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Prognosticators and podiums

Roadshow season, which seems to kick off earlier every year, has proved disorienting – and not really because within 10 days I have chaired events in Glasgow, Harrogate, Warrington, Birmingham, Bristol, New-market and London. No, it is more that the flood of macroeconomic forecasts of impending gloom and doom with which we began the year suddenly gave way to the cheerier outlooks of the various fund managers on Unique Boutiques 2012.

None of which necessarily proves the bears wrong, nor is it to suggest the roadshow’s speakers were painting a universally bright picture. For example, Rathbone global opportunities manager James Thomson observed that while previous cycles suggest 2008 may have been the bottom of what has so far been a 12-year secular bear market, “we are now in a deleveraging, healing and atonement phase”. That does not sound much fun.

Nevertheless, all the speakers did embody one of the more interesting aspects of the wonderful world of investment – that no matter how dark things may look, there is always somewhere to invest – even if it does occasionally feel as if that is only shotgun manufacturers and purveyors of caves in Wales.

“The stockmarket is not one homogenous entity,” was the cleverer way Neil Veitch put it. “There are always opportunities to make money.” That, as the SVM UK opportunities manager went on to add, is because “markets are discounting mechanisms. They always look forward and this is what enables them to allocate capital efficiently.”

For his part, despite conceding “markets are tricky, the outlook clouded and value elusive”, Cavendish Worldwide manager Julian Lewis was still able to point to eight “inconvenient facts for the bears”, including how earnings are growing – in most cases, faster than average – corporate debt is low and trending lower, P/E ratios are near 15-year lows and equity dividend yields are well above bond yields.

As such, even when asked what they would buy the moment after reading on their Blackberries the eurozone had collapsed, the managers were immediately able to answer it would be German bonds – although, for good measure, one of them also threw in tobacco stocks and a bottle of Jack Daniels.

Come rain or shine, Frederic Dupraz, manager of the Pictet Security fund feels he is covered. “Do you expect the world to become a more or less safe place than it is today?” he asked. “Either way, it is a reason to invest in security.”

However, in the fond hope we all manage to avoid any sort of Armageddon this year, where else were the speakers focusing? “It is no secret there is growth in emerging markets – the secret is to pay as little as possible for it,” said Renaissance Emerging Europe equity manager Plamen Monovski, who perhaps not wholly surprisingly saw his specialist area – and particularly Russia – as “the cheapest deep-value play on global normalisation”.

Also pulling up short of the apocalypse, Thomson observed: “This is a year when prognosticators behind podiums are likely to be wrong so I have positioned my portfolio for a variety of outcomes. If things improve, I will not shoot the lights out but neither am I likely to embarrass.”

Having ruled out a catalogue of possible assets, including banks (“opaque businesses”), China (“I’m reining back even my indirect exposure”), utilities (“all their customers hate them”) and Italy, Spain, Greece and the other stricken eurozone economies (“basket cases for the next decade”) – not to mention airlines, autos, telecoms, traditional retailers, alternative energy, mining, shipping, chemicals and pharmaceuticals – I began to worry he might have nothing left to invest in aside from maybe Sweden and cheese.

Wrong. Thomson is now focusing on themes that should help “weather-proof” his fund, such as squeezed spending, pricing power, companies that will gain market share or benefit from cost savings and, rather philosophically, “life and death”, which includes a funeral home boasting a 98 per cent customer satisfaction rating.

“Investors should try not to be too clever,” he concluded. “Seek out resilient, reliable and differentiated businesses – although take some calculated risks – and when mistakes are made, admit them and adapt.”

Julian Marr is editorial director of and


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