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Artemis' Niznik: I believe the struggle is now behind us
by Dylan Lobo on Jun 26, 2014 at 12:53
Screaming Brooks buy
One company featuring heavily in this archive is Brooks Macdonald, which at 2.8% is the £379 million fund’s second biggest holding. After his last meeting with the firm in March and the subsequent decline in its share price, Niznik believes Brooks offers an excellent opportunity relative to its sector.
‘Brooks shares are down 10% over the last month and If I didn’t own them already I’d buy them. It’s a screaming buy. Rathbones and Brewin Dolphin have a higher rating, yet Brooks’ organic growth of more than 15% is more than double [its competitors],’ he said.
‘When I saw Brooks in March, the funds linked to clients they are signing up is at the highest ever. People were worried that post-retail distribution review, Brooks’ money flows would decrease, but they have increased. While I have holdings in both Rathbones and Brewin, which are also cracking businesses, I think there is better relative value in Brooks.’
Niznik’s top holding is vet firm CVS, which accounts for around 3%.
‘CVS owns between 10-12% of the share of a fragmented market, 70% of which is dominated by family businesses. This share could rise to 20% rapidly,’ he said.
‘It has also got big enough to do its own branded stuff rather than buy stock from the big pharmas. This allows CVS to offer its products cheaper, while taking a bigger margin for itself.’
So after the small cap rally, does the inherently cautious Niznik believe things are going to be much tougher for his asset class?
‘My gut says after a strong run you should cut back. However, valuations remain attractive based on higher earnings growth and small caps are only on a small premium to large caps – they are not pre-Lehmans levels,’ he said.
‘My gut is saying bank profits but the stats are saying there is no valuation bubble. Now may not be the best time to buy small caps but I still have all of my own money in the fund. Over the long term I remain happy with my exposure.’
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