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Five stocks these fund managers really love

There has been little for fund managers to love this year, but with Valentine's Day around the corner, five fund managers reveal the stocks they just can't walk away from.

Nicolas Walewski, manager of the Alken European Opportunities and Alken Absolute Return Europe funds – Pandora

We are bullish on Danish international jewellery maker Pandora. We visited Pandora’s operations in Thailand last month and its outlook is extremely strong, with growth fuelled by online and expansion into new categories. Pandora has been successfully focussing its energy on Europe and the US, while continued expansion in Asia will accelerate its growth even further. Pandora has 19 stores in Singapore and 40 in China, which puts into context the huge growth opportunity for the company. In fact, Hong Kong is one of its most profitable franchises.

Pandora has one of the cheapest PEG ratios in European equity markets. This stock trades on about 15x earnings, with a growth rate above 30% – which is incredibly impressive. It is one of our top holdings in our Alken European Opportunities and Alken Absolute Return Europe funds.

Nicolas Walewski, manager of the Alken European Opportunities and Alken Absolute Return Europe funds – Pandora

We are bullish on Danish international jewellery maker Pandora. We visited Pandora’s operations in Thailand last month and its outlook is extremely strong, with growth fuelled by online and expansion into new categories. Pandora has been successfully focussing its energy on Europe and the US, while continued expansion in Asia will accelerate its growth even further. Pandora has 19 stores in Singapore and 40 in China, which puts into context the huge growth opportunity for the company. In fact, Hong Kong is one of its most profitable franchises.

Pandora has one of the cheapest PEG ratios in European equity markets. This stock trades on about 15x earnings, with a growth rate above 30% – which is incredibly impressive. It is one of our top holdings in our Alken European Opportunities and Alken Absolute Return Europe funds.

Jeremy Lang, founder and fund manager at Ardevora Asset Management – Micro Focus International

This is a stock we have owned for a long time and is a steady plodder. Although it is a tech stock, Micro Focus does not do anything flashy. It produces tools to help programmers deal with enormous amounts of legacy computer code embedded in the IT systems of big companies. It is a good, but somewhat dull business.

We were attracted to Micro Focus as we felt management behaviour had changed following an unsuccessful growth period from 2007 to 2011. A series of acquisitions did not work out well and investors headed for the exit. The long run of disappointments finally persuaded a disillusioned chairman to get more involved and set the business back on its boring path. Its share price has responded well to the absence of any new nasty shocks over the last three years and investor anxiety has been slowly dissipating.

Stuart Mitchell, manager of the SWMC European Fund – Orange

For years we have been intrigued by the strength of Orange’s franchise. The outlook for the group appears to be improving in a number of important ways. Management is working hard to reduce costs, but perhaps more importantly, European regulators have begun to acknowledge the industry has been weakened by fragmentation that long-term investment has been undermined.

Notably, 4G investment is said to be three years behind the US. The regulatory burden is consequently easing somewhat, while at the same time the process of consolidation has begun to accelerate.

Hugh Yarrow, manager of the Evenlode Income Fund – Diageo

A long-held stock within the portfolio, Diageo is a leader in the alcoholic drinks market with a portfolio of strong brands such as Johnnie Walker, Guinness and Baileys. It also has a well-balanced portfolio in terms of exposure to developed and emerging markets.

The last few years have been tough in terms of operational performance as emerging market growth has slowed. As a result, shares have under-performed and the stock offers a dividend yield of 3.4% – well supported by free cash flow. In our view, the long-term potential for dividend growth is strong (the most recent dividend increase was +5%). In the near-term, there are also some positive dynamics at play. Diageo’s US sales performance is improving and the recent fall in oil should provide a tailwind for US consumption growth. The US market represents more than 40% of its profit.

Tim Crockford, co-manager of the Hermes Sourcecap Europe ex-UK Fund – Sartorius AG

As one of the four main suppliers to the biological pharmaceuticals manufacturing process, Sartorius AG is well placed to benefit from the ramp-up in biologics production. A market leader in single-use biologic drug fermentation technology, it will continue to grow as the mix shifts towards branded biological drugs, and when biosimilar (generics) start to make their way to market.

This, combined with its high margins and increasing operational leverage as the business scales, will continue to drive profitability and returns on capital, justifying its premium rating as the company continues to surprise markets on the upside.

Related Fund Managers

Jeremy Lang
Jeremy Lang
6/77 in Alternative UCITS - Long/Short Equity (Performance over 3 years) Average Total Return: 53.88%
Stuart Mitchell
Stuart Mitchell
14/77 in Alternative UCITS - Long/Short Equity (Performance over 3 years) Average Total Return: 31.46%
Nicolas Walewski
Nicolas Walewski
25/77 in Alternative UCITS - Long/Short Equity (Performance over 3 years) Average Total Return: 20.55%
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