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The stocks Liontrust's Cross & Fosh back to keep them at the top
by Emma Dunkley on Feb 06, 2012 at 10:48
As the managers of the best-performing fund in the UK All Companies sector last year, Liontrust Special Situations ’ Julian Fosh and Anthony Cross are continuing to back a range of stocks that are set to grow despite subdued economic growth.
The fund has been a consistent top-performer, leading its sector last year with a return of 7.6% compared with the Hoare Govett Small Cap Extended TR index’s -8.77%. It has also been among the best over three and five years, delivering 77.86% and 53.9% respectively.Fosh and Cross attribute the fund’s stellar performance to its investment process, based on intellectual capital as opposed to tangible assets. Fosh said the stocks he will invest in all share a combination of three main attributes: intellectual property, strong distribution networks and recurring revenues.
‘Everything we buy has at least one of those three factors,’ Fosh said. ‘We then look at 10 years of history for demonstrable returns from the company, to see if they have covered their cost of capital. We also try to buy them at a cheap price.’
Rather than trying to forecast economic growth, or select specific sectors or themes, the managers stick to these criteria, hunting for intangible assets.
‘Rightmove, an online property site, has a big distribution network and a large market share,’ said Fosh. ‘PayPoint also has a large distribution base, and has also managed to recover from the threat last year from Camelot coming into its market.’
The stocks also benefit from having global-facing businesses, as opposed to being only domestically focused.
Aggreko, a global energy hire company, is in the portfolio, with ‘unparallelled levels of service,’ according to Fosh.
Increasing urbanisation means cities are developing faster than their underlying infrastructure and power generation can support, so the ability to provide immediate and temporary power supply on a global basis is a compelling business model.
Fosh said: ‘This company is so strong that when GE tried to come in, they actually ended up giving up.
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After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.