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Trio of rated managers reveal their top offbeat plays

Equity managers share the stocks and strategies they are using to uncover new investment ideas in the markets.

Hunting for opportunities

With so many stocks to choose from in the global equity market, it can be disappointing for investors to see different managers holding the same companies in their funds.

Fearful of herding in the same areas, many managers comb markets for little-known stocks, either drawn from newer companies with above average growth or firms that they view as part of a wider sector trend.

In this gallery, three Citywire rated managers highlight leading companies they have uncovered far from the madding crowd of the wider equity market.

ETFs

The ETF market has grown considerably over the past few years, with many investors attracted by the low costs. Citywire AA-rated Michael Clements, the head of European equities and manager of the Oyster Continental European Selection fund at SYZ Asset Management, believes ETF provider Flow Traders is an interesting play on volatility.

‘It is a leading ETF market maker with c.20% of market share in Europe. Taking a long-term perspective, it is benefitting from the structural growth in ETFs; in the short term, its revenues are largely influenced by volatility.

‘When this is subdued, low trading volumes and tight spreads weigh on revenues. However in times of stress or market dislocation, volatility provides a kicker to its structural revenue growth,’ Clements said.

He holds 4.3% of the fund in the company and added that its earnings have fallen due to the lack of volatility, but they will improve once volatility returns to its normal levels.

Adding environmental value

Citywire A-rated Thomas Sørensen and Citywire AA-rated Henning Padberg, who co-manage the Nordea 1 – Global Climate and Environment Equity fund, look for bottom-up opportunities adding environmental value to the fund.

‘We currently see significant opportunities for companies focussing on solutions within “resource efficiency” and “environment protection”. The main reason for the attractiveness of these areas is based on very attractive returns and payback times for these solutions.

‘In addition, changes in the environment, such as more volatile weather patterns and bad air quality, are triggering a wave of investments in areas like clean water and air and environmental services,’ Padberg said.

The top holding in the fund is Ecolab at 4.04%, a US-based firm which focuses on providing clean water and energy technology to industries. Padberg added that they prefer medium-sized growth companies as they are better positioned to capitalise on climate and environmental themes.

Building boom

The levels of infrastructure improvements and construction in Japan have increased as a knock-on effect caused by growing numbers of tourists from Asia who have an insatiable appetite for Japanese products.

Citywire A-rated Richard Kaye, who manages the Comgest Growth Japan fund with Citywire AAA-rated Chantana Ward and Makoto Egami, is playing the theme of tourism by holding Japan’s biggest rail company. He is also tapping the building boom in Japan through construction-related stocks.

‘Tokyo is pretty well served for hotels, but the west of Japan like Osaka and Kyoto lack hotels and Japan has been dealing with that problem. We have Makita, which is Japan's biggest power tool company. It has posted a consistent growth driven by its Japan business, which has benefitted from the growing construction business driven by hotel demand.’

Related Fund Managers

Henning Padberg
Henning Padberg
3/56 in Equity - Global Themes (Performance over 3 years) Average Total Return: 44.67%
Richard Kaye
Richard Kaye
13/168 in Equity - Japan (Performance over 3 years) Average Total Return: 55.18%
Makoto Egami
Makoto Egami
106/204 in Equity - Japan (Performance over 1 year) Average Total Return: 29.51%
Michael Clements
Michael Clements
99/596 in Equity - Europe (Performance over 3 years) Average Total Return: 37.79%
Thomas Sørensen
Thomas Sørensen
328/596 in Equity - Europe (Performance over 3 years) Average Total Return: 26.84%
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