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Investment Times

The anatomy of a stockpicker

| 18 November 2016 | A A A
The anatomy of a stockpicker

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No news or research item is a personal recommendation to deal. All investments can fall as well as rise in value so you could get back less than you invest.

Richard Pease has built a formidable reputation managing European equities. With a track record spanning 26 years, he is one of the most successful fund managers of his generation.

We first met him in 1998 and have followed his career closely, including his time managing European funds for Jupiter, New Star, Henderson and now CRUX, his own fund management business. Our research suggests he has one of the strongest stock picking records in the sector and has consistently added value for investors throughout his career.

He seeks companies operating in niche sectors, with high barriers to entry. This means less competition, and more pricing power, as demand for their products or services is less likely to be affected if prices rise. Richard Pease focuses on companies he believes could prosper in both good and bad economic environments. He expects outsourcing businesses, for example, to perform well even when markets are tough as they offer other companies the opportunity to save money. He therefore saw share price weakness around Brexit as an opportunity to add to holdings in the sector.

This included Finnish IT company Tieto and Nordic IT infrastructure supplier Atea. The manager rates the former’s management and expects them to bolster future growth through acquisitions, while the latter has a strong balance sheet, improving margins and increasing market share.

Guarding and security is another area he expects to prosper regardless of the wider economic environment. Securitas, a relatively new addition to the fund, is moving towards modern higher-margin forms of guarding, such as surveillance systems, which the manager believes will improve the company’s profitability over the next four years. The manager also used the impact of Brexit as an opportunity to increase the fund’s weighting in cash handling business Loomis at a discounted price.

Richard Pease also values businesses that manufacture low-cost but critical components for other products. The scents produced by Givaudan, for example, are a low proportion of the total costs for perfume makers but critical to the final product.

FP Crux chart

His focus on companies that he believes will provide some resilience during turbulent market conditions has paid off over both the short and longer term. The manager has been successful in selecting companies that have delivered good returns for their investors regardless of the wider economic and political environment.

He searches for winners across the entire market – regardless of company size or the country in which it operates. The portfolio therefore includes some exposure to smaller companies, which although they have greater growth potential, are also higher risk. Another feature we like is the fund’s relatively concentrated portfolio – with around 60 holdings, each can make a significant impact on performance, though this is a higher-risk approach.

Richard Pease has an exemplary long-term track record and our analysis attributes his performance to his strong stock picking ability. The FP CRUX European Special Situations Fund started life as the Henderson European Special Situations Fund and was transferred to CRUX in 2015. Since launch in 2009 it has delivered returns of 141%, compared with 73% for the average fund in the sector. Remember past performance is not a guide to future returns, and like all stock market investments the fund will fall as well as rise in value, so investors could make a loss.

FP CRUX European Special Situations Fund factsheet

We believe this fund represents a first-class choice for exposure to European businesses, but more importantly to the stock picking talents of Richard Pease.

Please note the fund’s charges can be taken from capital, which can increase the yield but reduce the potential for capital growth.

Fund information

Investment goal: Growth
Invests in: Shares
Net initial charge: 0.00%
Ongoing charge (OCF/TER): 0.86% p.a.
Ongoing saving from HL: 0.14% p.a.
Net ongoing charge: 0.72% p.a.
Vantage Service Charge: 0.45% p.a.

View Key Investor Information Document

View our charges

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