Bell also has the backing of the 21-strong career analyst staff
bench. We think highly of Newton’s research capabilities. The analysts have often worked in their respective industries prior to analysing stocks, and we believe their industry experience can add value to the research output. The team combines macro themes with bottom-up fundamental analysis, and their research leads to a recommended list of global stocks that reflects their level of conviction. This recommended list is the basis of a model portfolio which Bell shapes to produce this fund.
We think the strategy Bell uses is a sound one for a growth-oriented offering, but it differs slightly from his predecessor’s. While Bell maintains the fund’s growth orientation by looking for stocks that exhibit strong levels of sales growth and cash-flow growth, he is more disciplined in the price he pays for growth stocks than Butler was. As a result, the fund currently straddles the line between the large-blend and large-growth sections of the style box. While Bell’s valuation discipline may cause this fund to lag during go-go-growth rallies, it tones down this fund’s price risk by helping to avoid higher-octane growth stocks, whose value can fall rapidly when growth targets are missed.
Aside from this slight strategy tweak, the fund remains largely the same under its new manager. As always, its process is underpinned by Newton’s thematic approach. The firm’s views present themselves in the portfolio through noticeable sector and country biases. Thus far, Newton’s macro analysis has proved to be successful. Most recently, their work identified the potential risks to financial institutions and led their managers to cut back exposures in early 2007; that call helped this fund stand up better than its peers last year. But while the team’s view on financials proved prescient, it’s unrealistic to expect all their calls to be on target, as top-down analysis can be difficult to get right consistently. But on the whole we’re heartened by the team’s long-term track record.
In sum, we think this fund is a worthy offering. Although Bell is new to the fund, his experience and familiarity with Newton’s process negates some of the concern we would usually have when a new manager arrives at a fund. In addition, the experienced analyst staff that supports Bell helps to make this fund a strong choice for investors looking for a global equity fund.
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