Dobell upbeat as Fund's strategy of buying out-of-favour companies begins to pay dividends
Tom Dobell, manager of M&G Recovery, believes that current market conditions are providing more opportunities for investing in recovery situations than for many years.
Dobell, who has run the £1.07bn M&G Recovery Trust for around two years and is only the fund's third manager since it was launched in 1969, is running the fund with around 95 stocks.
He is also to be the joint manager with Richard Hughes of the forthcoming M&G Recovery Trust, the split capital rollover vehicle to the existing £269m M&G Recovery Trust, as reported exclusively in Investment Week last week.
Dobell said: 'We are trying to buy companies that are out of fashion and favour and where there are reasonable prospects of a re-rating. I generally hold these stocks for three to five years ' I look to buy when these stocks are low and sell when they are high.'
'The market is challenging at the moment and there are lots of pressures from all sorts of areas although the investment arena for the fund is alive and well. It is in these types of markets where there are more opportunities than there have been for many years, with lots of recovery situations,' he said.
He added that for six to seven years during the 1990s bull market, recovery opportunities were relatively scarce as the economy was buoyant.
Dobell is particularly keen on looking for opportunities in the mid and small-cap areas of the market and around 48% of the fund is in the FTSE 100 with 52% in mid and small-cap stocks.
He added: 'We have a good deal of diversification in the fund. I know most of the companies that I own better than average and I am keen on close contact with them. We do not get dragged along with short-termism ' we are not traders, we are investors.'
Dobell prefers taking each stock on its individual merits rather than aiming for thematic investment and the fund is predominantly UK-focused with around 95% of the holdings in UK stocks.
Among the stocks Dobell holds is Mothercare, which he said has around £450m in sales. He said: 'People are rude about Mothercare but it does not have debt and I think that the brand is magnificent. It has an endless supply of new customers coming in every year.'
He is also keen on Scottish & Newcastle, which he favours for its strong brand positions and because he feels that the company is conservatively run. In the food retailing sector, Dobell is keen on Somerfield and added that the company has £5bn of sales, no debt and good cashflow, with a 6% to 7% market share.
But Dobell is cautious on the macroeconomic picture. He said: 'The world has had a 10-year boom. My own view is that the world has got to go through a sobering up period that will last a little longer than many people expect. We have had a boom for three years too long ' there is overcapacity and valuations for many of the big stocks are unexciting.'
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