In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This week our interviewee is Guy Anderson, manager of the Mercantile Investment Trust (MRC), which is run by JP Morgan.
Which Sector Shows the Biggest Promise in 2023?
The portfolio is built on bottom-up stock selection rather than from a top-down sector perspective, but the areas of the portfolio that I am currently most excited about are undoubtedly the consumer cyclical sectors. Understandably, over the past year there has been huge concern about the UK’s economic prospects. This concern morphed into fear which peaked last October, and these stocks came uniformly under substantial pressure, irrespective of the company specifics. With the economic outlook having improved since then, and the UK consumer proving to be more resilient, I expect a number of these stocks that we hold to have a very good year indeed.
What's the Biggest Economic Risk Today?
For me, the greatest risk remains geopolitical, coupled with continued inflation and its consequences, looking closer to home.
Describe Your Investment Strategy
Our primary goal is to deliver long-term capital growth through investing in a diversified portfolio of UK listed mid and small cap companies. Our investment horizon is long-term, taking a bottom-up stock selection approach. We focus on investing in structurally robust businesses that operate in growing end markets with the ability to invest capital at high returns. We expect these companies to adapt to the changing environments in which they operate. We believe such companies can evolve into tomorrow’s market leaders.
Which Investor Do You Admire?
It’s hard to beat the Warren Buffett and Charlie Munger duo.
Name Your Favourite "Forever Stock"
Although nothing is exempt from rigorous scrutiny, we think that Dunelm, the UK’s market leader in homewares, is a great investment.
Although consumer weakness could make life more challenging for many retailers, we believe this business is firing on all cylinders with some fantastic recent results that demonstrated the appeal of their omni-channel proposition.
Growth continues to be driven by an improving customer proposition that is yielding ongoing market share gains and there is substantial headroom for such gains to continue. I would expect them to emerge from this difficult economic period with an even stronger competitive position and greater earnings power.
What Would You Never Invest In?
Meme stocks – really not my thing. We invest for the long-term, not headlines or fads.
Growth or Value?
I prefer to think about specific returns available from individual stocks than to divide the world into categories. With our focus of investing in structurally robust businesses that generate high returns and have the potential for substantial long-term growth, it should be clear that this portfolio is stylistically more quality growth.
House or Pension?
The Mercantile Investment Trust! In all seriousness right now, I believe equities are showing a far more attractive investment proposition than property.
Crypto: Brilliant or Bad?
I avoid investing in things that I don’t understand.
What Can be Done to Improve Diversity in Fund Management?
There is a wealth of evidence demonstrating the benefits that increased diversity of thought brings to organisations.
Increasing diversity is thus rightly a key focus for the industry. While there has been good progress in this respect – with for example initiatives around hiring, retention and return to work programmes – change takes time and there is far more to do.
We also see this in our conversations with Board and management teams of portfolio companies, where they are truly engaged on the topic and see the importance of how it can improve their businesses.
Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
Cranswick, the pork and poultry processor, is a business that we have seen significant progress from over several years of engagement. Themes of engagement have included plastic reduction, carbon reduction and reducing food waste.
We have seen the company remove thousands of tonnes of plastic from the system and now use 80% recycled material, they have achieved carbon neutral status at their manufacturing facilities and have made significant progress on reducing food waste.
We believe that these achievements position Cranswick as a best-in-class supplier to the grocers and food service industry and therefore leave them well placed to continue to win new business.
What’s the Best Advice You’ve Ever Been Given?
Do something every day that brings you joy.
What Would You be if You Weren’t a Fund Manager?
A schoolteacher.
