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Pick of the bunch

Since Ian McVeigh took over Jupiter UK growth in 2003, he has restored its fortunes as a top-performing fund. In my view, McVeigh is one of Jupiter’s most engaging fund managers and, I believe, much under-rated by the industry.

At an investment dinner in 2003, attended by journalists and brokers, he was one of the very few who remained steadfastly bullish in the face of a falling UK market.

It is something that he likes to remind me about every time I see him and when I caught up with him recently, he informed me that he is as bullish now as ever.

He believes that the market remains cheap and, as measured in price/earnings terms, is no more expensive now than it was in 2003.

Perhaps more important, he believes that equities remain good value compared with bonds and property – something upon which we agree.

Fund labels can often be misleading, so what does UK growth really mean? McVeigh sees his fund as unconstrained with no size bias and a pragmatic, flexible stance when look- ing at stocks.

Like many fund managers, he does not like to be boxed into a corner with labels of value and growth. He is finding better opportunities in the FTSE 100 with a two-thirds weighting there, around a third in mid caps and the remaining 5 per cent in small companies.

In fact, McVeigh characterises stocks into three sectors – growth, value and recovery. At present, and for the last year or so, he has had a bias towards growth as this area has seen a huge de-rating since the technology bubble.

McVeigh has tried to formulise the process a little more by defining growth stocks in terms of profit growth relative to the market average on a one to three-year time horizon.

Recovery stocks are where company profits have fallen very sharply but where he has some conviction that this will turn round over the medium term.

For value stocks, he looks at the price/earnings discount on the basis of 12-month forward earnings. This is a high-conviction portfolio which means that McVeigh will take big overweight positions in some stocks.

Just as important as buying is the sell strategy and McVeigh sets his own price targets which gives him a clear view of the returns he expects and an indicator allowing him to make a sell decision.

Currently, 48 per cent of the portfolio is in growth stocks,while 40 per cent is in value. The fund is overweight in mining, with 11 per cent exposure against the market weighting of 6 per cent.

What I found interesting was his top growth stocks across different sectors. These include Halfords, which has a 25 per cent market share in the car part market, Icap (a global leader in financial services), giant brewer SAB Miller and global broadband company Inmarsat. Other successes include Charter, which makes turbines for the booming power-generation industry.

As you would expect from any Jupiter fund, this is a real stockpicker’s portfolio. It showed a thumping return of more than 32 per cent over the last year so.

I remain surprised that UK growth is not mentioned more. Then again, McVeigh is in illustrious company. No broker will buy every Jupiter fund for his portfolio.

Mark Dampier is head of research at Hargreaves Lansdown

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