Savvides, who manages the £46m JOHCM UK Dynamic fund, admits that over the last few years markets have been dominated by a "macro obsession". However, he believes this is all about to change.
He says that his style of generating returns by analysing and evaluating individual companies will now be the most successful strategy, as businesses are now run more efficiently and the majority of headwinds that used to face investors have disappeared.
"The macro isn’t something I concentrate too heavily on – our stock selection is driven by generating ideas from what is going on in the companies themselves, instead of a broader top-down view of the market," he said.
"However, we have a constructive outlook for markets and we think valuations look attractive. Companies have been run much better over recent years because of the lack of underlying growth, and management teams have had to focus on how to make the most of their assets."
"We feel valuations are supportive for equities, especially compared with other asset classes such as government bonds or property."
"That means there are now huge opportunities for this sort of strategy, as the current market trend is very conducive to bottom-up analysis rather than top-down analysis."
"I do think we are starting to see a set of conditions whereby there isn’t so much of a focus on defensive or non-defensive stocks. There is now a much broader spread and I do think the macro obsession is dissipating."
"You might think that of course I would say that because I am a bottom-up stockpicker. However, while there are still a lot of risks out there and I have to be careful about what I say, market trends do now support a disciplined bottom-up approach," he added.
As investors will be all too aware, equity markets have been volatile in recent weeks thanks to rumours that the Fed’s quantitative easing programme may be coming to an end.
However, Savvides says this recent sell-off has shown him that stockpickers can dominate in the future, as events over the last few weeks have not been similar to risk-off periods in the past.
"This is where I disagree with other managers," he said. "If you compare this sell-off against other periods of extreme risk-off, such as in 2011, there has been a different dynamic."
"In 2011 there was a mass flight for safety, so any stocks that were seen as defensive or high quality were bought, and did well."
"These were the likes of British American Tobacco, Diageo and Royal Dutch Shell, for instance; almost bond-proxy type stocks where investors had extreme confidence that these companies could maintain their cash-flow."
"However, in this sell-off – which was sparked by the re-appraisal of interest rates – these bond-like stocks sold off just as much as any other. Interestingly, some of the small cap and UK domestic companies weren’t as heavily affected as last time."
"It is beyond my capabilities to know if investors are right to think interest rates will go up, but there has been a fundamental change in what is driving the market," he added.
Savvides has managed the JOCHM UK Dynamic fund since its launch in June 2008.
According to FE Analytics, it has been a top-quartile performer in the IMA UK All Companies sector over that time with returns of 80.4 per cent, more than double the amount made by its FTSE All Share benchmark.
Performance of fund vs sector and index since June 2008
Source: FE Analytics
The fund has also been a top-quartile performer in the sector over one, three and five years.
Savvides’ JOHCM UK Dynamic fund is a type of special situations portfolio, as the manager looks for companies that are either restructuring their business model, in a period of recovery, or whose growth is undervalued by the market.
He says that because of this approach, he is finding a number of opportunities in light of the recent sell-off.
Although he tries to find undervalued or recovery-style stocks, he says investors can still add value by holding mega caps, and points to telecoms provider BT as a prime example.
"Just because a company is large, it doesn’t mean it isn’t interesting. I challenge the notion that you can’t gain a competitive advantage by holding well-known stocks," he said.
"BT is a good example, which we bought back in May 2009. At the time there was a management change and a change in the company’s message, as the new management team was saying how they need to do more with their best assets."
"There were about 40 to 50 analysts looking at the stock, so ordinarily you would think it would be hard to gain a competitive advantage. However, the market was myopically focused on the company’s pension fund, which they thought could bring down BT."
"We worked out that that was misplaced negativity and that they could do a lot to abort that eventuality, but also they could do even more to restructure the company by making the most of their assets and pulling back from Capex," he added.
Savvides’ evaluation certainly paid off: according to FE data, BT has returned more than 300 per cent since May 2009, compared with the FTSE 100’s 74.97 per cent.
Performance of stock vs index since May 2009
Source: FE Analytics
JOHCM UK Dynamic requires a minimum investment of £1,000 and has a total expense ratio (TER) of 1.5 per cent. It also charges a 15 per cent performance fee on everything made in excess of the FTSE All Share.
