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AAA-rated Henry Dixon: three massively undervalued stocks

by Robert St George on Dec 04, 2013 at 11:48

And as with Direct Line, Dixon expressed confidence that the better financial position would enable a ‘material step up in cash returns’ from QinetiQ. ‘There is the opportunity and intention there from management,’ he relayed.

Dixon mentioned publisher Trinity Mirror as an interesting small-cap too. In part, this is a play on the UK’s domestic recovery. ‘If there are more builders, there will be more Mirrors sold,’ he surmised.

But the newspaper firm is also significantly undervalued, added Dixon, pointing out that its property portfolio and printing presses were recorded on Trinity Mirror’s balance sheet at far less than their true worth.

Dixon imagined that Trinity Mirror could replicate the near 100% rally of ITV, a holding he sold out of earlier in the year. ‘We rotated from fair value into great value,’ he explained. ITV’s price-to-earnings ratio is now 19.8, compared with Trinity Mirror’s 5.9. Trinity Mirror’s price-to-book ratio is also 0.7, valuing the company at less than the sum of its assets.

Since unveiling the GLG version of the Undervalued Assets fund last week, Dixon confirmed that he had raised another £5 million on top of the £40 million seed capital. Although the Matterley entity has only £75 million of assets under management, Dixon felt around £500 million would be an appropriate size for the strategy at current market levels.

On his move to GLG, Dixon cited the Man Group division’s superior resources as a principal attraction. He had already benefited from being able to bring sector specialists into meetings, greater access to chief executives, and better visibility of deal flows, he told Wealth Manager.

‘I had to put that aside,’ Dixon said of his five years at Matterley. ‘This was absolutely accretive to doing the job better. We hope the resource will help us push on.’

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