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Long-term holds bring Nigel Thomas stellar returns

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Long-term holds bring Nigel Thomas stellar returns

AXA Framlington’s star manager Nigel Thomas has returned 242% over the past 10 years on his UK Select Opportunities fund, a performance he puts down to backing his picks rather than always looking for something new. He said his approach was to hold and increase his investments in the UK companies he liked, instead of trawling the markets for different firms whose return may not be any better.

‘My investment style is buy and hold,’ he said. ‘[I live by] the old stock market adage of “don’t cut your flowers to water the weeds”. So if you have good companies in the portfolio and you have cash coming into the fund, then often I add to those good companies rather than trying to search the market for some equally good companies.’

And cash has certainly come into the fund, which has grown from £65 million in 2002 to £3.3 billion today.

Thomas said he has not been hampered by the fund’s size. ‘I enjoy running a large fund,’ he said. ‘Size is not a problem; it’s getting the stocks right that is the problem.’

Backing a pick

One of the holdings Thomas believes he has right is tied advice network St James’s Place (SJP). He believes the company’s business model will stand it in good stead after the retail distribution review (RDR), and said if recent reports that Lloyds Banking Group wanted to sell its 60% stake in SJP proved accurate, he would top up his holding subsequent to that sale.

‘If SJP is spun off, we would increase our allocation to the stock as long as the price is right,’ said Thomas.

‘The SJP business model looks robust [for the post-RDR world]. The partners have equity, meaning their interest is very aligned to the firm’s performance. Cashflow is strong and I believe the overhang from the uncertainty surrounding Lloyds has held back the stock,’ he said.

In general, he owns few financials and is sceptical of banks, holding only HSBC.

Confidence in the US

Thomas is confident about the US economy and has backed it to recover. He said investing in a manufacturing renaissance across the Atlantic was more important to him than emerging market growth.

He attributed the US revival to superior capital markets, intellectual property, technology and shorter supply chains. ‘Things work in America,’ he said.

Transportation and energy costs were making it cheaper to build a factory in Tennessee than in Shenzhen, he added.

Thomas spoke to New Model Adviser® a few weeks after he had returned from a trip to the US, and was enthusiastic about his UK stocks that have US exposure, highlighting two of his most recent purchases: Ashtead, a construction equipment rental company, and Wolseley, a plumbing and heating equipment supplier.

‘They are really plays on the US recovery and the housing market turning round, and actually the plumbers are more active in the US so that should help Wolseley,’ he said.

No plans to retire

Thomas has had a long and successful tenure at the helm of the fund and is now 57, leading some investors to wonder about succession plans. But he was adamant he had no plans to retire and would not be drawn on potential successors.

‘I enjoy meeting companies and trying to look forward all the time – tomorrow, tomorrow, tomorrow – to invest in good UK companies. And I can visit them in China or the US. It will be up to the company, ultimately if I do decide to retire, about succession.’

Nigel Thomas CV

2005-present     AXA Framlington UK Select Opportunities fund, manager

2002-2005            Framlington UK Select Opportunities fund, manager

1996-2002            Solus Special Situations fund and ABN Amro UK Select Opportunities fund, portfolio manager

1986-1996            Carrington Pembroke, portfolio manager

1984-1986            Hill Samuel, portfolio manager

1979-1984            Carrington Pembroke, private client portfolio manager

1978-1979            Robson Rhodes, trainee chartered accountant 

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