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Bright Talk 27 th February 2008
Duration: 0:04:07
Presenter
- Richard Penny
Richard Penny:
The Legal & General UK Alpha Trust is an actively managed fund which specifically targets capital gains. Perhaps a fund for the more adventurous investor we look to pick 25 to 30 views from the whole of the UK stock market. The fund has 25 to 30 holdings targeted at two styles. The first style is a deep value style perhaps investing in recovery or restructuring type ideas; the second style is a rapid growth investing in companies with fantastic business models growing the sales at 15% or more. In the deep value style we select restructuring or recovery type ideas, where companies that are out of favour give us opportunities for very positive returns. In recent times our focus has been more on the restructuring type ideas, companies like Invensys where you’ve had returns of up to 50%. With the economy perhaps looking a bit more adverse I think there can be some fantastic opportunities to buy companies that are actually recovery type stocks and maybe you get a refinancing and we can get involved maybe when new management come in, we can buy companies that are particularly opportune at low valuations and when these companies recover the price increases can be very, very positive.
In our rapid growth style we are looking to invest in companies where they are growing their sales at 15% or more. With such companies we believe that over a three to five year period they can become substantially bigger businesses. We are also in addition to that sales growth looking for good business models and we are looking to buy the companies at attractive prices. If all of these factors combine we get fantastic share price performance. One particularly successful investment from our growth style has been London Capital Group. This UK based spread betting company has grown itself not only at 15%, but as much as 100% over the last two years. We bought these shares at 82p and subsequently after they delivered fantastic profits growth the shares have traded as high as £4. The current fund constructions comes form a bottom up stock picking approach, a key mantra for the fund, so that means that the idea is getting there where we find growth or where we find the restructuring or recovery situations. Having said that, currently growth is probably more difficult to find in the general economy, we have a few more defensive names perhaps in the health care sector, we have some in international education.
One has to remember of course with this fund that it is a focused stock picking fund, where potentially we can buy things that go up five or eight times. Of course we are taking 4 to 5% holdings in these high conviction ideas and if these go badly wrong we can lose up to 2% of the fund value. Hopefully people now get the idea this is a high conviction stock picking fund, it is for the adventous investor, I would liken the risk to be something in between what you would get with the a mainstream UK equity fund and perhaps some of the more aggressive far eastern equities funds that are out there.
As with all funds invested in the stock market there is of course a possibility with this investment that your investment could fall as well as rise. When we have taken on more risk we have bought shares that have gone up as much as five or eight times – stocks to think of here are London Capital Group and Tanfield – we believe we can continue to run the fund in the same way.
This fund is for somebody looking to invest in the medium to long term and whilst we cannot guarantee that we will repeat the excellent success we’ve had, we believe we have the team and the process in place to give us every chance of doing this.
Moderator:
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