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Philip Rodrigs: smaller oil stocks beat vampires and dating
Most investors buying shares in oil companies do so because they think the oil price will rise. Philip Rodrigs, one of only 36 fund managers with a top Citywire AAA rating, isn’t one of them.
He told Citywire that his fund, Investec UK Smaller Companies , was now ‘heavily overweight’ on resources - 15% invested in resources companies, half of them specifically in oil - but that this had more to do with the homework done by these companies than the price of oil.
Rodrigs said: ‘This was never really driven by a belief that resources prices will rise. It’s mostly because these companies all spent their recessionary phase looking closely at their patches to see where their best prospects will be. The success rate of resources companies seems to be higher than we’re normally used to and that’s because they’ve taken a great deal of care over the last two-to-three years. ‘
He said that, at the moment, most investors were overlooking this potential: ‘The stock market is not pricing in any anticipated finds. The value of these companies are already at a discount to the known deposits or fields.‘
Companies he discussed were Ithaca Energy which has all of its operations focused on the UK North Sea and which aims to increase their production five fold over the next three-to-four years. The fund’s largest oil holding is Nautical Petroleum which Rodrigs points out has done better than Rockhopper this year. He said: ’I invested at 125p and it is now at 366p’. He said he had also recently bought into Petroneft less than a month ago at 43p, now at 62p.
Dating and vampires
Rodrigs said that encouraging maiden results sent the company’s share price up by 50% in September and that it was growing at 10% month-on-month. Like Hargreave, Rodrigs is not concerned that Easyjet founder has taken issue with the name because it is not a brand name. The three dating websites it runs are Cupid, Be Naughty, Girlsdateforfree.
The Investec fund’s biggest holding is Entertainment One which makes up 2.2% of Rodrig’s fund. It owns 50% of the franchise of popular children’s TV show Peppa Pig and last week signed an agreement with US-based Nick Junior, part of the children's TV network Nickelodeon.
But the jewel in its crown is that it owns the UK and Canadian rights to Twilight, the vampire movies, although this is one of a 150 movies per year that Entertainment One deals with. Rodrigs bought its shares at 55p and they are now worth 117p. Is it time to reduce the size of the stake? Apparently not: ‘At the moment I’m expecting good results from the company (due this week) and I consider the valuation to still be very low. It was very low when I bought into it and it is still very low.
‘I believe we’re in economic recovery. There’s a lot of fear out there about a double dip.’ But he said the figures don’t justify this fear.’ But what if his optimism is misplaced and the UK economy does dip?
Rodrigs said that the past performance of his fund showed that while able to benefit from good times, it hadn’t lost as much as its benchmark index in the bad times. He said: ‘There’s a lot of value to be gained by stock picking... we’ve generated emerging market-like returns for lower than emerging market-like risks.’
Although 4.5% of the fund is in cash, Rodrigs said that two thirds of this was earmarked for investment. ‘I’m keen to be fully invested as possible’.
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Look up the funds
- Investec UK Smaller Companies A Acc Net
- Standard Life Inv UK Smaller Companies Ret Acc
- Old Mutual UK Select Smaller Companies A Acc
- River and Mercantile UK Equity Smaller Companies A
- Marlborough UK Micro Cap Growth
- Marlborough Special Situations
- Close Special Situations
Look up the shares
- Ithaca Energy Inc (IAE)
- Petroneft Resources PLC (PTR)
- Nautical Petroleum PLC (NPE)
- Rockhopper Exploration PLC (RKH)
- Easydate PLC (EZD)
- Entertainment One Ltd (ETO)
Look up the fund managers
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