‘If you want value, don’t look to the US’

The Daily Telegraph - Your Money - - INVESTING FUND OF THE WEEK -

Peter Saacke of Artemis Global Growth tells James Con­ning­ton where he is find­ing the best ‘value’ shares

All eyes are on Amer­ica at the mo­ment, with Don­ald Trump’s pres­i­dency lead­ing many to ex­pect a pickup in in­fla­tion and in­ter­est rates, mean­ing that mar­kets could be boosted. This has led to pre­dic­tions that cheap, unloved so-called “value” stocks are due to out­per­form. The early signs of this are al­ready be­ing seen.

Artemis Global Growth is a £600m fund man­aged by Peter Saacke, who aims to hunt out these cheap in­vest­ments and has the free­dom to in­vest in com­pa­nies across the world.

Mr Saacke spoke to Tele­graph Money about why cheap Chi­nese banks were a “clas­sic” op­por­tu­nity and about his in­vest­ment mis­takes.

How do you pick stocks?

We take 6,500 stocks and look for val­u­a­tions that are out of whack with the com­pany’s growth prospects.

We then find out why the shares are so cheap. Some­times we find cases where other in­vestors’ views on a com­pany have driven a share price so low that its long-term prospects look ap­peal­ing.

The fund has a large num­ber of hold­ings. Why?

It has be­come fash­ion­able to build highly con­cen­trated funds with 30 or 40 stocks. We hold 150, so when I do get things wrong – which is reg­u­larly – it’s not a dis­as­ter.

Why do you in­vest less in Amer­ica than your ri­vals?

The US has per­formed ex­tremely well, so com­pany val­u­a­tions are ex­pen­sive.

Over the past year we have in­creased our ex­po­sure to cheaper “value” stocks, and Amer­ica is not the first port of call for those.

Ex­pen­sive “qual­ity” stocks such as con­sumer sta­ples have done well, and there are lots of peo­ple in­vested. But with in­fla­tion and in­ter­est rate prospects pick­ing up, these are dan­ger­ous hold­ings for the fore­see­able fu­ture.

Which value stocks have you bought?

We have been in­creas­ing ex­po­sure to Europe, in­clud­ing the UK, where there is a good se­lec­tion of beaten-up stocks. We own BMW and have been buy­ing Siemens.

But for a value idea you don’t have to look much fur­ther than Chi­nese banks. They trade at around five times their earn­ings, with div­i­dend yields of 6pc and dou­ble-digit re­turns on cap­i­tal. There were con­cerns about the bad loans they made dur­ing the fi­nan­cial cri­sis, but non-re­pay­ment rates have peaked and are go­ing down again.

It sounds like a clas­sic op­por­tu­nity. No one wants to be seen hold­ing Chi­nese banks but that doesn’t tally with the news be­ing re­ported. We own Bank of Com­mu­ni­ca­tions and Bank of China.

How have you re­acted to the prospect of ris­ing in­fla­tion and in­ter­est rates?

We got lucky. Ahead of Mr Trump’s elec­tion our process showed that the dull-as-ditch­wa­ter Amer­i­can re­gional banks were cheap, do­ing well and ben­e­fit­ing from reg­u­la­tors fo­cus­ing on big­ger banks. They per­formed steadily and then jumped by 25pc when Mr Trump was elected. I took some prof­its.

We have started to in­vest in Euro­pean banks too, such as Bel­gian bank KBC and Dan­ish bank Danske. It’s not a “Trump trade”, it’s a trade on in­fla­tion pick­ing up.

More im­por­tant in the past year has been in­creas­ing our ex­po­sure to min­ing and oil stocks.

What have been your big­gest suc­cesses and mis­takes with the fund?

The big­gest suc­cess was Amer­i­can semi­con­duc­tor maker NXP, which was one of the largest firms no­body had heard of. We bought it in 2012 and held it for three years; it is now be­ing bought by Qual­comm.

The big­gest loser was Vale, the Brazil­ian min­ing com­pany. We saw shoots of re­cov­ery in iron ore prices and got in­volved too early – the stock re­lapsed.

Do you have your own money in the fund?

Of course – mine, my wife’s and my chil­dren’s. At Artemis we eat our own cook­ing and can’t in­vest else­where.

What would you have done if you hadn’t been a fund man­ager?

Ini­tially I thought about academia, but re­alised it was more po­lit­i­cal than I an­tic­i­pated. How to buy the fund as cheaply as pos­si­ble

The trust has a to­tal cost (the “OCF” or “TER”) of a year. Be sure to buy the right “share class”, which is “I”. The in­vest­ment shop through which you buy the fund will also levy a charge. Some will charge

0.86pc

a per­cent­age of the amount in­vested, oth­ers will ap­ply a flat an­nual fee. Our colour coded ta­bles at

tele­graph.co.uk/ in­vest­ing

will guide you to the cheap­est fund shop for your cir­cum­stances.

www.tele­graph.co.uk/funds

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