Many managers used last year’s Covid sell-off to load up on stocks that had been too expensive for them to justify buying, but the managers of the SVS Church House UK Equity Growth chose to stick with the companies they have owned for 20 years.
Launched in 2000, the fund has been run by manager James Mahon since its inception, with Rory Campbell-Lamerton and Fred Mahon joining in 2017 and 2019 respectively. Since then it has an enviable track record, returning 189% and beating the FTSE 100 and average IA UK All Companies fund since it started.
Holding an FE fundinfo Crown rating of five, it invests in large-cap UK growth companies, focusing on quality businesses with low levels of volatility.
Performance of fund vs sector and index since launch
Source: FE Analytics
Below, the two newest managers – Mahon and Campbell-Lamerton – break down four stocks that have been held in the fund since launch and still believe in today.
RELX
First was RELX, which Campbell-Lamerton described as a “steady eddy business.” The second-largest holding in the fund, it is a global provider of information-based analytics, but the manager said its offering was more in-depth than that.
The company has four segments, all of which offer a different use for its analytics. The most well-known is the scientific portion, which involves publishing medical journals.
These publications are subscribed to by research institutions, hospitals and university libraries, all repeat customers creating a steady stream of income to the company.
“If you are Harvard Medical Library, you're always going to pay your subscription,” Campbell-Lamerton said.
A second part of the business is the risk side, which provides analytics for insurance providers, mainly in the US and is the fastest growing part of the business, the manager said.
It also has a legal division, providing a databased history of court cases regularly used by lawyers, which he referred to as the “Bloomberg” for lawyers.
Lastly, it has an event side, which has suffered during the pandemic. It makes up just 10% of the RELX business, down from 18-20% pre-pandemic.
Mahon said that this depressed the share price of RELX last year during the market falls, which made it seem like the company was lagging its global peers. However, he said that he still rated the business overall as a “consistent outperformer” and one for the long-term.
This recent dip is visible in the performance chart below but, over the long-term, the company has still outperformed the FTSE 100 on average, making almost 1,000% since 1995 (the earliest data available through FE Analytics).
Performance of stock vs FTSE 100 since start of data
Source: FE Analytics
Diageo
Another stock the managers plan to keep holding is beverage company Diageo, “the global leader in spirits and stout,” Mahon said.
Diageo is an ideal stock because it has strong pricing power, a key characteristic the managers look for as this will help during periods of inflation – something that has come to the fore in recent months – as the company has the ability to pass the rising costs onto the consumer.
“When we first invested in Diageo the price of a pint of Guinness was under £2, while now you would be lucky to get change out of £7 at the Guinea Grill (our local in London). Now that’s what we call pricing power,” Mahon said.
Diageo is the third-biggest holding in the fund currently and since 1997 has made 1,197%, well ahead of the FTSE 100’s 221% gain.
Unilever
Another consumer company the managers still like is Unilever, owner of popular brands like Ben & Jerry’s, Colman’s mustard and Dove.
The stock has been a “steady and reliable cornerstone of the portfolio since day one,” the managers said. Indeed, since 1995 it has made almost 3,000%.
“The market has fallen out of love with Unilever recently on worries about cost inflation and slower revenue growth through Covid times,” Mahon said, but Church House has gone the opposite way, adding to the position in 2021.
“We have seen Unilever survive and grow through far more challenging environments and are confident the company can weather the storm this time around too,” he said.
Smith & Nephew
Investing in strong bands is one way to have longevity. Another is to invest in a long-term theme, which Smith & Nephew does, catering to the ageing population trend.
“We invested in Smith & Nephew in 2000 because we believed the world’s population was ageing and this would drive strong demand for Smith & Nephew’s hip and knee implants,” the managers said.
“Sadly for the globe, this ageing remains the case more than ever today, as does demand for Smith & Nephew’s products.”
Since 1995 the medical device and wound specialist has made 870%, double the returns from the FTSE 100.
Performance of stock vs FTSE 100 since start of data
Source: FE Analytics