ARTEMIS US SMALLER COMPANIES FUND: ‘Up-down’ boss turning results on their head
No one who invested money in the launch of Artemis US Smaller Companies four and a half years ago can have any cause for complaint.
Not only has the £327million fund outperformed most of its immediate rivals since making its debut in late October 2014 – and proved a better investment than holding a UK investment fund – but it has more than doubled investors’ money.
An investment at launch of £1,000 is now worth more than £2,300. A healthy return on any level.
Since making its debut in late October 2014, it has more than doubled investors’ money
The fund’s success is in the main down to Cormac Weldon who has run it from the start. Having previously spent 17 years at rival investment group Threadneedle, ending up as head of its North American equities, he knows his US smaller companies inside out. Experience counts.
Although the fund’s performance to date is not far short of spectacular, Weldon is not an investment manager who is keen to take big risks.
The fund comprises just over 60 stocks – in other words it is quite diverse – and it is rare that any one holding is bigger than five per cent, Weldon prefers instead to sell the stake down and take some profits. He is also constantly analysing the fund’s portfolio to assess whether the potential gains from individual holdings outweigh the risks.
He labels this approach as ‘up-down’ which means that the potential gains from a stock over the next 12 months must exceed the possible losses, ideally on a two-to-one basis. So, for example, a 12-month potential profit of 50 per cent is only acceptable if the possible losses are less than 25 per cent.
It’s quite an analytical approach which means stakes are usually held on average for no more than 18 months. It also results in companies quickly being jettisoned from the fund if they fail to live up to expectation.
One recent disposal is robotics surgery equipment supplier TransEnterix. Weldon says: ‘I bought the company’s shares 18 months ago in the belief that it could prove a worthy rival to the main supplier Intuitive Surgical.
‘But Intuitive with its Da Vinci equipment dominates the market in robotics surgery and hospitals are loath to change suppliers given the training involved in getting to grips with the equipment. TransEnterix just did not sell the number of machines I thought it would, so I sold out at a loss.’
One winner has been gym operator Planet Fitness that Weldon bought into last summer. It woos US consumers with low-cost membership plans and its success can be measured by a jump in the share price – from around $45 (£35) when Weldon bought in to today’s price of $75 (£58).
He says: ‘Planet Fitness appeals to many first-time gym users, not just because its facilities are cheap to use, but because it does not target those who want to pump iron all day and look at themselves in full-length mirrors. Its gyms are less intimidating than some.’
With Weldon enthused by the fact that the US has the world’s largest pool of venture capital (start-up companies), he is confident he can find enough ‘idiosyncratic’ growth companies to sustain the fund’s strong performance – businesses that will survive any slowdown in the US economy.
As part of this process he will soon visit the US – Chicago, New York and Minneapolis – to speak to the management teams running the companies the fund is invested in. He will also see businesses that could one day end up in his fund – and add to performance. The fund does not pay a dividend so is unsuitable for income seekers.
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