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.
James Thomson has been at the helm of the Rathbone Global Opportunities Fund, a Select 50 constituent, for nearly two decades now. His key focus over that time has been on uncovering exciting growth opportunities that have gone under the radar of the wider market. That’s seen him get in early on stocks that have gone on to become household names across the world.
Take a look at the top 10 holdings in the portfolio, and you may wonder which we’re supposed to consider ‘under the radar’. Top spot is occupied by PayPal, while that lesser-known underdog Amazon is third. Other big names in the portfolio include Google owner Alphabet, and Estee Lauder.
Though well recognised now, Thomson invested in such companies long before their current value was realised. He’s held Amazon for over ten years; back then, its share price was a shadow of what it is today. Thomson likes uncovering hidden value, but he also likes holding onto that value and seeing it to fruition.
How does he uncover such gems? Via a simple investment process that he’s honed over his decades in management. He likes easy to understand businesses, companies that grow quickly but sustainably, and prudent management teams with great vision for the future.
At the same time, his companies must exhibit characteristics that set them apart from the crowd. They’ll typically be looking to shake up their industries or offer something different from the rest of the pack. They need qualities like this to ensure they’re scalable companies with consistent growth prospects over a number of years.
The approach naturally draws him to more small and mid-cap companies where growth potential is higher than peers, but these sit alongside the familiar large-caps that sit at the higher end of the portfolio. The manager aims to hold 40-60 companies, and with a portfolio that currently counts 60 names, he’s operating via a one-in-one-out policy. In his eyes, an upper limit like this keeps him disciplined, ensuring every newcomer must earn its place.
He’s seen his growth bias contribute positively to the fund over the pandemic period. One top 10 holding that stands out is Match.com, which currently comprises 2% of the portfolio. With options to get out and meet people outside limited, dating sites became even more popular over the pandemic. It’s a rise that’s unlikely to reverse. More and more aspects of our lives are moving online. It seems that dating is no different.
Thomson is afforded a good degree of flexibility in implementing his approach. The fund’s global remit means he’s free to scour any marketplace for companies. In practice, his fund has grown more and more exposed to the US, with the region now counting for over 60% of his total portfolio. His reasoning is simple: the US is where the growth is at. Over the past decade, US growth has rewarded investors handsomely.
Such a focus on high quality businesses often means paying a premium for their shares, which Thomson is ready to do. At the same time, he looks to balance the valuation of the business with its growth prospects - while willing to pay up for quality, he won’t throw money into just anything.
There’s a lot to like here. However, investors should bear a few things in mind. This fund won’t provide exposure to core assets (i.e. it won’t track the market) and it’s likely to diverge from benchmarks. High concentration in the US market means it’ll be less geographically diversified than other global funds. It could also struggle in periods of market volatility or when value stocks are in the ascendancy.
That said, Thomson’s approach has rewarded investors in the past, outperforming peers and benchmarks on a consistent basis. For investors looking for something a little different, the Rathbone Global Opportunities Fund is worth considering.
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 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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