New for 2017. Taking a flexible approach through the economic cycle
Medium-sized UK companies are often the frontrunners in the growth stakes and this is the part of the market focused on by this fund, managed by Richard Watts since 2009. Watts works within the company's UK small and mid-cap equities team.
They believe that a flexible style, encompassing a willingness to hold value and/or growth stocks, depending on the conditions and outlook, provides the greatest scope for sustained outperformance. Watts and the team make extensive use of external inputs then overlay this with their own detailed analytical work to identify potential investment opportunities.
Watts first looks at identifying sectors likely to outperform the overall economy. The team studies a wide range of economic and social indicators ranging over the domestic and global scene. This allows Watts to set the overall balance of the portfolio, such as the defensive or cyclical positioning.
When selecting companies to be included in the portfolio, Watts expects that firms will typically meet at least one of three selection criteria: likelihood of a positive earnings revision; re-rating potential; or sustained above-average earnings growth.
The team produces a weekly screen of data for all companies in the mid-capitalisation universe. This is one of the many tools Watts uses to gain investment ideas. In addition to detailed analytical work, meetings with company management are an important part of the process. He and the rest of the team typically conduct around 300-400 meetings a year.