View the article online at http://citywire.co.uk/money/article/a748414
Dobell: Gotham City doesn't scare me off Quindell
Tom Dobell, manager of the £7 billion M&G Recovery fund, has backed Quindell, the software outsourcing company hit in an 'unpleasant bear raid' last week.
Dobell (pictured) bought an 8% stake in the insurance software specialist in November. Last week its share price plunged 40% after Gotham City Research published a note describing it as ‘built on quicksand’. At the time it revealed that it had taken a short position in the stock and would benefit from a fall in the share price.
Dobell, who had 2.3% of the Recovery fund in Quindell last month, dismissed Gotham’s report as ‘a rather unpleasant anonymous bear raid’ based on ‘spurious information’, although he acknowledged that ‘some of it had some legitimacy’.
Quindell has begun legal action against what it termed a ‘coordinated shorting attack’. It has also published a detailed rebuttal of Gotham's criticism of its accounts. Meanwhile directors of the firm have bought more shares in the company to demonstrate their confidence in its future.'
‘It is obviously going through some growing pains at the moment,’ commented Dobell. ‘It is in transition. We are working closely with the company and its advisers. So far they are responding very well and they have a particularly hard-working, capable chief executive,’ he said referring to Quindell's founder and executive chairman, Rob Terry.
Quindell nevertheless remains a compelling investment for Dobell given what he says is its focus on simplifying the processing of insurance claims.
‘This business has a very interesting proposition in terms of making the industry a lot more effective for everybody.’ Dobell added that Quindell also contained a ‘really interesting’ division in Canada, and a ‘fascinating position’ in the roll out of risk-assessing black boxes for cars.
‘For a combination of those reasons, we supported the company enthusiastically and continue to do so,’ he concluded.
‘We have a thick skin here but we are working with them and I intend to try to help make this company a great success.’
The M&G Recovery fund has struggled in recent years, with a three-year total return of just over 16% compared with an average of 36.3% from funds in the UK All Companies sector. It has rebounded more recently, however, returning 0.7% over the past three months against a sector average of 0.2% and a drop of 0.6% from the FTSE All Share index.
Quindell is also a top holding of Gervais Williams' popular Diverse Income Trust (DIVI ), ranking eighth in the portfolio and accounting for 1.4% of its assets.
You can read more about DIVI's top holdings in the latest issue of Income Investor which looks at how investors can generate income from smaller companies.
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by Gavin Lumsden on Oct 21, 2014 at 17:20