Williams (pictured) invests across the FTSE All Share, but his expertise lies in small caps. While this area has had a stellar run, helping his fund to the very top of its sector in 2012, he says he is finding plenty of opportunities to drive the next phase of performance.
"In the last 18 months we’ve seen a strong recovery in share prices," he said. "The idea now is to find companies that will do that for the next 18 months, even if the market doesn’t do as well."
"We look for those that are colourful, which the market may say straight away from a distance that it doesn't like."
"We’re looking for the next premier cake maker Finsbury Foods. It’s got a market cap of only about £33m, so it’s very small, though it did see £200m worth of sales last year."
"We bought it about 18 months ago at 25p, on a P/E [price/earnings ratio] of only 3. However, it had only a little bit of debt, and we thought it was massively undervalued."
"It had a major disposal of the gluten-free side of its business, which helped it to pay off pretty much all of its debt. This, combined with a small rights issue, drove up the valuation of the company to 8x earnings."
"We pretty much made double our initial investment."
Here, Williams highlights three companies that he thinks could be destined for comparable success, and that are by his own admission "disgustingly cheap".
Quindell
Williams is very optimistic about the outlook for insurance services company Quindell, which he believes has been unfairly dismissed by the market at large.
"This company looks to reduce the costs of insurance companies," he said. "It looks to make these companies more cost-effective and provide better services to their own clients."
"It saw 19 acquisitions in quick succession, but because of the sheer number of share issuances the share price fell quite significantly."
"It’s on a P/E of 5.6x, which suggests the market doubts whether it’s going to be able to deliver."
"However, looking at its latest trading statement, it’s been trading very strongly indeed, and a lot of its pilot relationships with new clients have been secured."
"This includes one with RAC, which is in the top-20 biggest insurance companies in the country. They’ve confirmed a five-year agreement, which gives them a lot more scope going forward."
Three funds currently count Quindell as a top-10 holding – Ignis Smaller Companies, F&C UK Smaller Companies and Investec UK Smaller Companies, which has five FE Crowns.
"If this stock doesn’t come off there isn’t a massive downside, but if it comes off you could be looking at it going up two or three times," added Williams.
Rangers International Football Club
The manager is also a fan of Rangers FC, although he assures FE Trustnet this is only from an investment point of view...
He says Rangers has presented him with a particularly good opportunity because most investors categorise football clubs as bad investments.
"This is a very sceptical area for most institutions," Williams explained. "People look at football clubs and say 'you’ll never make money from them, they’re loss-makers', but I think in this case they’re completely wrong."
"Rangers has a market capitalisation of just £46m, which is pretty amazing when you consider that they’ve got £20m of cash on the balance sheet, have a huge stadium, training ground, car parks and barely any debt."
"On top of this it has a massive fan base, with an average attendance of around 56,000, making it the fifth best-supported club in the UK. This is in spite of all the trouble it’s had in the last couple of years."
Rangers went into administration in 2012 and was moments away from liquidation before businessman Charles Green stepped in and bought it.
"Rangers International Football Club" become the holding name for the group. Since then, the stock has lost 7.24 per cent.
Performance of stock since Dec 2012
Source: FE Analytics
Williams says there is great promise in the way the company is being run and sees its loyal fan base as its biggest asset.
"They’ve got in Puma as a kit supplier and Blackthorn Cider is also on their books now," he said.
"Their fans have been incredibly loyal and with that support you can see them going back in to the premier division and maybe even an elite European league if that happens one day down the line."
"I’ve already got a significant stake, but I’d like to buy more," he added.
FE Alpha Manager Giles Hargreave is also an advocator of investing in football teams, and currently holds Rangers FC across his small cap portfolios.
Only one fund – Close Beacon Investment – holds Rangers in its top-10, although Cazenove, Artemis and L&G are all big shareholders across their range of funds.
Augean
Williams highlights Augean as a "disgustingly cheap" stock that is being unfairly ignored by most investors.
"This business deals in the waste disposal of quarries," he explained.
"It’s been a difficult time for this industry, as quarries are linked to the building sector, where contracting has been very weak."
"However, it has recently got a commercial licence to process low-grade nuclear waste, which opens up a number of other avenues."
"No-one else in the country has the capacity to work in this kind of field. New management has organised things very well, and saw earnings double last year."
"It’s on 12x earnings at the moment, but I think that will go down to 9x next year once earnings come through. From there, I think it will do very well."
The stock has very weak five-year numbers, but three-year figures are much stronger – up exactly 30 per cent, according to FE Analytics.
No IMA funds hold Augean in their top-10.