The manager says that those companies which survived the market crash in 2009 are those which are more resilient and of a higher quality.
“Often people come into UK smaller companies with the idea we are investing in a bombed out economy, but these are global businesses making world-leading products,” he said.
Marriage’s Cazenove UK Smaller Companies has the highest returns of any fund in the IMA UK Smaller Companies sector over three years.
Performance of fund vs sector and benchmark over 3 yrs
Source: FE Analytics
He gave FE Trustnet a selection of companies he holds and the reasons why.
Perform Group
“This is one of the game-changing businesses we’ve found,” said Marriage. “We bought it at the IPO last year; it’s a quite complicated media business.”
“To be honest it was floated to the wrong people at the wrong time and we got in at the wrong price, but we went away and did more work on it, met the management again and we think it’s going places.”
“It’s the world’s leading media support business. They supply online sports content. If you’re a fan of one of the lesser-followed sports you effectively buy your own channel.”
Data from FE Analytics shows that, apart from Marriage’s other Cazenove fund, there’s just one more portfolio with the stock in its top ten.
L&G UK Absolute is in the top quartile of the IMA Absolute Return sector over the past year and has 3.69 per cent in Perform Group, its biggest holding.
Cazenove UK Smaller Companies has held the stock for a year, and it has risen by 85 per cent since January this year.
Smart Metering
Marriage’s co-manager John Warren said: “Smart Metering are the owners of gas meters. They get RPI-linked revenue streams from the meters in house and businesses.”
“Its growth is regulatory-driven as all meters have to convert to being smart meters over the next few years due to legal changes.”
The stock trades at a forward price to earnings ratio (P/E) of 28, making it the most expensive stock in the list of top nine holdings shown to us by the managers.
They explained that the company’s long-term potential – due to the regulatory issues – made it good value at that price.
The stock is up 83 per cent since February.
Elementis
FE Trustnet reported two weeks ago that this was the most-bought stock in the IMA UK Smaller Companies sector of the previous six months.
Marriage and Warren have held this stock for 5 years, in which time it has grown by 144 per cent.
However, the stock fell in value shortly after they bought it, with all of its gains coming since August 2010, showing the benefit of taking a long-term position and sticking to it.
Performance of stock over five years
Source: FE Analytics
Andor
This company, based in Northern Ireland, makes high-spec equipment used in capturing still and moving images, such as robotic studios and camera stands.
A trading update on June 2 saw the share price slump by 30 per cent, but Marriage explains that a meeting with management after the news reassured him that he was right to hold the company.
Performance of stock over five years
Source: FE Analytics
Nichols
“One question we always ask when we meet a company these days is if they have any exposure to Africa,” Marriage said. “British companies tend to do quite well there.”
“Nichols makes Vimto, which is massive during Ramadan, in fact, its number one in the Middle East with a turnover of £100m.
Data from FE Analytics shows the stock has risen steadily for a number of years.
Performance of stock over five years
Source: FE Analytics