Patience is a virtue for Michael as Oyster fund reveals rich rewards
PATIENCE is a virtue in most walks of life, including when running an investment portfolio. Those who do best tend to resist the temptation to buy at the top of the market and sell when share prices are sliding.
It is a trait that Michael Clements applies fastidiously in his role as a fund manager at Swiss firm SYZ Asset Management – both when buying stocks and when holding them.
He explains: ‘What I do is buy high quality businesses that are experiencing short-term problems. It might take six to seven weeks before I have done enough groundwork to convince myself that it is the right time to invest. But once I commit, I then usually hold the stock for at least three years, sometimes five, before my decision to invest bears fruit. Patience is my middle name.’
It is a contrarian approach requiring nerves of steel. But so far Clements has reaped attractive rewards for investors in the Oyster Continental European Selection Fund.
Since launch in late 2013, the fund has registered a return of 63 per cent, which is better than the performance of both the average European fund and the FTSE All-Share Index. Over the past three years, only seven rival European funds out of more than 100 have done better.
So far this year, Clements has taken new positions in five firms, while taking profits in four. Among the new purchases is Italian financial services company Banca Sistema.
‘Italian banks had a desperate 2016 as bad debts threatened to consume them,’ he says. ‘Banca Sistema got caught up in all the market froth, even though it is not a bank as such. Its focus is on factoring – buying invoices at a discount from companies waiting to be paid and generating a profit when the bills are eventually met.
‘It is a low-risk business, given the debtors are usually stateowned companies, which always pay up but are notoriously tardy. We were able to use the negativity surrounding the Italian banking sector to buy the company’s shares cheaply.’
Another recent purchase could generate a handsome return faster than expected. Clements bought shares in Danish payments company Nets in April. Last month, it was bid for by US private equity giant Hellman & Friedman, sending the shares to new highs.
‘We could have bought late last year when Nets carried out an initial share offering. But we thought the shares were too expensive. We waited six months for them to fall before we bought in. It is a great business with a dominant market position in Scandinavia and has a stable cash flow, which no doubt explains Hellman’s interest.’
Of the firms sold this year, Lectra, a French business that provides hardware and software for fabric cutting, has been particularly profitable.
He says: ‘We bought shares in mid-2014 for €7.5 and sold in April this year for around €20. At the time we bought it was out of favour because its growth plans were seen by some as too ambitious. But the strategy proved successful.’
Though SYZ’s head office is in Geneva, Clements runs the fund from London. He is head of a team of seven people – three are based in Edinburgh – who scour European markets for investment opportunities.
The fund comprises only 30 stocks and none are UK companies. But this is not because he finds them unattractive – it is simply a result of the fact that the fund invests only across the Continent.