Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Ben Yearsley, head of investment research, Charles Stanley.
The internet is a wonderful tool that makes researching investment opportunities much easier. However, while up-to-the-minute information is vital for avid share traders, is it so important for fund investors? The danger with too much information is that it leads to shorter-term investing, which in turn negates many of the benefits of investing in a fund.
Fund investors should be looking to stay invested for the long term – ie, three to five years minimum. Buy the right funds and any short-term underperformance can be ignored and can even be treated as a further buying opportunity. Here are three funds that I like.
Henderson European Special Situations (tel: 0800-832832) is managed by Richard Pease. I recently bought it for the first time. If you can ignore the hype surrounding the eurozone crisis and the poor financial state of various EU governments, European stocks currently look good value. Cash on corporate balance sheets and undemanding price/earnings (p/e) ratios help to make for a compelling investment story.
Yet very few investors buy European funds. This is a pity. Richard Pease, for example, is a top-quality manager who buys into companies with built-in future revenues – recurring revenue streams where new sales aren’t required to deliver profits.
Pease likes conservatively managed companies with strong balance sheets. In strongly rising markets, I would expect this type of fund to get left behind, because quality companies often get ignored in bull markets. However, over a full cycle, I would back Pease and the companies he likes.
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Another fund I have bought back into recently is BlackRock Gold & General (08457-845845), managed by Evy Hambro. Mining companies normally have a fixed cost of production, which means that high sustained commodity prices should lead to above-trend profitability.
However, despite the gold price remaining high, the share prices of gold companies have remained stubbornly in the doldrums. At some point this disconnect between the two will change. The gold price could fall, but with many governments straining under huge debt and the prospect of widespread currency debasement, gold remains an enticing prospect for those seeking safer havens.
Indeed, factor in more quantitative easing from America and you have a scenario where the gold price is underpinned. Evy Hambro is a quality manager with in-depth knowledge of the sector. I believe the time is ripe for this sector to turn around, hence my recent investment.
My final suggestion is focused on Japan. I have recommended this sector for the last few years and have been left looking slightly daft, as Japanese equities have done nothing. However, I feel that, with the recent re-election of Shinzo Abe as prime minister, things will genuinely be different this time.
Abe wants inflation at all costs and has the backing of a large parliamentary majority to deliver it. Inflation is the key to unlocking value in Japan, but it is likely to arrive hand in hand with yen weakness. Normally, I would suggest you buy my favourite Japan fund, Jupiter Japan Income. However, because I expect a weakening yen, I prefer to hold a sterling-hedged option.
Unfortunately, Jupiter’s best offering here is only available institutionally. For this reason, I’ve bought an equally good fund that offers a currency hedged exposure: the GLG Japan Core Alpha Equity fund (020-7016 7000).
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