Miton Group PLC (LON:MGR) Fund Manager and Managing Director Gervais Williams caught up with DirectorsTalk for an exclusive interview to discuss how 2016 went, any standout investments in their portfolio and his views on prospects, interesting sectors and particular stocks for 2017
Q1: Now Gervais, how do you feel 2016 went for you?
A1: Overall we didn’t make a lot of money for clients, we made a small amount of money for clients, so it wasn’t a very exciting year and clearly it’s quite a long way behind the markets. So it looks as though we didn’t have a very successful year relative to the indices but once you look under the bonnet at the underlying companies, many of our companies continue to grow very nicely and most particularly the underlying businesses themselves have, if anything, dropped in value relative to the valuations of the market so we think there’s plenty of opportunity going forward.
Q2: Were there any standout investments in your portfolio?
A2: There have been a couple of companies which have really surprised on the upside, these are companies where we’ve held the portfolios for some years now and they’ve started generating the productivity improvement and cash paybacks on those productivity improvements which has really driven the share prices of them. A good example of that might be International Greetings which is now called IG Design Group PLC (LON:IGR) and that’s a company where, as the productivity improvement came through, the share price was driven up considerably, even as recently as June, the share price was up at about £1.50 or something and it touched really at £3.00, it actually finished nearer £2.50. The point is that has been a big holding of the company, we’ve been looking for that productivity improvement to come through and it’s actually a good example of that.
Q3: What are your views on prospects for 2017?
A3: I think it’s going to be a challenging year, many of the trends which have been very positive for equity markets are beginning to run out, the ability of bond yields become much lower, actually limited, and valuations can move a little higher but they may run out of steam as we’ve seen a change in attitude. Political attitudes is probably going to lead to economic changes going forward so there’ll be some challenges there and also of course world growth has continued to slow so there’s some challenges up front, that said, if anything, we continue to be very upbeat about the companies we’re meeting. Plenty of companies are generating attractive cash paybacks, we’ll continue to invest in more corporates which actually can generate cash paybacks and if anything, the valuations are somewhat behind the market after the slow performance last year so we remain upbeat about 2017.
Q4: Now, which sectors do you think will be interesting for 2017?
A4: What’s interesting about portfolios is that they spread across a full range of different sectors. We tend to be very light in the sectors which are directly consumer facing so that includes many of the retailers, certainly many of the larger ticket items like house building and that area so the areas where we are more interested is those companies which are getting beneficiaries of de-valuation of sterling. that includes certain companies like some of the manufacturers in the UK, it does include certain software companies which are selling their software overseas, it does include quite a lot of miscellaneous sectors which are not well represented in the main market but where they’ve got certain individual companies which happen to have a very strong world market position in a very niche area. So one of the reasons why we liked IG Design Group PLC and why we held it for the previous years was because it was a world leader, one of the top 3 in producing packaging particularly for wrapping paper, so it’s kind of a company where there aren’t many other companies in that sector, it’s doing a great job and it’s investment for productivity improvement generated the cash flow return which we’ve got for clients.
Q5: Are there any particular stocks that you like the look of for 2017?
A5: Well there’s a huge range at the moment, the whole nature of our portfolios is that they’re actually invested across a huge number of companies so the Multi Cap Income Fund, the Diverse Income Fund, would probably hold just under 150 holdings, small-cap fund is just over 100 at the moment. So effectively we tend to have a lot of holdings rather than a lot of smaller bets with high waiting’s therefore we’re not really expecting any one individual stock to really drive the return, certainly the nature of the return we’ve generated for clients in the past has all been a number of smaller holdings actually all performing together and that’s what we’re looking for going forward. There will be some companies which surprise us with the upside, we’ll no doubt have our share of disappointments going forward as we have in the past but on average we expect many of our holdings to continue to perform. So I wouldn’t like to bring it down to just one of two holdings, the whole nature of our portfolio is well spread and stops specific risk as well, it’s much more limited than many other portfolios.
