Why tech fund is an ideal home for Rightmove
DOWNBEAT chatter about the state of the UK housing market has not dimmed enthusiasm for property website Rightmove – at least not for James Thornton, manager of the Rathbone Global Opportunities Fund.
His aim is to pick stock market winners, whatever their business and wherever they are in the world and Rightmove makes the grade.
Even to the most casual observer of UK housing market data, it might seem reckless right now to back a business that relies on individuals buying and selling homes in decent numbers. But Rightmove has an advantage – it is the largest online portal used by 80 per cent of Britain’s estate agents for reaching both buyers and sellers – and the tougher the market gets, the more help these agents will need – and will upgrade their packages with the website or so it hopes.
Thornton says: ‘Estate agents will need to pedal harder to sell homes. Rightmove is a mission critical tool for them. They are more likely to turn the lights off before giving up their Rightmove subscription.’
The company has been one of the fund’s best performing stocks, with its share price leaping about 1,500 per cent since purchased in 2009. Thornton trawls the world for this kind of opportunity – where a company starts off under the radar.
Many of the firms that he likes best generate growth using technology. About a quarter of the portfolio is made up of such technology holdings. Another tech favourite among the fund’s 60 stocks is Match Group, the US firm that finds love for ‘lonely hearts’ through its empire of dating apps including Match. com, Tinder and PlentyofFish.
Thornton recognises this is a volatile market but is reassured by management efforts to add premium services. He says: ‘Successful businesses in technology do not just put up prices. They need to give their customers something more. Tinder lets everyone “swipe right” for those matches they like the look of. But it also offers a Gold members-only service that allows access to features such as one that narrows the field to those people who have already “swiped right” for you.’
He also ‘weather-proofs’ the portfolio with defensive stocks that may grow less quickly, which are vital in an era of ‘unreliable growth’, he says. These include companies involved in care homes, medical equipment and healthcare.
Recession ‘ballast’ should be provided by the US pawn shop business First Cash. He says: ‘Pawn shops do not prey on their customers. It is a clear transaction. You bring in your guitar and they value it real time and then give you 60 per cent of that value. Three quarters of people come back for their item and the typical interest rate works out at 14 per cent.’
Another ‘ballast’ stock is Waste Connections, one of the largest US rubbish collection companies. He says: ‘Garbage collection is done privately in the US. Even in a recession people want their garbage collected.’
The fund’s global flavour has transformed since Britain’s Brexit vote. Back in 2016, about a quarter of the portfolio was in the UK – now it is just 5 per cent. About two thirds are now in US stocks ‘where the growth is’.
Thornton has a track record of picking winners. Over the past five years, the £1.8billion fund has delivered a return of 120 per cent, compared with 66 per cent for the average global fund and 31 per cent for the FTSE AllShare. Charges of 0.78 per cent a year are competitive. Patrick Connolly, of adviser Chase de Vere, says: ‘The manager’s skills have produced excellent longterm returns for investors.’