The most up-to-date Financial Express data shows the SF t1ps Smaller Companies Fund has lost 21.4 per cent of its value in the last 12 months. Over the same period the UK Smaller Companies retail funds and investment trusts are down 38.8 per cent.
Winnifrith says there are about 600 private investors in the fund which has £3.2m under management including his own personal pension. The largest holding in the fund (2 per cent) is another personal pension, that of a former city analyst who is now the CEO of an AIM-quoted mining company. However, he said that the fund was not invested in the mining company in question.
He says that the main reason for the fund's relatively good performance is that it was 51 per cent in cash up until August 31. Since then it has been buying and its top-10 holdings have been overhauled with only three of the ten largest holdings the same as they were three months ago.
Performance of T1ps versus Small Cap, AIM and Hoare Govett
Source: Financial Express Analytics
Blavod Extreme Spirits remains the largest holding at 9.75 per cent. Blavod has a market cap of just £3.4m and t1ps is its largest shareholder, owning about 8.4 per cent of the company. Shares were bought at 2.75p.
Blavod shares are up 29.17 per cent over the last 12 months and are up 61 per cent since a 2.62p low-point at the end of 2007. However the shares are down 83 per cent over the last three years. In his 't1ps for 2008', Winnifrith wrote: "Now I can almost here you laughing already. This is among the worst ever tips on this site. The company was doing OK as Blavod Vodka until it merged with some Americans who pushed it to the brink."
The second-largest holding is completely new to the fund's top-10, Advanced Computer Software, making up 6.79 per cent of the fund and this replaces Nexus Management which is now the third largest holding (6.2 per cent). Advanced Computer Software shares gained 46.67 per cent over the last 12 months.
Three months ago, First Property Group was the fund's eighth largest holding but is now its fourth largest, at 5.96 per cent of the fund. It replaces Dominos Pizza which has been removed from the top-10.
The fifth largest holding is now Centamin Egypt (5.41 per cent) which previously was not in the funds top-ten holdings. This replaces Avanti Communications Group. Winnifrith said: "This is a new investment – gold price has gone up and shares bounced with it."
Winnifrith said that investments in IDOX, Formjet and Northern Bear were added to by buying out distressed sellers. Additionally, investments in First Property were done at a discount to net cash.
Formjet PLC is the sixth largest (4.95 per cent) and replaces Minerva Resources. Northern Bear (4.9 per cent) is the seventh largest holding and replaces Minoan Group. Telecom Plus (4.88 per cent) replaces First Property Group and Idox (4.81 per cent) replaces Stanley Gibbons.
Despite the success stories, the fund lost 25 per cent over the last 12 months. Winnifrith said: "We lost money on one stock which went bust, Myhome. Like Nigel Wray and Mark Slater we believed the story but were taken in by what are now apparent but were well hidden management failures.
"There are a number of other stocks which have fallen. While our two near production/in production mining stocks have done very well indeed, we hold shares in four earlier stage plays which have fared less well amid fears that they will have a hard time securing the funding they need to develop mines. We believe current prices discount near universal failure for the four which will not occur and so we remain holders.
"Five stocks we own have fallen back on fears about their debt position (Interquest Group, Empresaria, ILX Group, IQ Holdings and First Artist Corporation). Again they now discount real issues which may not emerge. We believe that all 4 could be debt free within 3 years and are trading strongly. If any of them reach that goal their current valuations will look ludicrous and the upside is enormous.
He said: "Now clearly there is a possibility that some of those nine stocks held back by balance sheet worries may fail. The point is that most will not and if they do not fail there is mammoth upside which is not discounted in any of those cases. While management deliver in all cases we remain supportive and have and will again average down."
Winnifrith said: "We would generally have between 25 and 30 holdings. We will make an initial investment and if there is price weakness we will use it as an opportunity to add to our holdings.
He said that £50m was about as big as the t1ps fund could get because it had limited itself to 30 stocks and could hold no more than 10 per cent of any one company.
He said: "We are now more or less fully invested. We perceived that there was real value in the final-quarter of last year. We are going for value stocks and it can take a long time for value to out. We are patient and we are prepared to be patient."
He added that mid-caps were over priced and expected at least 10 companies in the FTSE 250 to go under this year adding that this was not priced into current valuations. In contrast he said: "Micro cap share prices are already factoring in universal Armageddon. They may not be re-rated dramatically tomorrow, but will go up over two years. He said that the small size of the fund meant that it could afford to invest in micro caps, unlike some of its larger peers."
Commenting on the funds' 51 per cent cash holding until August, Winnifrith said: "Our professional advisers said that we were being irresponsible having so much cash. We told them to go to hell and I think we were justified. Small caps will be over valued at some stage over the next decade and when it happens I will again have a very high cash weighting."
Asked if dealing in such small stocks could result in allegations of "pumping and dumping", Winnifrith said: "We’re not dumping these. Our aim is to hold these stocks for five to ten years. We would only sell if we believe they have become fundamentally over valued. If a stock gets tipped in a tip sheet and goes up by 10 per cent, it can only give a temporary blip. But we’re looking for stocks that deliver 100-200 per cent over five or 10 years. We don’t flip stocks."
He said: "Some fund managers will be glued to their screens but we take a long-term view, not a day-by-day view."
The next best performing unit trust was Liontrust Intellectual Capital, down 21.8 per cent against the sector’s 38.8 per cent decline.
Baillie Gifford British Smaller Companies has lost 28.03 per cent. Only four smaller companies unit trusts listed by Financial Express have lost less than 30 per cent over the last 12 months.
The top three performing funds vary widely in size, the t1ps fund has just £3.2m under management. Liontrust’s Intellectual Capital has £55.3m under management while Baillie Gifford has £235.2m.
Winnifrith says there are about 600 private investors in the fund which has £3.2m under management including his own personal pension. The largest holding in the fund (2 per cent) is another personal pension, that of a former city analyst who is now the CEO of an AIM-quoted mining company. However, he said that the fund was not invested in the mining company in question.
He says that the main reason for the fund's relatively good performance is that it was 51 per cent in cash up until August 31. Since then it has been buying and its top-10 holdings have been overhauled with only three of the ten largest holdings the same as they were three months ago.
Performance of T1ps versus Small Cap, AIM and Hoare Govett
Source: Financial Express Analytics
Blavod Extreme Spirits remains the largest holding at 9.75 per cent. Blavod has a market cap of just £3.4m and t1ps is its largest shareholder, owning about 8.4 per cent of the company. Shares were bought at 2.75p.
Blavod shares are up 29.17 per cent over the last 12 months and are up 61 per cent since a 2.62p low-point at the end of 2007. However the shares are down 83 per cent over the last three years. In his 't1ps for 2008', Winnifrith wrote: "Now I can almost here you laughing already. This is among the worst ever tips on this site. The company was doing OK as Blavod Vodka until it merged with some Americans who pushed it to the brink."
The second-largest holding is completely new to the fund's top-10, Advanced Computer Software, making up 6.79 per cent of the fund and this replaces Nexus Management which is now the third largest holding (6.2 per cent). Advanced Computer Software shares gained 46.67 per cent over the last 12 months.
Three months ago, First Property Group was the fund's eighth largest holding but is now its fourth largest, at 5.96 per cent of the fund. It replaces Dominos Pizza which has been removed from the top-10.
The fifth largest holding is now Centamin Egypt (5.41 per cent) which previously was not in the funds top-ten holdings. This replaces Avanti Communications Group. Winnifrith said: "This is a new investment – gold price has gone up and shares bounced with it."
Winnifrith said that investments in IDOX, Formjet and Northern Bear were added to by buying out distressed sellers. Additionally, investments in First Property were done at a discount to net cash.
Formjet PLC is the sixth largest (4.95 per cent) and replaces Minerva Resources. Northern Bear (4.9 per cent) is the seventh largest holding and replaces Minoan Group. Telecom Plus (4.88 per cent) replaces First Property Group and Idox (4.81 per cent) replaces Stanley Gibbons.
Despite the success stories, the fund lost 25 per cent over the last 12 months. Winnifrith said: "We lost money on one stock which went bust, Myhome. Like Nigel Wray and Mark Slater we believed the story but were taken in by what are now apparent but were well hidden management failures.
"There are a number of other stocks which have fallen. While our two near production/in production mining stocks have done very well indeed, we hold shares in four earlier stage plays which have fared less well amid fears that they will have a hard time securing the funding they need to develop mines. We believe current prices discount near universal failure for the four which will not occur and so we remain holders.
"Five stocks we own have fallen back on fears about their debt position (Interquest Group, Empresaria, ILX Group, IQ Holdings and First Artist Corporation). Again they now discount real issues which may not emerge. We believe that all 4 could be debt free within 3 years and are trading strongly. If any of them reach that goal their current valuations will look ludicrous and the upside is enormous.
He said: "Now clearly there is a possibility that some of those nine stocks held back by balance sheet worries may fail. The point is that most will not and if they do not fail there is mammoth upside which is not discounted in any of those cases. While management deliver in all cases we remain supportive and have and will again average down."
Winnifrith said: "We would generally have between 25 and 30 holdings. We will make an initial investment and if there is price weakness we will use it as an opportunity to add to our holdings.
He said that £50m was about as big as the t1ps fund could get because it had limited itself to 30 stocks and could hold no more than 10 per cent of any one company.
He said: "We are now more or less fully invested. We perceived that there was real value in the final-quarter of last year. We are going for value stocks and it can take a long time for value to out. We are patient and we are prepared to be patient."
He added that mid-caps were over priced and expected at least 10 companies in the FTSE 250 to go under this year adding that this was not priced into current valuations. In contrast he said: "Micro cap share prices are already factoring in universal Armageddon. They may not be re-rated dramatically tomorrow, but will go up over two years. He said that the small size of the fund meant that it could afford to invest in micro caps, unlike some of its larger peers."
Commenting on the funds' 51 per cent cash holding until August, Winnifrith said: "Our professional advisers said that we were being irresponsible having so much cash. We told them to go to hell and I think we were justified. Small caps will be over valued at some stage over the next decade and when it happens I will again have a very high cash weighting."
Asked if dealing in such small stocks could result in allegations of "pumping and dumping", Winnifrith said: "We’re not dumping these. Our aim is to hold these stocks for five to ten years. We would only sell if we believe they have become fundamentally over valued. If a stock gets tipped in a tip sheet and goes up by 10 per cent, it can only give a temporary blip. But we’re looking for stocks that deliver 100-200 per cent over five or 10 years. We don’t flip stocks."
He said: "Some fund managers will be glued to their screens but we take a long-term view, not a day-by-day view."
The next best performing unit trust was Liontrust Intellectual Capital, down 21.8 per cent against the sector’s 38.8 per cent decline.
Baillie Gifford British Smaller Companies has lost 28.03 per cent. Only four smaller companies unit trusts listed by Financial Express have lost less than 30 per cent over the last 12 months.
The top three performing funds vary widely in size, the t1ps fund has just £3.2m under management. Liontrust’s Intellectual Capital has £55.3m under management while Baillie Gifford has £235.2m.