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Confident Nimmo keeps cash low, profits from Cove sell
Standard Life Investments UK Smaller Companies fund manager Harry Nimmo makes a quick profit on Cove Energy and sells out of SuperGroup.
A confident Harry Nimmo, manager of the Standard Life UK Smaller Companies fund , made a profit of £15.7 million from selling his stake in bid target Cove Energy (COVE.L) last month, while he is keeping his cash holdings low as he believes his portfolio is 'resilient'.
Profiting from Cove Energy
Nimmo, who is currently relatively bullish for the stocks in his £1 billion portfolio, bought into Cove at 76p a few months ago and sold out last month with the stock trading at £2.28.
Normally a long term investor, he said the shorter holding time frame and type of company Cove is was not typical of his fund, but that his colleague Caspar Trenchard had identified it as a promising stock to own.
He told Citywire Selection: 'Cove does not naturally fit our process as it is a blue sky investment and we normally run our winners for longer. Caspar identified it and it has been a huge success for us. Normally we limit that type of investment to below 5% of the fund.'
Elsewhere, online fashion retailer Asos (ASOS.L) remains the fifth biggest holding despite Nimmo banking some profits in the second quarter of last year. He believes the company still has plenty of growth potential outside of its home market which is not being recognised by the market.
'We met them 10 days ago and it is still a strong story. We have had it since 2006 and it came off in mid 2011 but has started to move back up again. They are building an international business with two thirds of revenues now from Australia, France, Germany and the US and they are building French, Italian and Russian language sites.'
'Investors made a mistake because they were too concerned about the UK business but only 10% of the revenues come from the UK.'
Nimmo recently sold out of long term favourite and former biggest holding SuperGroup (SGP.L), citing concerns that the company is 'trying to grow a bit to quickly for its infrastructure' while he has been adding to his stake in diversified drug research group.
He has also been building his stake in data storage specialist Telecity (TCY.L), which is now more than 3% of the fund, and which is benefiting from the need for greater capacity for storage for smart phones.
Nimmo also added Northern Irish IT consultancy First Derivatives (FRST.L) recently, which provides software to help hedge funds and investment banks oversee their portfolios.
'It is off the radar for most people with a market cap of £90 million, but it is benefiting from the increasingly regulatory environment and is growing rapidly.'
Nimmo holds 10% of the company, with the owner owning some 30% of its shares, making it quite difficult to acquire.
Recent sells have included Globeop Financial Services (GO.L) which was sold after the company was bid for at a premium to its share price and Edinburgh software firm Craneware, which makes software for US hospitals.
'It is a good company but has had some downgrades and there is some uncertainty over trading in its markets.'
Profits have also been taken on Nimmo's third largest holding Rightmove (RMV.L), which has been reduced as it had gone over the 5% level at which Nimmo likes to cap his holdings, while consumer goods producer PZ Cussons (PZC.L) has been sold completely as Nimmo had concerns about trading in its home market Nigeria.
Positive on stocks
The fund currently has 2.5% in cash, reflecting Nimmo's relatively positive take on his companies' prospects.
'None of our companies need to borrow from banks and they are in growing markets. If there is further macro uncertainty we think our stocks will be very resilient.'
The fund was soft closed last August when it hit £1.3 billion on concerns it would affect Nimmo's investment strategy, but has recently been made available again through Standard Life's platform after a combination of market falls and outflows took it back to around the £1 billion mark.
The soft closure measures remain in place for all other third party platforms and distributors and our Citywire research shows that there is no initial charge for the fund through Hargreaves Lansdown although it remains in place for Funds Network and Bestinvest.
In the five years to 15 June, the fund has returned 22.9% compared to the Numis Smaller Companies benchmark's 3.8%.
More about this:
Look up the funds
Look up the shares
- Standard Life UK Smaller Companies Trust PLC
- Cove Energy PLC (COVE.L)
- SuperGroup PLC (SGP.L)
- ASOS PLC (ASOS.L)
- BTG PLC (BTG.L)
- Telecity Group PLC (TCY.L)
- First Derivatives PLC (FRST.L)
- Globeop Financial Services SA (GO.L)
- Rightmove PLC (RMV.L)
- PZ Cussons PLC (PZC.L)
Look up the fund managers
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- Standard Life Investments UK Smaller Companies
- ry Nimmo
- First Derivatives
- Globeop Financial Services
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by Gavin Lumsden on Dec 10, 2013 at 16:51