Ignore market cycles at your peril

The J O Hambro Capital Management UK Opportunities Fund has just celebrated its two year anniversary under the management of John Wood, senior fund manager and Ben Leyland, co-manager. It has recently added an A-rating by Standard & Poor’s to its OBSR AA-rating. John also holds an AA-rating by Citywire.

The Fund has been top decile since launch and has returned 33.74% against a benchmark return of 26.18% and a sector average of 23.46% over the two year period. John Wood has outperformed the index and peer group every year since 2002.

“What we are currently experiencing is a normal market cycle, and we will see the usual phases of "Regret" and "Recovery" following a "Recession" . The time to buy equities will be during the "Regret" phase.” says John Wood, senior fund manager of the J O Hambro Capital Management (JOHCM) UK Opportunities fund.

“It is always tempting to anticipate this and buy too early: we are working hard to resist that temptation. This is particularly relevant for stocks in more cyclical sectors, which despite performing poorly this year could still be value traps, where earnings downgrades steadily undermine what initially looked like a cheap valuation. At turning points such as these, investors too often forget this kind of risk. For now, an investor’s most valuable asset is patience, and we remain firmly in capital preservation mode. We continue to be vigilant about stocks we own, and as always are selling where we perceive a fundamental problem or a stretched valuation.

At the moment we like companies with recurring earnings, trading at reasonable valuations. We favour food retailers, tobacco stocks, defence stocks and, in general, businesses that can grow relatively independently of the economic cycle.”

Fund description

Despite periods of volatility, it is the prospect of attractive long-term capital growth that attracts investors to this fund. The Fund invests mostly in stocks of UK-listed large and medium-sized companies, but may also hold up to 10% of its assets in international stocks. “High conviction” is the term that best describes the manager’s style. The Fund’s holdings (typically around 30-40) represent his strongest investment ideas – a blend of attractive stock specifics and promising themes.

Investment strategy

John aims to identify long term trends and themes and then find undervalued, high quality companies which benefit.
Markets persistently underestimate the value created by well-managed companies in growth areas, reinvesting wisely; are stocks of particular interest to John
John’s returns-based absolute valuation approach avoids momentum and relative valuation pitfalls.
He follows a strict "sell to zero" discipline: the main risk is holding "bad" shares not missing out on "good" ones.