After his sudden departure from Jade Absolute, Scott McGlashan has re-emerged at J O Hambro CM to ma...
After his sudden departure from Jade Absolute, Scott McGlashan has re-emerged at J O Hambro CM to manage their Japan fund. McGlashan has built up an impressive track-record at Invesco Perpetual and Close Finsbury using a pragmatic investment style and his performance since the inception of the J O Hambro CM Japan Fund has also been good despite a disappointing start due to excessive cash levels on the back of inflows.
The fund offers investors an actively managed stockpicking vehicle with an emphasis on quality companies showing catalysts for future re-rating. The fund has the ability to invest across the market-cap range but is essentially focused on large and mid-caps. Cash is considered as an asset class and is managed accordingly. The experienced McGlashan uses several local brokers and will only undertake company visits where essential. He follows an active bottom-up management style which is benchmark-aware rather than benchmark-driven and, as a result, stock and sector weighting can deviate substantially from the benchmark, although at least 15 sectors will be represented.
In his search for stocks the manager targets attractively-valued quality companies for which he can highlight a potential growth catalyst to enable a re-rating during the course of the next 12 months. The manager favours companies able to generate sustainable growth of 10% to 15% pa, with strong cash flows and balance sheet strength. Liquidity is emphasised, although this does not necessarily constrain the fund to the largest companies, with investments taken across the market-cap spectrum. The portfolio will typically feature between 40 and 60 holdings and stock weightings. The manager follows an active trading approach to maintain a portfolio of high conviction stocks and portfolio turnover consequently may be relatively high.
McGlashan remarks that the profitability of Japanese companies is currently very high and is expected to remain high as companies increasingly target return on equity. Valuations, on the other hand, are very low by historic standards and although earnings might be approaching a peak, the manager believes there is further room for growth. He notes that concerns over the US economy, the US dollar and the US markets are currently dampening sentiment towards Japan. The manager believes in a sustained revival of capex on the back of a replacement cycle which is needed to boost productivity. Although the manager has reduced some of the bets in his portfolio, he has retained his pro-cyclical stance linking into Chinese growth with overweights in building materials and machinery. The manager remains underweight technology on valuation grounds and has zero exposure to the car manufacturers on the premise the competitive landscape in the US is eroding margins. He notes that, overall, it has become more difficult to find valuation anomalies.
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