‘If you know the stocks I own, I’m not doing my job’

Buying hitherto unknown brands is the best route to returns, but investors need to watch out for debt, Fidelity’s Amit Lodha tells Jonathan Jones

It has long been known that the secret to good investing is to buy a stock before everyone else has heard of it. Easier said than done, however. It takes bravery, skill and blind luck to buy the giants of tomorrow when they are plucky start-ups. Some managers can prove they have the talent and courage to pick the winners.

Amit Lodha, manager of the Fidelity Global Focus fund, has demonstrated this since taking charge more than a decade ago. The £600m fund has tripled investors’ savings while markets returned just 184pc. The manager has beaten his average peer in nine of the past 10 years. Last year, Mr Lodha returned 30pc, despite the turmoil of the pandemic, three times more than the market.

He tells Telegraph Money about how he goes about spotting winners and why the future is riddled with problems for investors.

WHAT MAKES YOU DIFFERENT? I have access to a lot of research working at Fidelity. I have managed the fund for 10 years, but my strength is believing in the value of our analysts on the ground.

We have feet on the street all over the world and, as a global manager, I am never going to be the first to know what is going on in each market, so I have delegated a lot of the nitty-gritty work and then I connect the dots.

HOW DO YOU PICK STOCKS? I look for strong management teams. I have met the managers of Apple, Amazon and Facebook, so when meeting bosses of medium-sized companies, I am looking for those who may be in a smaller stock but have the same vision and quality.

I also look for firms that are in industries that are growing and that provide a unique service, because this gives companies pricing power, which is very important.

However, my “North Star” is finding and buying stocks trading below their intrinsic value.

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If the company is already recognised as the next Amazon, I do not think we will get great returns.

WHO IS THE FUND FOR? It’s for investors who believe there is value in stock picking, because this portfolio is as active as they come.

We have an “active score” of 97pc, which means there is nearly no overlap with a benchmark index. If you know more than three stocks in my top 10, then I am not doing my job. We do not buy typical names such as Nike or Apple. It is for investors who put money away for three to five years and think the next Amazon or Netflix could appear from anywhere in the world.

HOW DO YOU VIEW THE FUTURE AFTER THE PANDEMIC? We are going to see one of the strongest periods of earnings growth over the next year or so. But the critical question is how much the stock market has already priced this in. I would wager a fair amount.

But the main question now for companies and countries is how much debt is too much? Governments have raised a lot and at some point that will come home to roost.

In the 1920s, after the Spanish flu and the end of the First World War, we had two very divergent economies. In America there was the Roaring Twenties due to profligate spending, but the US had to meet its maker in the 1930s with the Great Depression. Britain was much more conservative, so things were not as great in the 1920s, but not as bad in the 1930s. How we manage the next 12-18 months will decide how things look down the line.

WHAT HAS BEEN YOUR BEST STOCK? Online grocer Ocado. We first bought in when it traded around 350p. It went down to almost 200p, but I kept on adding. Now it is at £20, up 10 times.

AND YOUR WORST? TripAdvisor, the online holiday company. A rule I have is once a stock is down 50pc from what I paid, I sell it. You have to make a call somewhere, because if you keep taking money away from your winners and adding to the losers, you just end up with a portfolio of lemons.

The pandemic destroyed the business, understandably, and it hit the 50pc mark. I sold it eventually but only after it had halved, and halved again. I, therefore, learnt the importance of my own rules.

HAVE YOU INVESTED IN THE FUND AND HOW ARE YOU PAID? Yes. I think it is vitally important for me to be invested alongside my clients. Both my daughters’ Isas are in my fund, too, and I am paid on a fixed salary with a bonus that is dependant on my three-tofive year performance.

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WHAT WOULD YOU BE IF NOT A FUND MANAGER? I would want to research the psychology of people and behavioural sciences.