However, beyond his largest holdings there are some much smaller, less well-known companies that punch well above their weight compared with the FTSE All Share index. In the first of a new series, FE Trustnet highlights these hidden gems, which may be of interest to long-term investors looking for growth.
Kenmare Resources
M&G Recovery’s largest FTSE 250 holding – making it into Dobell's top-10 – is Ireland-based miner Kenmare Resources.
The company is focused on mining in Africa, particularly Mozambique, and makes up 2.08 per cent of the M&G fund.
It mines rare earth metals for industrial purposes, including ilmenite, zircon and zirconium.
Over the longer-term, Kenmare Resources has picked up 226.93 per cent – significantly more than the majority of blue chip companies that make up the FTSE 100.
This stock is not for the faint-hearted; it is extremely volatile and has sustained heavy losses over one- and five-year periods.
Performance of stock over 10-yrs
Source: FE Analytics
Over the last 12 months, it is down 37.66 per cent.
The recent underperformance ties in with FE Alpha Manager Dobell’s focus on recovery stocks that he believes are under-appreciated by the market.
If he is right, this kind of stock could deliver spectacular returns over the longer-term.
The only other funds with top-10 exposure to the miner are Ignis UK Focus and the FOUR Active UK Equity fund.
Kenmare Resources has a market cap of just under £1bn.
De La Rue
This is a British security printing, papermaking and cash-handling systems company headquartered in Basingstoke.
The FTSE 250 firm has a long-standing history in the manufacturing of high-security paper and printing technology, which it sells to more than 150 countries.
It is also one of the principal manufacturers of playing cards.
Over the last 10 years, it has nearly doubled the average returns of the FTSE 250, making 659.42 per cent, compared with 343.43 per cent from the index.
Performance of stock vs index over 10yrs
Source: FE Analytics
Although the stock has continued to deliver positive performance over one, three and five years, it has lagged the underlying index fairly significantly.
It has recently been taken over by new management – a theme that Dobell often looks for when picking stocks. It had big problems in production in 2010, but its share price has since recovered.
As at 31 October last year, the stock made up 1.64 per cent of M&G Recovery.
FE Alpha Manager Mark Martin is also a big admirer of the company and holds it in his Neptune UK Mid Cap fund.
De La Rue has a market cap of just under £1bn.
Glanbia
One of the most left-field holdings in Dobell’s portfolio is international food and cheese group Glanbia.
The Irish company is listed on the Irish and London stock exchanges. Only two funds in the IMA universe hold the niche company in their top-10 – M&G European Smaller Companies and F&C European Growth & Income.
Dobell increased his weighting to the company between September and October. It now makes up 0.88 per cent of the fund – roughly £66.55m.
Although the stock has had a bumpy ride since October, it has still picked up 14.01 per cent over this time.
The FTSE AIM index, by comparison, has only gained 8.29 per cent, according to FE Analytics.
Cobham
Dobell is also backing Cobham – a British manufacturing company based in Dorset and another constituent of the FTSE 250.
The main source of the company’s revenue is its three technology divisions: mission systems, defence systems, and aerospace and surveillance.
Dobell bought it in October and it now makes up 0.71 per cent of M&G Recovery.
Performance of stock vs index over 1yr
Source: FE Analytics
The company fell from favour amid rumours of possible cuts in government defence spending, particularly in the US. It also lost its chief executive.
However, Dobell felt the stock was unfairly valued, and he is starting to reap the rewards of this hunch; according to FE data, it is up 22.85 per cent over the last 12 months.
It features as a top-10 holding in the Dimensional UK Small Companies fund and makes up a significant proportion of several trackers, including BlackRock Mid Cap UK Equity Tracker and the HSBC FTSE 250 Index.
Toumaz
One of Dobell’s smaller bets, making up 0.18 per cent of the portfolio, is AIM-listed healthcare IT and consumer electronics company Toumaz.
The tiny company has had a difficult time over one, three and five years, and has lost 18.33 over the longer period.
However, it has surged ahead of the AIM index in the extreme short-term, picking up 22.5 per cent over one month, while the index only gained 2.2 per cent, according to FE Analytics.
Only one fund in the IMA universe has taken a top-10 punt on the IT company – the MFM CFS Balanced Opportunities fund.
Although many of these individual holdings are fairly volatile, holding them together in the M&G portfolio has decreased company-specific risk to investors.
Over the last five years, the fund is only marginally more volatile than the IMA UK All Companies sector and FTSE All Share.
It has an annualised score of 18.18 per cent, while the index sits at 17.09 per cent and the sector has an annualised score of 17.96 per cent, according to FE Analytics.
Over the long-term, the M&G Recovery portfolio has surged ahead of the sector and index, making 243.22 per cent over 10 years, while the sector and index made 153.3 per cent and 170.24 per cent respectively.
Although it has delivered positive returns over one, three and five years, it has lagged the sector over these periods.
The fund requires a minimum investment of £500 and has a total expense ratio (TER) of 1.65 per cent.
FE Trustnet recently highlighted it as an out-of-favour fund that could be set for a rebound.