Five star investor Mark Martin has taken over management the volatile Neptune UK Opportunities fund with promises to turn the OEIC into a more diverse and profitable offering.
Martin has been at the helm of Neptune UK Mid Cap since 2008, which has a five star rating thanks to four years significantly outperforming its peers and benchmark. He takes over UK Opportunities from outgoing manager Scott MacLennan as part of Neptune’s new investment strategy announced earlier this month. Founder Robin Geffen closed 40% of Neptune’s funds and hired a new team of analysts in a bid to turn around the fortunes of the asset manager.
Martin has begun by cutting the number of holdings in UK Opportunities from 51 to 42 companies and refocussing the fund away from purely FTSE 100 listed stocks. Currently the break down is 65% large caps, 22% mid caps and 13% small caps, but Martin will shift this towards the lower end of the spectrum overtime.
“I have sold out of smaller positions to make the UK Opps fund more concentrated, and will focus on the most attractive stocks across the spectrum, taking the best ideas from the mid-cap fund and combining them with the best opportunities in the FTSE 100,” he said.
Addressing concerns that he will be stretching himself too thin over the two portfolios – an accusation levelled at Geffen in the past – Martin said that he had always dedicated time to studying stock markets outside of his UK mid-cap remit and feels the new analyst team will help support both his roles.
He added: “We already have significant experience in the team to support both funds.”
Get Rich Slowly
Among Martin’s new additions to the UK Opportunties portfolio are Rolls Royce (RR.) and Johnson Matthey (JMAT). The UK manager said that he likes companies in high tech industries, commercialising British science.
The Rolls Royce call is at odds with many analysts – including Morningstar’s own, who today downgraded the fair value estimate for the aerospace company. Last week, Rolls chief executive John Rishton admitted that underlying profits had fallen and that the company faced “challenging conditions”. After these admissions the share price slumped 8% - something Martin sees as a buying opportunity.
Martin also pointed to sausage skin manufacturer Devro (DVO) as an example of a company taking time to invest its own long term development which he believes is undervalued by the market.
“The market is too worried with short-term trends,” he said. “Rolls has a large number of orders to fill, it is a good problem to have. Patience is a virtue in short supply among investors at the moment. I would rather take a long term view on a company and make my unit holders rich slowly.”
Pharmaceuticals to Benefit from Weak Sterling
While Martin says he prefers to pick stocks based on their underlying fundamentals he admits that a weak sterling presents investment opportunities. The outlook for sterling against the dollar is not positive for 2015, thanks to the uncertainty of the UK General Election and positive economic data from across the pond.
“Healthcare stocks are the biggest beneficiary of a strong dollar, thanks to global revenue streams,” said Martin. “In terms of other big themes within the portfolio I think there are certain companies ripe for takeover – US companies are spending money and there is M&A potential in the UK market.”
