He currently runs the top performing CF Miton UK Multi Cap Income fund, CF Miton UK Smaller Companies fund and Diverse Income trust, having previously managed open and closed-ended funds at Henderson and Gartmore.
According to FE Analytics, Williams has returned 353.1 per cent to his investors since the turn of the century, beating his peer group composite by more than 125 percentage points in the process.
Performance of manager vs peers since Jan 2000
Source: FE Analytics
Williams attributes those high returns to finding companies that can not only grow their business, but also their dividend, over the long term.
“We like companies with plenty of upside,” Williams said. “We want income growth of course, but we are willing to be patient and buy companies that we think will be in a position to pay a decent yield a few years down the line.”
However, the manager says valuation is a very important to his decision and as a result will look to sell if he thinks a company, even if he still likes the business itself, has become fully valued.
With that in mind for those who want to add risk to their portfolio with smaller companies, Williams tells FE Trustnet about an example of stocks he has bought but also those that he has been taking profits from as they are now fully valued.
Buy – Gulf Marine Services
Williams took part in the Gulf Marine Services IPO recently. However, unlike other companies that have recently come to the market, he says the oil services company has seeming gone under the radar of most investors.
“It only came to the market a few weeks ago and due to the amount of IPOs this year which has caused some investor fatigue, and because it is in oil, the stock hasn’t gained much attention,” Williams said.
Gulf Marine Services, according to Williams, provides services work for the major oil companies, particularly those with offshore wells.
“They do work-over on offshore wells. The cost of a rig for the oil companies tend to be very expensive, but Gulf Marine supplies jack-up platforms which can do the job for a third of the cost. There is demand there but it is still quite an immature area of the market, but they are attracting a lot of clients because their services are very efficient.”
The company was listed on the 14th March and, according to FE Analytics, investors who bought the stock on its first day of trading would have seen a return of 13.55 per cent.
Performance of stock since Mar 2014
Source: FE Analytics
However, Williams says it is a good long term buy.
“It came to the market with a P/E of seven and at 135p; however its business should double over the next couple of years.”
“The dividend yield is not big at the moment and they do have quite a lot of cash on the balance sheet, but they have been using the capital they have raised to invest for growth by increasing their fleet.”
“However, I expect that dividend to increase steadily over the next two to three years.”
Buy – 888 Holdings
Williams says that a number of his holdings had become fully valued a few months and as a result he had sold his exposure to. However, some of them have recently become attractive again, one of which is 888 Holdings.
“Bizarrely, we haven’t sold anything completely this year,” Williams said. “We had sold some of our positions which had done very well for us, like gaming stocks such as Net Play and 888, but we have been going back in again recently.”
Williams says that as well as performing well here in the UK and being the market leader in a number of European countries such as Italy and Spain, it should also benefit from a number of US states legalising online gambling.
The likes of Nevada, Delaware and New Jersey have already taken the step, but Williams says if California – which is set to make a decision on the issue at some stage this year – to allow online gambling then 888 would likely be prime beneficiary.
Our data shows the stock, which is listed on the FTSE 250, has delivered a return of more than 200 per cent over three years. However, it has considerably underperformed over the last 12 months with losses of 10.12 per cent.
Performance of stock vs index over 1yr
Source: FE Analytics
However, Williams is backing the stock to outperform from here.
Despite that, our data shows that no funds in the IMA universe count 888 Holdings as a top 10 position.
Trim – Greencore
One stock investors should be wary of however, according to Williams, is Greencore Group.
Williams says he has been trimming his exposure to the FSTE 250 food manufacturer which has been a long-standing holding for him. While he still rates the company and its management, he thinks it has now become quite expensive and as a result, he has taken profits.
“We first bought it in 2011. It has making an acquisition of company called Uniq at the time, but as you remember 2011 wasn’t an easy year,” Williams said.
“Also, food manufacturers were in a difficult place as super markets had been increasing space and their margins were coming under pressure. The sector hadn’t been performing well and we picked up the stock at a yield of 9 per cent.”
“What has happened is that the share price has moved from 50p to 270p and obviously the yield is now no longer 9 per cent.”
According to FE Analytics, investors who bought shares in Greencore two years ago would now be sitting on a return of more than 300 per cent.
Performance of stock vs sector over 2yrs
Source: FE Analytics
While Williams still wants a degree of exposure to Greencore – which is the world’s largest sandwich manufacturer – he says the recent share price has forced his hand.
“I love company and I love what they are doing, but given where it has come from it is now expensive. I think now is a good time to take profits and look for opportunities elsewhere,” Williams said.
Lazard European Smaller Companies and SWIP UK Smaller Companies are the only two IMA funds that hold Greencore in their top 10.
