Old Mutual’s Richard Buxton bemoans ‘frustrating’ year

A “frustrating” year continues for Richard Buxton according to the Old Mutual fund manager, with another profit warning for agribusiness Tate & Lyle.

The £1.49bn Old Mutual UK Alpha fund was almost 1 percentage point behind the FTSE All Share and IMA All Companies sector for August, which has further depressed his performance numbers for the year.

The fund has risen just 0.85 per cent in the eight months to 31 August, compared to the sector’s 1.53 per cent and FTSE All Share’s 3.46 per cent. 

And this morning Tate & Lyle disclosed another profit warning after a disappointing US corn harvest caused greater supply headaches than first expected. It has shaved 20 per cent off its full-year pre-tax profit range, taking it to £230m to £245m.

That compounds “intense” competition in the market of its artificial sweetener Splenda, where the price of sucralose is now 25 per cent lower than it was, almost double the drop it expected.

The firm disappointed the market in February.

Buxton says his colleague has been speaking with the management this morning and a review of the business’s prospects will be made before he decides on a course of action.

The Chinese competition means things are likely to get worse before they get better, he adds.

Iron ore prices have also been plummeting, which will affect Buxton’s 4.12 per cent holding in miner Rio Tinto.

He remains confident on Rio, with its cleaned up balance sheet, and management that has been “chastened” into providing shareholder returns.

He is not worried about the iron ore price as Rio has a low cost base and can still make decent returns even if the price falls further, he says.

“It’s not news, I’m here for the strong growth in shareholders’ returns that are coming over the next couple of years.”

GlaxoSmithKline has also been a “disappointment” this year, he says.

“We’re about 1 per cent down for the month, which has dragged the year to date number back. It remains a frustrating year but we continue to kick the tyres on existing stocks and some new ideas.”

We’re not in the mood to make a wholesale change to the portfolio.

The overnight news from the US of restrictions on tax inversions has hit both AstraZeneca and Shire’s value, he says, but he is using such events to buy more.

It’s not completely gloomy for Buxton, with Glencore creating “fabulous cashflows” even at low prices, allowing it to start a share buyback.

Reed Elsevier continues to hit all-time highs, but he thinks it is likely to continue, given its solid business is expanding in excess of GDP growth.