Three fund managers’ biggest British bets

One way to attempt to beat the broader stock market is to take a “high-conviction” approach to investing: identifying shares where you truly believe in the investment case, developing a deep understanding, and investing a significant amount.

This presents clear risks, but is a tactic used by a select group of fund managers. Telegraph Money spoke to three such managers about the stocks they have backed with significant proportions of their investors’ cash.

Nick Train, manager of the £4.8bn Lindsell Train UK Equity fund, is one of the highest conviction investors around. His top 10 holdings account for nearly 80pc of the fund.

He has more than 9pc – almost the maximum allowed – invested in each of consumer goods firm Unilever, alcoholic drinks producer Diageo and analytics company Relx.

He said: “Outperforming the index is very challenging and you have to take risk. There are a variety of types of risk you might choose to take, but we have chosen the Warren Buffett approach: owning big positions in inherently predictable and reliable businesses. Our biggest holdings tend to be in the companies we think have the best brand or market franchise.”

On Unilever, he said that after years of its website saying two billion people worldwide used its brands daily, the figure had recently been updated to 2.5 billion. “It has found 500 million more people to use its products in six or seven years, due to the increase of wealth and disposable income around the world. It is in a uniquely advantaged position to distribute its wonderful brands’ products in nearly every part of the planet,” he said.

Tesco has been staging a comeback over the past few years. Its shares have risen by more than 30pc over the past year. Following its recent growth, the stock has become the largest holding in the £870m Majedie UK Focus fund, at more than 9pc.

James de Uphaugh, one of the fund’s managers, said: “The share price has hit 12-month highs, but we focus on the long term. Tesco’s shares still trade at a multi-decade low in terms of valuation compared with the broader UK market.

“This jars with both the breadth and strength of Tesco’s brand and sales recovery. When we think a recovery story has legs, we back it in size.”

Devro is a £360m group that produces “manufactured casings” for the food industry – primarily sausage cases.

It has had a rocky few years – its shares have fallen by 30pc over five years – but since the end of 2016 it has staged a comeback that has seen the shares gain almost 60pc.

Mark Martin has 9.1pc of his £510m Neptune UK Mid Cap fund invested in the stock. Darius McDermott of Chelsea Financial Services, a fund shop, said Mr Martin “concentrates on holding a collection of high-quality, undervalued businesses”.

“He is happy to take large positions in companies that he has an in-depth understanding of and that have an attractive risk-reward balance, and where the shares have historically had low correlation with other holdings,” he said.

In a recent interview with Mr McDermott, Mr Martin said there was a growing, “albeit slightly out of fashion” demand for processed meat, “especially in emerging markets as populations become wealthier and more urban”.

He added: “Devro has been investing for its future, and that investment period has just finished. Management has also been rapidly reducing debt levels.” He described Devro as a “prime example” of a business strategically positioned to succeed and “undervalued relative to its longterm earnings”.

Some fund managers are not afraid to hold big stakes in stocks they really believe in. James Connington looks at three of their ‘highconviction’ holdings ‘It has found 500m more people to use its products in six years’

Tesco’s valuation ‘jars with the breadth and strength of its recovery,’ one fund manager said. He has 9pc of his fund in the stock