His £1bn UK Smaller Companies fund has returned 375.28 per cent in the last 10 years – around 150 percentage points more than its sector – and he was recently crowned the most consistent FE Alpha Manager of the last decade in one of our recent studies.
Here he highlights some of the companies that have passed his stringent screening process and found themselves in his portfolio – of particular interest given that his fund is famed for having a very low turnover.
PayPoint
"This is a basic business in a very noble and growing industry," said Nimmo (pictured). "It’s hugely cash-generative and has been investing a lot of that money, but it’s taken time to come through."
"Collect+ and PayByPhone – the parking meter service – have begun to do well and its expansion into Romania is doing better."
"Over the next five years or so, I expect these investments to really pay off."
Nimmo previously held the company in his fund – from its listing in 2004 until 2009 – but was concerned about its decision to diversify when the core business was not growing.
However, he says it now looks in good shape.
"We bought a £20m position in it in the third quarter of 2012, which represents around 2.2 per cent of the portfolio."
PayPoint is a top-10 holding for eight funds in the IMA unit trust and OEIC universe, including Liontrust UK Smaller Companies.
Performance of stock since Sep 2004
Source: FE Analytics
The FTSE 250 company is up 480.58 per cent since launch.
Ted Baker
"Funnily enough, this is another company I’ve held in the past," said Nimmo.
"Geographical diversification always seems to end in failure and at first it looked like it was the case for Ted Baker; however it’s now put that right and looks to be in a very strong position."
"Internationally it is starting to get traction, and the Asia Pacific market is still yet to get involved. It now has 30 per cent of its business outside the UK."
"I’ve got a £16m position in it – or 2 per cent – which I started about the same time as PayPoint."
The FTSE 250 retail clothing company had a poor 2007 and 2008, but has since recovered strongly, growing by 153.9 per cent in the last three years.
It appears in the top-10 holdings of four IMA funds, including Franklin UK Smaller Companies – a portfolio recently tipped by head of FE Research Rob Gleeson.
Workspace
"I’m back into real estate companies after years of absence," said Nimmo. "They keep coming up in our screening process and one that stood out was Workspace."
"This company buys warehouses and turns them into work spaces for smaller businesses on three-month leases. It offers an all-services rental arrangement, which is good for smaller companies looking to find their feet."
"It’s a good way to tap into the competitiveness of the London housing market."
Nimmo took a 1 per cent position in the FTSE 250 company late last year. BlackRock UK Smaller Companies is one of three funds that hold it in their top-10.
Performance of stock over 5-yrs
Source: FE Analytics
The company is up 66.93 per cent over three years, but because of its dreadful showing in 2008 and 2009, it is still down more than 80 per cent over five years.
Quintain Estates & Development
Nimmo commented: "This is another real estate company that has been flagged up recently. It’s a developer of projects, probably best known for its youth projects in Greenwich and Wembley."
"It’s done well recently and again is beginning to benefit from the competitiveness of the London property market."
Quintain Estates is part of the FTSE Small Cap index. Three funds and one trust – the Caledonia IT – hold the company in their top-10.
It has lost money over three, five and 10 years, but has had a strong 12 months – up 52.98 per cent, according to FE Analytics.
When asked whether these domestically focused stock-picks were as a result of his optimism in the UK economy, Nimmo said: "I haven’t really thought about it – it’s not like I’ve been seeking domestic stocks out."
"More and more are being flagged up in our screening process."
"Since we’ve been running the Global Smaller Companies fund, I’ve found that the UK punches above its weight in the global matrix."
"Part of this is linked to the strength of London property and at the margin the AIM market is also providing support – something many other regions don’t have."
Nimmo says he still rates most of the companies he has been selling out of to raise capital for these additions.
"I’ve been selling companies that have on the whole done a good job for me, but which are too big for the portfolio," he explained.
"I need to hold 80 per cent of the [UK Smaller Companies] fund in the bottom 10 per cent of the market by capitalisation, so I can’t keep hold of everything."
"Spirax and First Quantum are two that spring to mind."