Rathbone Global Opportunities Fund Accumulation Units

Navigating global markets in the search of growth was not an easy task in 2011. According to James Thomson, manager of the Rathbone Global Opportunities Fund, 2012 is likely to be characterised by similarly choppy conditions, and the way to beat the markets is to stay nimble.

The fund was more resilient than many of its peers during last year's volatility. This was mainly down to James Thomson's decision to increase the fund's cash weighting in the summer when he saw the number of profit warnings from companies accelerating. As a result he sold a number of Asian and European stocks so that by November the fund was 20% in cash.

Yet with economic indicators turning positive, particularly in the US, and inflation falling, he anticipates a short-term rally. He has therefore started putting his cash position to work, predominantly buying US stocks in the industrial and consumer areas. He is also keen on certain technology stocks such as Amazon. He feels Amazon's Kindle e-book reader will offer a resilient and growing income stream from the e-books customers regularly buy for the device.

Cash now represents 10% of the portfolio, and could be reduced further if James Thomson finds the right opportunities. However, he is keen to maintain a defensive, 'weather-proof' core to the portfolio through companies with particularly reliable growth prospects. Swedish Match is one example. The company sells chewing tobacco known as 'snus', which more than 20% of Swedish men use daily. This provides a resilient income stream, and the firm also has significant growth potential from the US market where it has launched a range of cigars that have already proved popular.

Another unusual but, in James Thomson's view, dependable way to play global growth is Rational, a German manufacturer of industrial ovens - essentially large all-in-one appliances for caterers covering baking, steaming and grilling. In large kitchens these machines are more efficient and can replace up to 50% of cooking equipment. The company enjoys 54% market share of the global market and customers include Marriot, Cathay Pacific and KFC in China.

He is, however, cautious on direct exposure to emerging markets currently, especially China. He suggests the country's reliance on infrastructure investment and basic manufacturing make it vulnerable. Indeed he is playing the theme of 'near sourcing' in his fund. Rather than outsourcing manufacturing to China, US firms are increasingly using Mexico, as it can take less than 7 days to freight goods compared to 21 days from China. He has bought into Kansas City Southern Rail, which transports goods from Mexico into the US and is benefiting from this trend.

There are also a large number of sectors James Thomson is avoiding altogether. He has no exposure to banks due to a lack of transparency, he is avoiding mining companies sensitive to volatile commodity prices, and the fund has no exposure to pharmaceuticals, utilities, or telecoms as he feels these sectors offer few growth prospects. He is also cautious on auto manufacturers, airlines and shipping.

We believe James Thomson's high conviction, focused approach to investing could generate excellent long-term returns. It is a concentrated fund, which means each stock idea contributes significantly, but also increases risk. It is also small and nimble, so it is able to quickly exploit opportunities in higher-risk small and medium-sized companies. We believe it continues to make a fine choice for exposure to global markets and it remains on our Wealth 150 list of favourite funds across the major sectors.