The Henderson Opportunities Trust, which is managed by FE Alpha Manager James Henderson, is renowned for its eclectic range of stocks that have been chosen using a strictly bottom-up process. 
At a time when markets across the globe are more volatile than ever, it is these investment vehicles with a high alpha ratio and a low correlation to its benchmark that have a good chance of performing strongly over the long run.
Henderson’s five FE Crown-rated trust is no exception, having significantly outperformed its FTSE All Share benchmark year-to-date by 28.82 percentage points to deliver a return of 26.39 per cent.
Performance of fund vs benchmark and sector in 2015
Source: FE Analytics
“It’s a mix of a portfolio. It does something different to most capital growth trusts, which are mostly focused on what the index is,” Henderson explained in an FE Trustnet article earlier this week.
“We’ve got a mixture of large, medium and small companies – the small company part has added more value over time than the rest of it, but it’s been more volatile. I try to reduce the volatility through the large company exposure.”
Talking through his portfolio, which consists of 96 stocks in total, Henderson tells us more about the companies he is particularly excited about in the article below.
Oxford Pharmascience Group
Approximately 18 per cent of the £31.7m Henderson Opportunities Trust is currently invested in university spin-outs, as Henderson believes these stocks, while high risk, can provide substantial levels of growth.
Oxford Pharmascience, a drug development company that was founded in 2008, is the manager’s second-largest holding and has a 3.4 per cent weighting in the portfolio.
“They’re reformulating aspirin so it causes less gastro problems for people. Certain painkillers, if they’re taken too often, can burn and cause trouble with the lining of the stomach,” he explained.
“It will be an important market and the results that are coming out are very positive in regard to reducing gastro problems when taking aspirin regularly.”
Oxford Pharmascience, which is listed on the AIM, announced last month that its OXPzero pain relief drug has reached the second stage of its clinical trial.
The product, which is a 400mg chewable, taste-masked version of ibuprofen, will be tested as part of a randomised, controlled pilot clinical study at an undisclosed date.
While the stock battled with significant volatility and losses of almost 70 per cent in 2012, it has shot to success this year and has outperformed its AIM peers more than 26 times over in 2015, providing a return of 133.58 per cent.
Performance of stock vs index in 2015
Source: FE Analytics
Rolls-Royce
“I’ve been buying Rolls-Royce recently. I think the technologies they have are very good – the success of the Trent engines is growing the whole time,” Henderson said.
“Therefore, the visibility in the medium-term sense of where that timeline is going is promising. I think it’s an undervalued stock at the moment so that would be a good one in the industrials sector.”
The company, which designs, manufactures and distributes power systems for aviation and other industries, created a family of three turbofan aircraft engines called Rolls-Royce Trent, which are currently in service on the A380, Boeing 777 and the Airbus A330 planes among others.
The first model was run in 1990 and achieved huge commercial success, and the latest model, the Rolls-Royce Trent 1000-Ten, underwent a test programme which has since been described by company project managers are “fantastically successful”.
The company’s solid performance is a far cry from earlier this year, after Rolls-Royce had announced three profit warnings in less than two years and its chief executive unexpectedly left.
The stock’s volatile performance has led to losses of 27.22 per cent compared to the FTSE 100’s drop of 7.64 per cent over the last year. However, it has delivered a top-quartile return of 175.38 per cent over the last decade, outperforming the UK blue-chip index by more than double.
Performance of stock vs index over 10yrs
Source: FE Analytics
Rolls-Royce Holdings has a P/E ratio of 197.55 and a price-to-book value of 2.09.
St. Modwen Properties
St. Modwen Properties is a property-based development business headquartered in Birmingham and is a constituent of the FTSE 250 index.
“They’re a brown land developer in the UK that often completes planning on difficult sites, clear them up and sell them onto the builders,” Henderson explained.
“They sometimes build on the land themselves and develop shopping centres, for instance. But it’s their skill at taking on difficult blocks of land, finding a use for them and making money from them that make them an attractive company.”
Currently, the company owns a portfolio of 180 property investment and development sites across the UK, most of which are either on brown land or in urban environments.
Earlier this week, the stock was upgraded by analysts at JP Morgan Casenove to an ‘overweight’ rating and has been recently given a ‘buy’ rating by investment advisory firm Stifel Nicolaus.
This is no surprise as, since the start of the year, it has tripled the performance of the FTSE 250 index to provide a return of 21.53 per cent.
Performance of stock vs index in 2015
Source: FE Analytics
At the end of this month, St. Modwen Properties will officially open the new £450m Bay Campus at Swansea University, which has been built by the company in just over two years.
It also submitted a planning application recently to build 168 additional new homes at Locking Parklands in Weston-Super-Mare, which will be a £400m project that is developed over a period of 20 years.