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Graham French: last summer was the worst of my career
by Matthew Goodburn on Mar 12, 2013 at 13:54
M&G Global Basics manager Graham French admits that last summer was ‘the worst period’ of his investment career as the fund suffered from its overweight to resources stocks and the issues surrounding security at the Olympics with core holding G4S.
French told investors that there were three resource stocks ‘perhaps we shouldn’t have been in’ last year, including South African platinum miner Lonmin which has now been completely sold.
He said: ‘Last summer was one of the worst I can recollect [as an investor]. One of our largest holdings G4S not participating in the Olympics ceremony hurt performance and it was also the start of commodities not performing.'
Speaking as the company came under intense public scrutiny in August last year, French said he was sticking to his guns on the stock as he regarded G4S as a well-diversified company able to weather the press storm.
French admits that G4S was the fund’s ‘stock horribilis’ last summer but after working actively behind the scenes with the company’s management, he increased his stake in the firm when its share price plummeted over the Olympics debacle.
‘When we have problems with a company, we don’t shout about it in the press and become aggressive like a hedge fund, we talk privately and try to make things better. G4S is one of the largest companies in the world and is well diversified. The chief executive is fantastic, and if you believe in global growth and emerging market growth G4S is a wonderful company to give you that.’
May was another 'terrible month', says French. 'We exited most commodities but kept some of them and have to accept that last May we had two or three shares we shouldn’t have and it cost us 2-3% of performance. We panicked early and got rid of the problem early.’
‘Rightly so, we had to take some criticism last summer as we had not moved up the chain with the commodity cycle coming to an end. We apologise for that blip and have had a good six to nine months since.’
But while the fund has been hurt by its large allocation to miners and basic materials, French does not think demand for them has fallen off a cliff and he remains overweight to Australian miners such as mineral sands miner Iluka Resources, and copper producer Oz minerals.
Miners still on the agenda
He insists that the main issue for the sector has been the misuse of capital as many miners extended themselves by making costly acquisitions and failed to improve production levels or dividend payments to shareholders.
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