He has run money since the late-1970s and has built up an enviable track record. He took over the now £4.6bn AXA Framlington UK Select Opportunities fund in September 2002, over which time he has been a top decile performer in the IMA UK All Companies sector with returns of 300.38 per cent - 120 percentage points more than the FTSE All Share.
Performance of fund vs sector and index since Sep 2002
Source: FE Analytics
The fund has also outperformed the sector in 10 out of the last 11 calendar years and has beaten its benchmark in nine of those.
Thomas attributes these strong returns to his GARP [growth at a reasonable price] strategy and to holding his nerve during times of market uncertainty, sticking with cash-generative businesses that he believes in.
Speaking yesterday, the manager said that the current market is riddled with uncertainty but he will not change his approach.
“Economic growth in the UK is actually quite good, but the Scottish referendum and general election are going to create political risk,” Thomas (pictured) said.
“I’ve been investing since 1979 and I have been through various economic cycles and market conditions. For instance, in 1987 I lost 30 per cent of my clients' money value in just two days, but then we ended the year up.”“You’ve got to invest through uncertain times and the way to do it, if you are a long-only manager, is to buy the companies you like and stick with them.”
Clearly, the referendum on Scottish independence is the big “what if” at the moment and the outcome of the vote will be decided by the time this article is published.
He says that a yes-vote would certainly cause headaches as Scotland accounts for 8 per cent of UK GDP and 32 per cent of its landmass, therefore secession would mean the “laws of unintended consequences could be massive”. However, he isn’t running to the hills.
“We will get shocks and scares, but I’ve got to invest through periods like this. My mantra has always been that things won’t necessarily get better or worse, they will just be different.”
Therefore, he highlights a selection of companies that he intends to hold on to over the long-term, even though they could go through periods of volatility over the next year or so.
ITV
ITV is Thomas’s largest holding in his AXA Framlington UK Opps fund, making up 5.2 per cent of the portfolio.
He has been a long-term backer of the company, watching it grow from a FTSE 250 stock to a member of the FTSE 100.
Thomas has been impressed with ITV’s chief executive Adam Crozier as well as its content production and expects much more from the media company over the coming years.
“It’s a great company that paid out two special dividends last year. It generates 100 per cent cash profits and is really a classic cash machine.”
ITV has had a volatile year so far in 2014. However, it is up 14 per cent year to date compared with the FTSE All Share’s gains of 2.76 per cent.
Performance of stock vs index in 2014
Source: FE Analytics
Apart from Thomas, there are 27 other funds in the IMA universe that count ITV as a top-10 holding.
They include the likes of JOHCM UK Equity Income, Jupiter Undervalued Assets and Old Mutual UK Equity Income.
Weir Group
Thomas has also been a long-term supporter of Weir Group, the FTSE 100-listed multi-national engineering company.
As FE Trustnet recently highlighted, shares in Weir Group have fallen over recent weeks due to the fact that the company is headquartered in Scotland.
Thomas doesn’t deny that the stock could continue to be volatile, even though its management has suggested it may relocate south of the border in the event of independence.
However, Thomas describes Weir as a global company and due to its presence in its industry and cash-generation abilities it is one he is willing to hang on to.
“It’s been one of my long-term holdings,” Thomas said. “We held it in 2008 when the share price fell from £9 to £6 in the space of three months. A few years later and the share price is at £26. It just shows that it is worth sticking with good companies during bad times.”
Performance of stock vs index since Jan 2008
Source: FE Analytics
Weir Group is Thomas’s seventh largest holding, accounting for 2.8 per cent of his total assets.
AXA Framlington UK Opps is one of only four IMA funds that count the company as a top 10 holding. The others are Saracen Growth, Lazard UK Omega and Aberdeen European Smaller Companies Equity.
Poundland and B&M
Poundland and B&M, the discount retailers, have been two of Thomas’s most recent acquisitions. Poundland came to the market in March 2014 and B&M’s IPO took place just three months ago.
The major reason why Thomas is bullish on the two stocks is because they are becoming popular with UK consumers, who are shunning major retailers such as supermarkets.
“You can’t buy the likes of Aldi or Lidl on the LSE, but it is part of the market that is growing,” he said.
“The big food retailers - Tesco, Sainsbury’s and Morrisons - have got to change their pricing architecture. Morrisons have already started to do it, but I met with Tesco two years ago and I sold my shares on the back of it as I didn’t believe the strategy they had in place would work.”
Both B&M and Poundland came to the market at quite expensive valuations, according to Thomas.
However, he expects earnings to strengthen over the next couple of years, which will erode their high P/E ratios.
Despite this, both stocks have made double-digit losses since their first day of trading.
Poundland’s IPO share price was 200p and it is currently trading at 322p. B&M, on the other hand, floated at 200p a share and the stock is now 245p.
