In the video series, "Fund Managers' Favourites", Morningstar speaks with UK-based fund managers to learn about their top investment picks. In this video, Morningstar journalist Alanna Petroff speaks with Dave Taylor from Chelverton Asset Management about three of his favourite dividend-paying, small-cap companies.
Funds and Securities Mentioned in this Video:
Chelverton UK Equity Income Fund
4imprint Group (FOUR)
Tarsus Group (TRS)
Braemar Shipping Services (BMS)
Previous videos from the “Fund Managers’ Favourites” series:
- Fund Managers’ Favourites: Small-Cap Picks (Previous picks with Dave Taylor from Chelverton Asset Management)
- Fund Managers’ Favourites: More Small-Cap Picks
- Fund Managers’ Favourites: 3 Extra Small-Cap Picks
- Fund Managers’ Favourites: 3 Technology Picks
- Fund Managers' Favourites: 3 Solid Growth Stocks
Video Transcript:
Alanna Petroff: One of the most popular videos from the last few weeks has been a video I did with Dave Taylor from Chelverton Asset Management. That was a Fund Managers' Favorites video where we specifically talked about some of his favourite small-cap picks. He's back again today and we have a theme for today. So Dave, what's the theme?
Dave Taylor: Well, the theme today is we thought it'd be very interesting for everybody--given all the problems in the UK and the eurozone--to have a look at three UK small caps that we really like, that we own in our funds and who derive the vast majority of thir profits from areas of the world that are not the UK and the eurozone.
Petroff: Okay. So, based here, but profits outside?
Taylor: Absolutely.
Petroff: Okay. So, let's go over the first company, that's Tarsus.
Taylor: Yes, the first company is Tarsus. Tarsus owns a number of tradeshows around the world. Now tradeshows are where people meet, get together, look at products, introduce new products, and do business. It's just in the UK, we don't really have a culture of tradeshows. What's very important about Tarsus is that 40% of their trade shows are in emerging markets. For them, that's the Middle East, it's Turkey, and its China. The balance of their tradeshows are in America. There's a little bit in Latin America and only a very small amount in Europe. And we believe, and the company has a stated objective, of over 50% of their revenues will be from emerging markets by the end of 2013.
Petroff: Now, if you look at the stock graph though, you see that they're down about 35% since 2007, if you look at the five-year graph. They don't seem to be doing much since they bottomed out in 2009. Why would you be buying now?
Taylor: You'd be buying that essentially because of the increasing value of the emerging markets portfolio that they are putting together. They recently bought an auto tradeshow in China. The acquisitions – also recently have been buying businesses in Turkey. So, going down this emerging markets route, these businesses are becoming more and more valuable. Also, just to put things in perspective, their biggest show, which is the Dubai Airshow, is only every two years. So they have this strange profit projection going forward, which is they have a good year then a less good year, as Dubai comes in and out. But once again, just to show the value of these shows, Boeing announced one of their biggest ever o