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My top five equity bargains: SVM's Colin McLean

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on Feb 27, 2014 at 12:55

In the fourth instalment of our five part series running this week on where fund managers are finding equity bargains, SVM UK Growth fund manager Colin McLean reveals his favourite stock picks.

Welcome to the fourth instalment of our five part series this week on where fund managers are finding equity bargains. Up today is Colin McLean, who manages the SVM UK Growth fund alongside Citywire AAA-RATED Margaret Lawson.

Over the last 12 months, the fund is up 29.19%, almost four times the 7.55% rise in its FTSE 100 benchmark. Over three years, the fund is up 51.33%, compared to the benchmark's 23.93% rise.

Earthport

'Technology is not inherently cheap, but, based on our predictions, some stocks could be cheap. With that in mind, we favour Earthport, which is a money transmission and payment system business at an early stage.

A small degree of additional business could quite dramatically impact in its profit and loss.'

Griffin Mining

'If Griffin Mining delivers the earnings I expect it would come down to a multiple of 2 or 3 in a couple of years’ time: they were bargain basement a year ago.

Griffin Mining is a small miner largely based in China, which is why it has gone down to quite a low level; for us it was more of a bottom fishing type of stock. The firm’s price culminated at 68.75p four years ago but fell by half in 2013, reaching 26p in July.

At the time of writing, its share price has risen 36.7%, driven by a rise in zinc prices and growth in consumption; and Panmure Gordon recently had a target raised from 102p to 111p.'

ITV

'We’ve seen better performance from the likes of ITV – where the market misunderstood the difference between the growing area and the declining part of the business.

Three years ago, and with a share price at 52.5p, ITV delivered its first dividend since 2008, pushing the price up. The firm since balanced its business model, focusing on its studio, broadcast and online, pay and interactive propositions.

Over the last 12 months, ITV’s share price is up 68.4% reaching 200.4p at the time of writing.'

Partnership Assurance

'We see Partnership Assurance turning around this year, which joined London listings with a £1.8 billion valuation in June last year, and has been hit by profit warning, and an investigation into its life insurance business pricing.

In September, the Financial Conduct Authority (FCA) said it was looking into a distribution services agreement with an undisclosed firm. While the stock lost a third of its value since September, it is up just over 15% over the last month.'

Thomas Cook

'We have bought into recovery stories such as Thomas Cook, Trinity Mirror and Johnston Press.

While Trinity Mirror and Thomas Cook are further down the line albeit still completing their restructure, Johnston Press is at a much earlier stage of its turnaround.

These companies all come from quite a highly leveraged structure and inherently challenged industries. However, we think they are just getting to the point of which the growth areas can offset the declining areas and they can restructure to improve.

Shares in Thomas Cook took off towards the end of 2013 reaching three-year highs after the firm reported adjusted pre-tax profits of £117 million, beating forecasts.

Johnston Press’s aggressive cost-cutting program and move into digital started paying off despite taking a £194.5 million write-down on its portfolio in 2013. Since October, the share price has risen 76%, but the publisher is still trading at half of its 2009 highs.'

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