The CF Miton UK Value Opportunities fund has “avoided the landmines” to post a credible return in what has been a rollercoaster year for the FTSE and a horror show for Aim.
The £143.6m fund, managed by George Godber and Georgina Hamilton, has returned 8.2 per cent year-to-date (4 December) compared with the IMA UK All Companies’ 1.5 per cent, according to FE Analytics.
Godber says he is proud of the return, especially when compared to its low volatility, in what has been a year of “bullets”.
“But the year still feels like it’s got a long way to go yet,” he adds.
“There are some real bullets around: It’s not just about picking the winners, but about avoiding the landmines as well.”
Small cap and Aim have had a “dreadful” year, he says.
Thomas Cook and Petrofac are both off 30-odd per cent for the year to December.
Former Aim darling Quindell has plummeted 80 per cent in the same time.
The fund had a brush with one landmine, UK domestic airline Flybe was the largest position last month, but has since been sold down after a European Union directive was published that will hit the company’s profits. That was compounded by the failure to offload onerous aircraft leases.
The stock is off a quarter in the past six months, however it is still more than double the price of two years’ ago.
Godber says the business is a great one long term, but it has serious problems in the short term.
Morrisons has been badly beaten by the market – along with the other large supermarkets – owing to the price squeeze from discounters.
However the fund bought into the stock in September due to its robust balance sheet and attractive valuations.
“It’s got the strongest balance sheet and cashflow in the sector and actually we think the turn around story is pretty credible.”
He notes that Morrisons owns virtually all of its stores, whereas Tesco has been selling property and leasing it back, which is badly crimping its financial position if the effect is capitalised.
Tesco now owns less than half its stores, he says.
Mid cap has been middling to say the best with several swings throughout the year. It has offered 1.96 per cent growth for 2014, the worst of all the headline FTSE indices.
Excepting, of course, Aim which has lost 15.7 per cent in 2014.
Godber says the fund is a deep value fund, a style exercised by just 6 per cent of all UK funds, according to analysis by Bloomberg.
He and Hamilton take no financial risk in the fund, holding companies that have strong balance sheets and undervalued cashflows.
The fund has 65 holdings with no positions that are outsized compared with each other.