‘Aversion to UK stocks gives rise to bargains’

Georgina Hamilton and George Godber made their name at Miton, investing in small and medium-sized UK firms. Over their three years running the Miton UK Value Opportunities fund they returned more than 60pc, compared with 12pc for the FTSE All Share index.

The pair launched the Polar Capital UK Value Opportunities fund in January last year, after leaving Miton. It is on the Telegraph 25 list of our favourite funds. The fund has grown to £590m in the year since launch, compared with £870m for the Miton fund when they resigned.

Here they tell us which UK stocks look cheap, the changes they’ve made to their fund and why there is no Plan B for their careers. the UK market overall, it has been shunned by most investors, and at an international asset allocation level the UK is at an all-time low. Because of this negative view, it is a really good opportunity to hunt out bargains – as people are tarring all stocks with the same brush.

Georgina Hamilton:

The UK market is split into domestic earners and overseas earners, and domestic earners are cheaper at the moment – by about 20pc across the board for the FTSE 350 index. However, it’s harder to get visibility of profits in the UK, because there is a more tricky outlook.

This means we end up focusing on boring stuff that delivers regardless of the economic conditions. So we get excited about screws, paving slabs, bricks and dry cleaning.

Overseas earners are typically more expensive, but ability to predict

GG: GH: CV: Georgina Hamilton and George Godber

Georgina Hamilton and George Godber dber joined Polar ar Capital in 2017 to set up the he UK Value Opportunities ties fund.

Before this his they both worked for r Miton Group, managing the UK Value Opportunities and Undervalued Assets funds. future profits is quite good, so there the fight is to find cheaper shares.

Brexit looks to be a ‘messy divorce’, this duo at Polar Capital tells Laura Suter, but it is resulting in discounted shares

GH:

A domestically focused example is Forterra, the bricks producer. It is a well-consolidated market and people still need bricks, whether it’s for urban regeneration, social housing or private house building. Without too much growth in overall demand, it can grow by taking share from overseas.

Overseas we invest in Vesuvius, which came out of Cookson. It offers molten steel flow control.

It has products to help move iron ore around steel plants and its stuff appears in a third of steel plants in the world. A lot of what it is doing is “self help” – lots of its profits are derived from its internal restructuring.

GG: GH:

At the moment shares are being punished very severely for missing expectations. We think there is a lot of opportunity out there, but harsh reactions on profit warnings mean there is more risk. There is more of a risk but more of a return. council tax bills rising, auto enrolment pensions taking more take-home pay, and petrol prices going up again.

However, our experience from speaking to company managements is that even pro-Remain companies are just getting on with it. They can’t wait around and see what happens.

‘ VALUE IS COMPELLING’

GG:

camping-focused and benefits from Britain’s love affair with festivals. JD also benefits as demand for trainers is robust, online business is strong, and its expansion into other markets is going well. It is very focused on trends. The average number of trainers millennials have is extremely high and JD Sports is offering exclusive products – about 50pc of its trainers are exclusive to JD, which is how you compete with the online threat. If you want big brand marketing, for Nike for example, you will go to someone like JD. The company has had a tough year, although we have held it for a long time. We like cheaper shares though, and as the price has fallen we have bought some more. We still think the value is compelling.