Dan Roberts has only been at the helm of this fund since August 2005. The evidence so far suggests that Roberts is a manager whose style is typically contrarian. He’ll consider buying when an analyst issues a sell recommendation on a stock. He also uses a model comprised of 18-20 valuation and qualitative metrics to screen for stocks which tend to be out of favour with the wider market. An example of such a stock is Compass Group, the FTSE 100 catering company, which was engulfed in a corruption scandal. After a number of
disposals and share buy backs, the company has recovered to return around 75% since November 2005 which is when Roberts bought the stock. Roberts is not constrained by the benchmark FTSE All-Share sector weightings but he won’t invest more than five to six percent of the portfolio in a single stock. This helps prevent the portfolio from being excessively exposed to the fluctuations of any one company.
Roberts’ style is sensible enough in that he isn’t chasing risky, higher-valuation stocks, and many of his picks boast strong yield characteristics. We also like the fact that he clearly isn’t afraid to position the portfolio as he sees fit, which is key to meaningfully outperforming a benchmark.
However, he has been at the helm for just two years—not long enough to form a clear picture of his ability to execute the strategy. Moreover, his record thus far is just middling relative to other offerings in the Morningstar UK Large-Cap Value category. Finally, the firm he works for, Morley, has endured significant changes: Former CIO Katherine Garrett-Cox left in March 2007 after roughly three years at the helm, and Adrian Jarvis, Morley’s current head of strategy has taken the CIO’s reins in the interim. The head of equities Niall Paul has only been on board since 2006. At the CEO level, Chris Phillips was set to become CEO later this year but passed away before he was able to take up the role. Morley has also recently changed its approach to research with a two-pronged value and growth approach.
Given all the changes at Morley and Roberts’ limited tenure and middling results thus far, we see no compelling reason to buy this fund at this juncture.
