John Johnston has taken over LeggMason Investors' Slater Growth unit trust fund, writes Ruth Alexand...
John Johnston has taken over LeggMason Investors' Slater Growth unit trust fund, writes Ruth Alexander.
Under Johnston, who joined the group on 1 November, the fund is to be renamed the Legg-Mason UK Emerging Growth fund.
Johnston, who previously ran the Murray Enterprise fund at Murray Johnstone, said 25% of the LeggMason fund's stocks will be immediately cut from the portfolio. The subsequent rate of replacement of stocks will be dependent on the quality of ideas and the price he can buy them at. He plans to keep the number of holdings between 50 and 60 stocks.
The fund was previously outsourced to Mark Slater, and stocks were picked for their price to earnings growth ratio, their cash flow and their relative strength.
Johnston said he will still take account of a company's PEG but he will concentrate on buying into stocks before they show relative strength.
Johnston said: "I am looking for a hockey stick-like sales curve when picking stocks. That is, I will be working to identify companies, which have emerging growth. I will invest in companies regardless of their size. I aim to target those companies which reach the pot of gold at the end of the rainbow. The realisation of the pot is all important, rather than its size."
Johnston is looking to reduce the number of holdings the fund has in numerous sectors, where he believes companies find it difficult to differentiate themselves.
The fund has 10.7% in the building and construction sector, which makes up only 1.7% of the FTSE All-Share index. Johnston will sell out of many of these holdings.
The brewers, pubs and restaurant sector is not favoured by Johnston and he will be cutting the portfolio's 15% holding.
General retail is also disliked by Johnston and he is to reduce the portfolio's holding of 11.9%.
Johnston will invest in companies which he believes have unique selling points, as well as significant barriers to entry.
He said: "We evaluate each stock on a consistent basis, according to its power balance and quality. These evaluations are ongoing. I believe it is vital to have as many ideas as possible in order to keep the stocks in a portfolio fresh."
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