Buy, hold or sell: Guy Anderson
Rebecca Jones quizzes manager Guy Anderson on the stocks he is buying, holding and selling.
BUY: INTERNATIONAL PERSONAL FINANCE
FTSE 250-listed International Personal Finance makes up 1.05% of the portfolio. It provides small one-year loans to consumers in six markets, including Mexico and Poland, where it has its largest presence.
After his initial purchase in October 2012, Anderson added to the stockholding significantly last December, when a negative ruling by the Polish Consumer Protection Agency over the way IPF calculated APR sent its share price plummeting. However, Anderson says: "The company is strong enough to adapt to or at least partially mitigate any changes in regulation."
He has so far been proved right, as IPF's shares are currently trading at 552p, nearly 100p up from the trough of last December. However, he insists it was IPF's fundamentals, rather than its share price, that prompted his decision.
"IPF really reflects what we look for: companies that are well positioned to succeed in the long term, produce high returns on capital and generate lots of cash," he says.
Anderson believes IPF's plans to expand further into Eastern Europe and refinance its balance sheet at a more favourable rate leaves it well positioned for growth and to return more cash to shareholders.
Anderson is optimistically hanging on to a holding in the UK's largest price comparison website, which he admits 'hasn't really done anything' since he bought it in March last year at prices that ranged from 180p to 195p.
Moneysupermarket's share price, currently trading at around 180p, was hit hard when Google changed its search algorithms last June, pushing the comparison site from number one for the search terms 'car insurance' and 'home insurance' to fifth and sixth place respectively.
However, Anderson is confident the site can turn itself around. "It has been working hard to improve its web content, which is one of the key things Google is looking for, and it's now ranking higher. Clearly it's not there yet, but it has been improving," he says.
He is also confident that growth in mobile internet use will prove a significant boon for the company. "The move of internet consumption to mobile technology should drive brand loyalty as people rely more on the apps they have downloaded to search for products," he says.
Anderson adds that fundamentally the business is strong, with "high operating margins, great returns on investor capital and very low capital needs". These factors are reflected in its dividend yield, currently 4.5%.
Anderson bought into beleaguered retailer Debenhams in March 2012 when, he says, the stock was widely seen as a "value opportunity" in its range of 77p to 83p. "There was limited UK growth, but there was scope for international expansion through the franchise model, which I found quite exciting," he says.
Anderson says that, with a typical franchise netting Debenhams £200,000 for little capital outlay, the firm's planned expansion from 65 to 150 franchises could have added £17 million to group operating profits.
In August last year he had 0.8% of the fund invested in Debenhams, but sensing that expectations were not matching reality, he began selling out in October at 108p. Following a disastrous Christmas trading period, he relinquished his position entirely in January at 77p.
"Over the past two years franchise growth has not been as rapid as I expected," Anderson says. "I think the firm is struggling because there is a bit of negative sentiment around the brand and, while it is taking steps to address this, UK performance remains disappointing."
He doubts whether management will be able to turn profitability around, not least because the firm remains "behind the curve" in terms of its web presence.
This feature was written for our sister publication Money Observer
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.