Majedie fund invests in the UK but is international in many ways. Firstly, because the blue-chip names it often buys derive much of the profit from overseas but also because the fund holds some names from non-UK markets. The fund currently holds 10% outside of the UK, but has the mandate to raise this to 20% if the managers wish to.
The fund’s performance has tended to vary more than the market, indicating the managers’ high- conviction approach.
More on the Majedie UK Equity Fund
The Majedie UK Equity Fund features on our Select 50 list of favourite funds
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