To mark the anniversary of Jupiter Asset Management taking over the Omnis Income & Growth Fund, and with the portfolio transition practically complete, we took the opportunity to speak to manager Ben Whitmore about his first year in charge.
Omnis was delighted to secure the services of a manager with Ben Whitmore’s track record. As you can see from the chart below, Ben has consistently managed to deliver healthy returns since 2006 even though market conditions could be said to favour ‘growth’ shares against his ‘value’ style of investing for the majority of this period (for more on this, read Colin Gellatly’s recent article).
Ben strongly believes in his approach which involves investing in financially sound companies that appear undervalued. Historical performance backs up Ben’s conviction. This chart shows that since 1951, buying the cheapest shares has delivered annual returns of more than 5% better than the most expensive shares.
Ben also provided insight into the other criteria he uses when evaluating an investment, such as how he distinguishes between low value and good value.
Ben discussed the wide range of environmental, social and governance (ESG) factors he takes into account in his investment process; citing Jupiter’s intervention in remuneration policies of Anglo American when it believed that these did not sufficiently reflect the need for management to ensure the safety of employees in its mining operations.
Ben discussed some of the shares he holds in the fund’s portfolio to show his philosophy in practice.
Kingfisher is a retail giant that owns a wide range of brands, including household names like B&Q and Screwfix. Ben wasn’t only attracted by its low valuation compared with other retailers, but he felt new leadership would help correct the self-inflicted issues the company was dealing with.
Booking Holdings runs booking.com. While lockdown has weighed heavily on its share price, Ben likes the business model because it’s a travel company that doesn’t own any hotels or planes, it simply earns a commission from facilitating reservations. He feels its financial strength means the company is well positioned to bounce back as borders open up again.
The portfolio also holds shares in Royal Bank of Scotland and Standard Chartered. The markets are concerned about the banking sector due to the potential impact on profits of low interest rates and the economic slowdown, but Ben feels banks are in a much stronger position compared with the 2008 financial crisis and the outlook isn’t as bad as their valuations suggest.
While Ben’s approach generally involves researching individual companies rather than political or economic trends, one issue no UK fund manager can afford to ignore is Brexit. The vast majority of the portfolio’s holdings are listed in the UK (we allowed Ben to invest in some international shares), but Ben estimates that around 80% of the profits generated by the companies in which invests come from outside of the UK and should not be vulnerable to Brexit uncertainty.
In terms of the coronavirus crisis, Ben expects most companies to recover, although some sectors, such as business travel and retail, may fall into the ‘low value’ category instead of ‘good value’.
The Whitmore Effect
Ben’s influence on the Omnis Income & Growth Fund has started to show. Performance lagged in the first six months, as the portfolio transition gathered pace, but it has improved significantly since. Over six months, the fund is ranked in the second quartile, while it’s ranked in the top quartile over one and three months.
These timeframes are typically too short to measure performance, but they hopefully prove the fund appears to have turned a corner under Ben’s stewardship.
Ben recognises that value investing has faced challenges over the last five years, with growth outperforming to the greatest extent since the dot com bubble in the late nineties and early noughties. The US markets have particularly benefited from this effect. However, with UK valuations so low, he’s optimistic.
While past performance isn’t an indicator of future results, historically value has outperformed growth following similar periods of underwhelming returns. After all, with shares of tech companies like Facebook and Amazon so expensive, they have to generate substantial profits for many years to come to justify those valuations.
To conclude, the Omnis Income & Growth Fund is a key building block for the actively managed Omnis Managed Portfolio Service and the Graphene model portfolios. As highlighted by Ben and in Colin’s article published earlier this week, value and growth investing tend to complement each other. Blending the two styles with a portfolio should help to deliver strong returns in the long run.
- Ben Whitmore of Jupiter Asset Management took over the Omnis Income & Growth Fund one year ago. The portfolio transition is nearly complete;
- Ben has a strong track record as a value investor as proven by the returns he has delivered since 2006, and Omnis was excited to secure his services;
- Value investing has historically outperformed growth investing over the long run;
- Ben believes that only 20% of his portfolio is particularly vulnerable to Brexit uncertainty;
- While long-term performance will take a while to recover, it has improved over one, three and six months as the portfolio experiences the ‘Whitmore effect’;
- Ben is optimistic about the future because UK valuations are so low;
- The Omnis fund range benefits from a blend of value and growth investing as the two styles complement each other.
Chief Investment Officer, Omnis Investments Limited
Issued by Omnis Investments Limited. This update reflects Omnis’ view at the time of writing and is subject to change. The document is for informational purposes only and is not investment advice. We recommend you discuss any investment decisions with your financial adviser. Omnis is unable to provide investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given. Past performance is not a guide to future performance and may not be repeated.
The Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC are authorised Investment Companies with Variable Capital. The authorised corporate director of the Omnis Managed Investments ICVC and the Omnis Portfolio Investments ICVC is Omnis Investments Limited (Registered Address: Washington House, Lydiard Fields, Swindon, SN5 8UB) which is authorised and regulated by the Financial Conduct Authority.