Aldridge's key aim is to find companies with scarce assets that are difficult for competitors to replicate. The search for scarcity has led him to companies that are held by other managers who will be holding, buying or selling them for different reasons. Alridge said: "Scarcity, is the key to building conviction."
According to its most recent factsheet dated 27 Feruary 2009, the fund’s top-10 holdings are Myriad Genetics, Shering-Plough Corp, Chevron Corp, Colgate-Palmolive, Procter & Gamble, Amgen, Toyota, Nestle, Johnson & Johnson and Total.
The funds largest holding is Myriad Genetics listed on Nasdaq which has a $3bn market cap. According to Financial Express data this company is in the top-three holdings of five other funds. It is also the largest holding of the Franklin Templeton Franklin US Opportunities fund which has 3.34 per cent of its assets invested, and it is the third largest holding of JP Morgan US discovery IT and the JPM US Smaller Companies fund - both of which are 2.3 per cent invested in this stock.
Shering-Plough Corp, the fund's second largest holding, is held by 14 other funds In comparison the iShares MSCI World ETF is held by 10 funds and is the largest holding of four of them including the Thesis Levaud which is in the same sector as the M&G Global Growth fund.
Measuring its cumulative performance over the last year the M&G Global Growth fund is 52nd relative to its peers in the IMA Global Growth sector where it just remains in the top quartile. The fund has been in the top quartile for the past ten years.
Performance of M&G Global Growth fund versus sector over past 10-yrs
Source: Financial Express Analytics
Over the last year it has outperformed the IMA Global Growth sector by 4.31 per cent.
Performance of M&G Global Growth fund versus sector over past 1-yr
Source: Financial Express Analytics
More than a quarter, 27.20 per cent, of the fund, is invested in the consumer products sector, 19.90 per cent is in industrials, 12.8 per cent in health care and 9.9 per cent in Telecom, media and technology.
Here Greg Aldridge explains his 'bottom-up' approach to stock-picking.
Q: What is your asset allocation approach? Why the focus on consumer products?
A: I look for companies whose assets and resources best equip them to create value for shareholders over the long term by out-competing peers, delivering returns sustainably above their cost of capital and growing profitably by reinvesting in their business. In particular, I am looking for companies with "scarce" assets and resources that competitors find difficult to replicate as this provides a sustainable competitive advantage. These scarce assets might include tangible assets like a low-cost, high-quality mine, intangible assets like brands or patents, or organisational assets like skills and capabilities or a strong culture. Understanding the potential for these scarce assets to create value over the long-term by sustaining strong performance and reinvesting in the business is key to understanding valuation and generating returns for investors.
Q: Have there been/will there be any significant changes in your asset allocation? What would have to happen before you shifted asset allocation?
A: I am retaining my long-term investment approach, while selectively taking advantage of short-term weakness in stocks where the company’s positive long-term prospects are not reflected in its share price.
Q: How do you approach risk management?
A: I work closely with our in-house portfolio strategy & risk team. The team conducts in-depth analysis of investment approach and risk parameters, aiming to ensure that sufficient risk of the right kind is taken to enable the fund to meet its objectives.
Q: What are the basics of your stock selection technique? You don’t seem to use ETFs – is there a reason?
A: The core fund proposition is one of 'bottom-up' stockpicking, focused on quality companies with scarce assets that are under-appreciated by the market but which we believe will generate sustainable high returns, and growth, over the long-term. The scarce assets that drive the stockpicking process range from the traditional and usually tangible, such as property and factories, to the less traditional and often intangible, such as commercial expertise and organisational culture. These scarce assets mark out the identified companies as special and should equip them to sustain and often grow returns and reinvest profitably in their businesses, creating value and increasing shareholder wealth in the process.
Q: What factors/actions enabled you to outperform the other retail funds in your sector over the last year?
A: The fund's relatively strong performance over the past year has been driven by a combination of portfolio positioning and stock selection decisions. As financial and economic conditions deteriorated in the second half of 2008, the fund benefited from its substantial exposure to areas perceived to be defensive, such as healthcare and consumer staples. This was particularly true of US pharmaceutical companies Myriad Genetics and Schering-Plough, which ranked as the fund's top two performers in the year to the end of March.
Myriad Genetics announced recently that despite the slowing economy it had been able to deliver improved sales and profitability, largely thanks to the continued rapid growth in its medical diagnostics arm. Schering-Plough also performed well as it reported resilient results. It continues to enjoy a healthy product portfolio and pipeline, factors not lost on rival Merck, which tabled a $41bn bid for the company in March. The fund’s largest underweight position is in financials, which has also been very beneficial to performance over the past year.
More recently, some of the portfolio's economically sensitive holdings have made healthy positive contributions, with diversified miner Rio Tinto and Brazilian oil giant, Petrobras making strong gains as investors began to take a positive view on the outlook for demand for resources and the quality of both companies' assets.
Q: What do you see happening in terms of currency movement and how this will affect UK investors and their global growth portfolios?
A: As a 'bottom-up' stock picker I don’t take a view on currency issues.
Q: What is your assessment of which areas will perform best over the next year?
A: There is no doubt that the global economy has entered an extremely challenging period, which makes it particularly difficult to make short-term predictions about individual sectors and companies. However, for those willing to invest for the long term, the current situation offers many opportunities. Many good quality, well-managed, successful companies are now on offer at attractive valuations. But it is still crucial to be selective, as there are many companies whose share prices have fallen sharply but are still not attractive because their fundamentals have deteriorated to a similar degree.
With market volatility remaining at heightened levels, we try to ignore market 'noise' and instead remain focused on the long term investment case for a broad range of businesses, from both cyclical and non-cyclical areas, whose scarce assets differentiate them from their competitors and should enable them to generate high returns and grow over the long-term.