Though he admits the FTSE 250 listed food wholesale operator hasn’t necessarily made him the most amount of profit, he says that its stellar run in recent years has been the most satisfying as it fits in perfectly with the mandate of his Rathbone Recovery fund. “Though it may not have been the best ever investment, I think it has certainly been the most satisfying,” said Chillingworth (pictured).
“We started buying Booker Group four years ago when the share price was 30p; it is now £1.20 – four times your money isn’t too bad at all.”
“It is isn’t at all a speculative or risky play and I could talk about oil or mining companies that have done very well, but equally I could talk to you about oil and mining companies that haven’t done so well.”
According to FE Analytics, investors in Booker Group have seen returns of 333.14 per cent over the last four years.
Performance of stock over 4yrs
Source: FE Analytics
Over the same period, the FTSE 250 has delivered 125.16 per cent.
Booker Group is Chillingworth’s largest holding, making up 4.85 per cent of the £61m portfolio.
The manager says he bought the stock after it fell out of favour with investors following a disastrous period between 2005 and 2007.
However, with a new management team in place, he says it was exactly the type of recovery stock he and co-manager Marina Bond were looking for.
“The company was going through some very difficult times and ‘cash and carry’ businesses were out of favour,” he explained. “Booker Group had also taken on a lot of debt and people were asking what the future was for the company.”
“The reason why we bought it was because a man named Charles Wilson came in from M&S to head up operations.”
“He is a bit of a retail guru and we backed him. We did the numbers, met him and decided it was a very good buying opportunity and got behind him. His great skill is his attention to detail and getting to grips with a company.”
“Instead of just supplying to traditional ‘cash and carry’ and corner shop retailers, Booker now works with caterer suppliers and so is now supplying small to medium size restaurants, too.”
“This move has proved to be very successful. We saw some numbers yesterday showing that that side of the business is growing very strongly.
He added: “The final piece of the jigsaw is M&A. Due to Wilson’s reputation as a trouble-shooter, he was approached by German retailer Metro, to take over ‘cash and carry’ business Makro. It is based in the UK and Booker has agreed to take on a joint venture.”
“This should give another leg to the company’s growth prospects.”
Eleven other funds in the IMA universe count Booker Group as a top-10 holding.
These include FE Alpha Manager Giles Hargreave’s Marlborough Special Situations fund, and the five-crown rated Cazenove UK Smaller Companies portfolio, which is co-managed by John Warren and FE Alpha Manager Paul Marriage.
Chillingworth says he has no plans to sell out of the stock yet, but is watchful of Booker’s increasing popularity with investors.
“It is getting harder and harder [to see value], but we are very pleased with the stock, especially now it has quadrupled in price. The main thing is that the market is starting to believe us. With a PE of 22 times it is up there and I think the acquisition of Makro can help it in the long run,” he said.
He points to BG Group as a company that could deliver comparable success, and he says he has upped his exposure to the oil and gas giant recently.
“It is a completely different beast – a large company that we bought one and a half to two years ago and have been adding to,” Chillingworth said.
“BG Group has been hit hard recently as investors got very depressed about the delays in their massive oil field in Brazil.”
“When you have a big discovery like that, bringing it to fruition is always fraught with problems. The share price is £11 at the moment, but I think the NAV [net asset value] is at least £18 plus – so I think the market is missing a trick here.”
“It is large company that has a good portfolio of developed assets and discovery operations, and there aren’t many of those left,” he added.
As the chart shows, BG Group has had a very mixed last few years. Investors in the company would have seen returns of 4.56 per cent over the last five years, but returns very strong in the first half of the 2000s.
Performance of stock and index
| Name | 1yr (%) | 3yr (%) | 5yr (%) | 10yr (%) |
|---|---|---|---|---|
| BG Group | -21.33 | 2.04 | 4.43 | 408.16 |
| FTSE 100 | 14.27 | 24.37 | 31.55 | 143.66 |
Source: FE Analytics
BG Group is a constituent member of the FTSE 100. With a market cap of £38bn, it is the 13th largest company in the UK.
The five crown rated Liontrust Special Situations fund is one of 138 funds in the IMA universe that counts BG Group as a top 10 holding.
Julian Chillingworth has been running funds at Rathbones since 2002. As well as managing Rathbone Recovery, he also heads up the five crown rated Rathbone Blue Chip Income & Growth fund.
He and Marina Bond have managed Rathbone Recovery since its launch in 2009. Over three years the fund has been a top quartile performer in the IMA UK All Companies sector and it has significantly outperformed the FTSE All Share.
Performance of fund versus sector and index over 3yrs
Source: FE Analytics
Rathbone Recovery has an ongoing charges fee (OCF) of 1.65 per cent and has a minimum investment of £1,000.
In the previous article in the series, we asked FE Alpha Manager Harry Nimmo to highlight his best ever investment.