Gartmore fund manager Gervais Williams argues Mothercare shares could double while motor retailers are still attractive investments.
Williams, an active trader, manages the £222.5 million Gartmore UK & Irish Smaller Companies unit trust as well as the £105 million Gartmore Growth Opportunities (GGO) and £70 million Gartmore Fledgling investment trusts. He told Citywire he has recently been 'very, very active', and, despite the large rally among small-caps, can still find plenty of opportunities in the market.
For instance, last month he bought shares in Internet services group Easynet (ESY) during Marconi's sale of 44.7 million shares at 127p each, and has very recently picked up more. The shares are up 2p at 122.5p today.
He said: 'The share price has been weak recently, but the group has a lot of cashflow and it will be cashflow positive soon.'
He has also bought into troubled baby goods retailer Mothercare (MTC), which is also a significant investment for GAM's AAA-rated manager Andrew Green.
'It's had a good run but I still think there could be upside of 50%-100%,' Williams said. 'It has a lot of sceptics, but the group has lots of assets and has had a change of management.'
Mothercare shares have soared from just 85p in February to 221.5p, and are up 7.5p today ahead of a trading statement on Wednesday. In July the retailer, which has disappointed investors on numerous occasions, said like-for-like sales in the UK over the 15 weeks to 11 July rose 3.4%.
And he has picked up shares in educational retailer and home shopping group Findel (FDL) as 'it has not sold a lot of exercise books to schools, but it has got a big yield and is not on a big price/earnings ratio.'
He also has a larger-than-normal position in the motor retailing sector, and owns shares in HR Owen (HRO), Pendragon (PDG) and Lookers (LOOK). The European Commission's block exemption reform plans, which come into effect this week, break some of the tight controls previously held by car manufacturers and allow motor retailers to sell a variety of brands in their showrooms. 'This is not all priced in [to the share prices],' Williams said.
Elsewhere, he has only a small position in property stocks, because of the significant amount of vacancies in City and West End properties, and retailers, on valuation grounds.
And he is cautious on the housebuilding sector, unlike colleagues Eric Moore and Sacha Sadan, who run the £320 million Gartmore UK Growth fund and who favour the sector. Williams said: 'I've left the bullish camp and taken most of my profits. I don't think you'll make a lot of money from here, although perhaps you'll get a few bids.'
Over the past five years the net asset value of the Gartmore Fledgling trust has risen 175%, compared with an average 31% increase among funds in the sector.