What’s more, his MFM Slater Income fund has achieved top-decile annualised returns of 18.93 per cent over five years, amounting to a total return of 80.95 per cent and pipping its FTSE All Share index to the post by 28.18 percentage points.
Performance of fund vs sector and benchmark over 3yrs
Source: FE Analytics
In an update on the funds’ performance so far in 2015, Slater (pictured) said: “We’ve been reasonably active year-to-date but not as active as we were last year. There’s been some movement, but a little bit less, comparatively.”
“In terms of new holdings in the funds this year-to-date, we’ve bought Barratts, Taylor Wimpey, P2P, which is a peer-to-peer investment fund, ITV, National Accident Helpline, Greene King, Lakehouse and Fairpoint, which is our most recent investment.”
Fairpoint, which provides services related to debt solutions, claims management and legal services, was admitted to AIM in 2002 and has focused its attentions on the UK’s over-indebted market over recent years.
Lakehouse, which was bought by Slater at IPO, has added approximately a quarter of a percent to both his growth and income funds since the start of the year.
“Lakehouse is similar to Mears [Group] – we like Mears and we own them as well. Mears is a small services business, it mainly services social housing, and Lakehouse is in the same industry. It has a slightly different approach to Lakehouse though so they don’t really compete.”
“They both have the same house broker so Mears had to approve that, and they don’t see themselves as competitors, but they are in similar spaces broadly-speaking. It’s a nice steady business and it’s doing its thing.”
Lakehouse is one of two IPOs that the manager has bought into this year, as he says that a lot of junk filters into the market from initial public offerings. However, he’s confident in Lakehouse’s ability to perform.
“You’re much better off buying a business and letting it grow than worrying about the headline yield. In the case of Lakehouse, it’s a well-managed business with highly experienced managers. We bought it at a very low price, so the P/E purchase price was about 8.8x and the dividend yield is 4.35 per cent so it has a very strongly-covered dividend. It’s got good growth and it’s in an area where there is lots of opportunity for acquisition – they’ve got a very strong track record in terms of bolt-on acquisition.”
As well as adding stocks to his portfolios, however, Slater has sold out of some positions this year, including multinational engineering and project management company Amec, multinational marine and energy services provider Braemar Shipping, luxury menswear store Moss Bros and HSBC, which was the only bank in his portfolio.
The manager believes that bank stocks won’t be making a return any time soon, as a result of surging compliance and regulatory costs.
Slater also sold out of Interior Services, which was one of the worst performers in his portfolios, losing the MFM Slater Income fund 0.7 per cent since the start of the year.
Fortunately, stocks that have performed well in his funds have outweighed those that haven’t fared so well.
As part of his investment process, Slater invests in companies from three separate categories – growth stocks, ‘stalwart’ stocks and cyclical stocks – to ensure that his funds remain durable and well-balanced.
“The growth category has been very productive, we’ve had three very nice performers there – Centaur Media added about 0.6 per cent returns, National Accident Helpline, which is a new position, added 0.7 per cent and Marsdon’s the brewer added 0.5 per cent. Provident Financial also added 0.4 per cent, so all of those were quite nice contributors,” he continued.
“A few others added around a quarter of a per cent, maybe a bit more, and those included Arbuthnot, Amino Technologies, ITV and of course Lakehouse.”
“In terms of losers, there were only two in the growth category. One was River and Mercantile, which cost us 0.12 per cent, and the other was UTV Media, which cost us just under a quarter of a percent.”
Last week, UTV Media, an Irish broadcasting company, announced plans to launch a new broadcast centre as part of a strategy to launch four national radio stations – Virgin Radio, TalkRadio, TalkSport 2 and Talkbusiness.
“It’s cost them a bit more than they anticipated, but we don’t think it’s anything to worry about,” Slater added.
In his ‘stalwart’ category, the MFM Slater Income fund has reaped the benefits from real estate investment trusts (REITs) and property-related businesses, with primary care property business Assura adding just over a third of a per cent to the fund’s performance.
Other property stocks such as Hansteen, New River, Segro and Town Centre Securities also added a quarter of a per cent this year.
The top-performer in this category in 2015 so far, however, was Standard Life, which makes up 2.18 per cent of the portfolio and returned 0.45 per cent.
The only notable loser in the category was Royal Dutch Shell, which has lost the fund 0.3 per cent.
“In the cyclical category, there were some very good performances,” Slater said.
“The standout one was Redde, which gave us 0.69 per cent, but there were quite a lot of others. House builders did very well for us: Bellway gave us 30 basis points, Taylor Wimpey was a quarter of a percent. Galliford Try gave us half a percent in terms of performance, and there were a few others too.”
Redde, a specialist accident management and legal services company, and Galliford Try, a housebuilding and construction group, are both in the income fund’s top 10 holdings with weightings of 2.25 percent and 2.27 per cent respectively.
Walt Disney, which is one of only two overseas holdings that Slater owns, is a stock that he is particularly pleased with at the moment.
The stock has been in the MFM Slater Growth fund for approximately two years and has provided a return of 0.5 per cent since the start of the year.
“I think Disney is one of the best franchises in the world – I think Star Wars is going to be huge, for instance. It’s a guaranteed hit. Last year they were growing about 30 per cent and it’s a $108bn business,” he said.
“Currently they’re going to grow 15 per cent I think, so it’s pretty strong stuff. I see it with all the Marvel films. It’s very cleverly done – in each film they introduce one or two new characters and they really are a cunning machine.”
“I really kick myself for not buying it sooner because it was on 11/12x P/E at the beginning of 2012 -we bought at 14x [P/E].”
