Holly Black: Welcome to Morningstar. I'm Holly Black. Fund managers, we trust them with our life savings and expect them to turn it into more money for the future. But what do they actually do all day? I'm here at Janus Henderson to find out.
So, I'm here with James Henderson. He is Manager of the Lowland Investment Company. Hi.
James Henderson: Hi, Holly.
Black: Do you want to tell us just briefly what the Investment Trust does?
Henderson: Lowland is an income fund that grows its income over time by investing in U.K. companies, large, medium and small companies. It's a relatively long list of companies. It's over 100 holdings and the small companies are what really give it its growth over time. And I've been doing it since 1990.
Black: Wow. So, you've been coming here for 30 years. What does a typical day look like for a fund manager? What's the first thing you do in the morning?
Henderson: I'm always thinking about the holdings. I'm always thinking about the companies and thinking about the blend of risk that the portfolio has got and wanting to be in companies that are going to grow over time. And sometimes I'll be disappointed and sometimes I'll be very excited. And you never quite know. The great thing about the job and why I've done it for so long is you never quite know if it's going to be a day where you're going to be really pleased that the companies are progressing, or you're going to leave bit disappointed that it's not going the way you think it should.
Black: So, obviously, as a fund manager, when you're not looking at stocks on a computer screen, you're often meeting companies, and this is where you bring them.
Henderson: Yes.
Black: How many companies do you meet in a typical week or month?
Henderson: At this time of year because companies are reporting their results, we might do two or three meetings a day. And that's, say, 10 to 15 meetings a week at this time of year. This is a busy time for us, because the companies are reporting. It will get quieter in the summer. In August, for instance, we will do two or three company meetings a week. So, it varies.
Black: Three a day is quite intense. So, do they tend to be mostly companies you might invest in, or they tend to be catchups with managers where you already are invested?
Henderson: It needs to be both. You need to try and be on top of what you are holding and meeting those companies, seeing if they're progressing. We must always be open to new ideas. New companies are always coming along. Companies are changing. Companies that have got policies that are going to move them forward, keep coming in. And then, other companies that are getting tired and aren't progressing are also coming in. And we need to be open to both and be open to see which way they're going.
Black: So, what are some of the things you always ask? Are you a tough interviewer?
Henderson: No, I'm not a tough interviewer. I think people tell you more if you try and be sympathetic and understand. And actually, I admire all – most chief execs. I know I can run a company. That's why I'm a fund manager. Because I think the demands of being a chief exec are huge and you need so many different skills whereas somebody like me is observing and trying to understand the company, we know we can be running them.
Black: So, what are some of the things that make you buy a stock?
Henderson: The things that make me buy a stock is to believe that the company is better than the market thinks it is. So, first, you need to know what the valuation is. So, the valuation is what the market is currently thinking. If the story is actually better than that, that's what makes me buy a stock. And if the story is actually worse than that, that's when we'd be trying to sell the stock.
Black: Yeah. So, what are some sell signals then?
Henderson: Sell signals is when people start to believe that they're very good. No one is very good. Usually things aren't as good as you're told. And usually things aren't as bad as you're told. But sometimes the companies believe that things are going very well. And actually, they're not taking on board all the risks that are out there. So, that would be a telltale signal.
Black: So, what is the company you've recently added to the portfolio?
Henderson: A recent add has been Halfords, the bicycle and motor company. This company has – the valuation is relatively low because people are worrying about the companies like Amazon coming into their markets. Retailing in the UK has been difficult. But we believe that specialist retailers that are producing products that people – selling products that people really need, and want to see, have got away forward. And that's the case with Halfords.
Black: So, you've checked your holdings, you've had your lunch, you've had three company meetings maybe. What do you do for the rest of the day?
Henderson: Well, I try write up the company meetings. We've also got shareholders, unitholders in our funds, and they're wanting to know what's happening. So, you have to think about the economy. We got some very good economists on the downstairs, and I will be trying to learn a bit about the economy from them. So, there's plenty to do.
Black: And so, people might have an image in their head that fund managers are at their desk for 20 hours a day. Is that true?
Henderson: No. No. I'd like to visit companies. I'd like to get out of the office often find people are more open at their place of work. So, at least once a fortnight I go out to the offices or the factories where people are. And sometimes you learn a bit more about the competition. People talk about who is competing with them there in a more open way than they would when they come to these offices. And some people are very good at presenting these offices. And then, actually, they appear less confident at their place of work and vice versa. It's very strange there.
Black: Well, James, thank you so much for your time.
Henderson: Thank you very much, Holly.
Black: So, James has dashed off to another company meeting leaving me on my own. I guess the day in the life of a fund manager is not over yet. But mine is. I'm Holly Black for Morningstar. Thanks for joining us.
