Shares in the company are down 26 per cent since the start of March when the company first revealed its heavier-than expected capex costs which have weighed on profits.
Standard Life Investments UK Smaller Companies has a 4.9 per cent holding in the fund, having bought it over 10 years ago and championed it ever since. Nimmo didn’t want to comment.
The Standard Life UK Ethical fund has a 3.1 per cent holding, while the Baillie Gifford UK Equity Alpha – 6.5 per cent holding – and British Smaller Companies funds – 3.2 per cent holding.
Marlborough UK Multi-Cap Growth fund has a 3.4 per cent holding and is by FE Alpha Manager Richard Hallett.
Performance of funds since ASOS’s market correction
Source: FE Analytics
Thirteen funds in total hold ASOS in their top ten holdings including other top funds Baillie Gifford Global Discovery UK, Rathbone Global Opportunities and J Chahine Digital Funds Stars Europe.
ASOS’s share price suffered a significant market correction at the end of February, after warning that it was spending more on expansion than it had foreseen. Today it ASOS announced profits were down 22 per cent compared to the same period last year, although revenues were up 34 per cent.
Performance of stock since correction
Source: FE Analytics
However, FE Alpha Manager Margaret Lawson says investors in ASOS should not sell out of the stock despite its recent share price tumble.
Lawson, who co-manages the £116m SVM UK Growth fund alongside Colin McLean, says she will continue to hold the stock as she thinks it has got a long way to run, despite its high valuation and profit fall.
“Its potential market is the whole world and it has always been investing ahead of the curve,” she said.
However several fund managers have recently said high valuations in the tech sector suggest it could be due a fall.
FE Alpha Manager Jeremy Hall draws a comparison between the bursting of the dotcom bubble and today’s high valuations in tech companies.
“It [the tech sector] taken as a whole is starting to feel a little bit like 1999 and the bursting of the dotcom bubble, lots of businesses that are stretched in valuations terms for weak underlying earnings growth,” he said. “However, one thing 1999 taught is it can go on a lot longer than you think.”
Other analysts have recently warned that there could be a bubble bursting in these areas of the market.
Lawson says she is not worried about a 1999 – style tech bubble and will continue to invest in other tech stocks, but judge them on their individual characteristics.
George Godber, lead manager of the Miton UK Value Opportunities fund, says the stock doesn’t interest him due to its high valuation relative to earnings.
“The stock has been one of the best long term stock market stories you will find not just in the UK but anywhere in the world,” he said.
“There are very few businesses that have compounded at this rate, but the rating it’s on just doesn’t fit our valuation criteria: It’s on 86 times earnings and 20 times book value.”
However, FE Alpha Manager James Thomson recently told FE Trustnet he thought ASOS could deliver strong returns in the future despite its high valuations and said it was the perfect example of a quality company.
“When ASOS was 5p it was expensive, and at £65 a share it’s still expensive,” he said.
“These companies look expensive from the outside, but their innovation and ability to take market share markets their earnings growth justified.”
The manager remains confident in the stock despite the market correction, saying such an occurrence is typical.
“A common risk of high-growth investing is that these type of companies are prone to maddening pullbacks, proving why these kind of stocks are not really for short-term investors,” he explained.
“ASOS announced slower sales growth and sluggish margin improvement, as they invest for the next phase of growth. The stock was priced for perfection and has sold off.”