JP Morgan fund manager Neil Gregson seeks out quality companies which he believes can “win out” amidst the troubled small cap commodity producers.
The manager of the £1.2bn JPM Natural Resources fund says the portfolio continues to have a high small cap bias of around 40 per cent in spite of the recent poor performance within the sector.
He says: “If we look at some of the small cap indices, they are back below where we were post-Lehman crisis. They are back to where they were 10 years ago.
“It has been extremely tough. In the 25 years that I have been doing this, it has been certainly the longest and most severe down draft.”
However Gregson is now taking advantage of what he sees as a turning point for the sector. He says: “I really do feel we are through this now.
“There are stock specific events which are starting to drive some of the smaller cap situations, in spite of all the sector headwinds.”
With specific attention to emerging and growing smaller companies, Gregson gives examples of some of the fund’s recent small cap investments which have managed to grow their share price.
In particular, he draws attention to exploration company Sirius Resources which has risen from $2 per share when first bought for the fund in December 2012, to its current trading value of approximately $2.70-80.
Elsewhere the fund bought a small uranium exploration company only last month that is already up 45 per cent from the purchase price, according to Gregson.
Selecting quality stocks for the long term, says Gregson, should ensure these assets “win out.” He adds: “We look through the tough times and the good times in the cycle, which you have to do with these smaller companies, and stay the course.”