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Cazenove's Paul Marriage: my UK smaller company stock tips
Paul Marriage, manager of the Cazenove UK Smaller Companies fund, shares some of his best stock ideas.
Paul Marriage, manager of the Cazenove UK Smaller Companies fund, a pick of Citywire Selection, talks about the stocks he likes best.
Lagging 'deep value' rally
Cazenove UK Smaller Companies manager Paul Marriage has been happy to lag the sharp rally in small and medium-sized stocks at the start of 2012 because he believes his focus on quality stocks makes him better placed to pick out the long-term winners.
Marriage's fund posted a return of 5.2% in February, compared with the UK smaller company index's 7.9% return, while the medium-sized stock index managed a return of 6.7%. But Marriage thinks the rally has been indiscriminate, boosting the price of resources stocks he tends to avoid.
'A rising tide catches all boats, and we will probably be a few months behind [in the rally] as we tend to lag a rising market,' he said.
Smart Metering leads fund returns
Nevertheless, Marriage has seen continued strong performance from a diverse range of stocks that he believes can continue to grow profits and revenues at a steady and recurring rate.
A good example is digital gas meter supplier Smart Metering (SMSS.L), which Marriage initially bought when it floated on the stock market last year. The stock was Marriage's standout performer over the past few weeks after he bought in at 60p, and had doubled in price to £1.20 by 5 March.
'There was a dual trigger this month with both a solid trading statement that led to small upgrades and a competitor business looking to float as well,' he said. While Marriage now thinks the stock is 'a little overvalued' at present, he continues to back it.
'We feel that the long-term growth opportunity and utility-like recurring revenue generation will continue to make this an attractive investment.'
Walter Greenbank 'looking cheap'
He describes Walker Greenbank, which owns soft furnishings brands Sanderson and William Morris, as something akin to a luxury goods group, and uses Mulberry (MUL.L)'s buying power as a comparison.
'Walker Greenbank has sales of around £80 million compared to Mulberry's £170 million. It has a market cap of £50 million and is on seven times one-year earnings. Mulberry has a market cap of £1.1 billion and a valuation of around 20 times one-year earnings, so we think Walker Greenbank looks very cheap,' Marriage said.
Pendragon added on market weakness
Marriage has used market weakness to add car dealership Pendragon (PDG.L) to the portfolio while he has taken some profits from Ulster TV, Domino Printing (DOPR.L) and Immunodiagnostic Sytems (IDH.L) after strong runs in the recent rally.
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- Smart Metering Systems PLC (SMSS.L)
- Walker Greenbank PLC (WGB.L)
- Dialight PLC (DIAL.L)
- Mulberry Group PLC (MUL.L)
- Pendragon PLC (PDG.L)
- Domino Printing Sciences PLC (DOPR.L)
- Immunodiagnostic Systems Holdings PLC (IDH.L)
- Telford Homes PLC (TELF.L)
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