Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Rathbone Global Opportunities is a long-standing favourite on the Select 50. The fund has an excellent long-term track record, appearing in the first quartile of its peer group over three and five years and over the 17 years that James Thomson has been running the fund.
The past year has been more challenging. At the start of the year, investors shifted their attention from the growth stocks that have performed so well in recent years and where Thomson has largely found the best opportunities. The fund has kept pace with global stocks over the past year, but Thomson’s fans expect more.
Catching up with him this week, we learned that he has prepared the fund for a range of outcomes - a continuation of the V-shaped recovery of the past 18 months or an economy that runs out of steam. He says now is not the time to go out on a limb.
Top of mind at the moment is inflation. “We’ve never really seen a demand collapse and rebound like this before. Inflationary pressures are building and to me they don’t feel transitory. They feel persistent and they could get worse.” He cites soaring house prices, shortages of materials and “record low levels of inventory”.
For Thomson, there is a silver lining. “Inflation lifts earnings if you are in the right sectors and the right companies.” He also believes that the concentrated nature of inflation in areas of the economy tied to re-opening should stay the hand of central banks when it comes to raising rates.
The past 18 months have been a roller-coaster for Thomson. Even as share prices were plunging in March 2020, he told us that he saw the falls as a “once in a lifetime opportunity”. This week he said “last year I deployed more cash than at any time in the history of the fund into our existing investments.”
But he has been wary of just ploughing the same furrow. He says “we have sold some of our pandemic winners and tilted the portfolio into companies where earnings were hibernating during lockdown and which are now starting to reawaken”.
Thomson’s portfolio has typically been weighted towards big tech. Now he is looking at industrials, which he believes are enjoying “a rare confluence of bullish indicators as demand improves”. And, for the first time in five years, he is buying banks. There are fewer consumer staples in the fund than there were.
One of the key features of a fund with only 60 shares is what it does not hold. Thomson notes the bifurcation of views on China today, and he falls on the sceptical side of the debate, recently selling out of the fund’s holding in internet giant Tencent.
Back in his favoured US market, he admits that his decision not to invest in Tesla was wrong but stands by his rationale. “Every auto company is developing the next generation of electric cars. I prefer to invest through the ‘picks and shovels’ businesses that make the components. We think that’s a safer approach.”
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Overseas investments will be affected by movements in currency exchange rates. The Rathbone Global Opportunities fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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