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Sanjeev Shah

Ice cream and fish fingers may not seem the most glamorous introduction into the world of finance but Sanjeev Shah’s graduate trainee job at Birds Eye Walls, with Unilever as a commercial analyst clearly set him on the right career path.

At 35, the manager of the Fidelity UK aggressive fund will have been running the fund for three years in October and he still seems to be enjoying it.

“The good thing about this job is that it is intellectually challenging and demanding. You can have quite a good balance between your work life and your non-work life because it is not like a corporate finance job where you are going in at weekends.”

Having spent two years at Unilever, Shah left towards the end of 1994 and went to do an MBA in France. After a summer internship at Fidelity in 1995, he joined full-time in March 1996 as a research analyst in food retail. He went on to cover a range of sectors, including media, pharmaceutical and telecom stocks before taking over his current post from Glen Pratt in October 2002.

The £234m fund has around 120 holdings and Shah says he has become more relaxed about the number since the fund passed the £100m mark, having initially tried to keep the number of holdings under 100. For the five years to July 18, the portfolio posted a return of -1.9 per cent against a sector average of -1.3 per cent. Over three years, the fund comfortably outperforms the sector mean, achieving 45.2 per cent against 37.3 per cent.

Describing the fund discipline as value-orientated, he says he runs a pure stockpicking fund which means he can ignore the benchmark and the index and concentrate upon looking for valuation anomalies. “I am not so good at picking stocks which are five or 10 per cent misvalued. I am much better at looking at the extremes and spotting things which are 30 or 40 per cent misvalued by the stock market. And clearly those opportunities are few and far between but they do exist.

“My whole process is geared towards trying to weed out those types of opportunities and really trying to fill my portfolio with those types of names.”

He takes a pragmatic approach to sector industries, saying he is comfortable looking at “anything where there could be an opportunity” because “ultimately all companies boil down to revenues, costs, profits and cashflow”.

The fund is overweight in real estate and the oil sector, with 10.1 per cent of the portfolio invested in BP. Shah remains very positive on oil and is gearing money towards the classic integrated oil stocks such as Shell Transport and Trading this year, as opposed to exploration and production stocks which were favoured in 2004. Recently, he has become more positive towards the media sector because valuations have dropped and he believes the sector is less likely to suffer from a weakening dollar and cost inflation on the oil side.

But things can go wrong and Shah says at times he could be criticised for selling too early. “Where I suppose I have lost the most money is where I have not paid sufficient attention to the balance sheet risk, for example. I lost a lot of money on a German software stock because their customers were not paying them on time.”

What drives him is the intellectual challenge of trying to beat the market by picking stocks that others have rejected and which then rise sharply.

“It is like being a detective and you are going out looking for these types of opportunities and trying to weed out unloved, under-researched stocks and it is always nice to be proven right on those.”

The name of the fund is something that he would like to define more clearly. He says people confuse the use of “aggressive” as meaning a focus fund or being concentrated on one or two sectors or thinking he trades every two or three months. “Aggressive, in my mindset, means it is focused purely on stock picking and individual stocks, irrespective of whether they are benchmark constituents or not.”

Particularly successful stocks for him in the past have included Edinburgh Oil and Gas in 2004 and Mothercare in 2003, which has risen from 100p to around 300p today. But he is not a buy and hold investor and turns the portfolio over every two years.

Shah sees several challenges in the market. He says it is becoming harder to find traditional value opportunities, especially in small and mid-caps where valuations have caught up.

“However, I will say that because I have got 3,000 stocks to choose from in the UK and Europe, those opportunities will always exist – it is just a question of making sure that you go out and find them.”

When not busy picking stocks, Shah likes hiking, both in the UK and further afield and he also enjoys scuba diving, having been to Asia and South America on diving expeditions. An avid U2 fan, he saw them play at Twickenham, but it looks as if stockpicking will remain number one for Shah in the near future.

Born:22 June, 1970, London

Lives: West Hampstead

Education: MA Economics, Cambridge University; ACMA, Chartered Institure of Management Accountants; MBA, INSEAD

Career:

1992: business analyst, Unilever.
1993: commercial analyst, Birds Eye Walls, Unilever.
1996: Fidelity research analyst.
2002: fund manager of Fidelity UK Aggressive Fund.

Likes: hiking, scuba diving, cooking Thai and Italian cuisine

Dislikes: Washing-up, reality TV

Life ambition: To be involved in setting up an orphanage in India

Car: Mercedes 280SL, 1969Hero: Nelson MandelaFavourite author: Robertson Davies (Canadian writer who wrote The Salterton Trilogy and The Cornish Trilogy)

Favourite film: The Big BlueFavourite album: U2, Achtung Baby

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The value of an investment and any income from it can fall as well as rise and you may not get back the amount originally invested. Forecasts and past performance are not a guide to future performance. Some information and statistical data herein has been obtained from sources we believe to be reliable but in no way are warranted by us as to their accuracy or completeness. These are Neptune’s views and as such this document is deemed to be impartial research. We do not undertake to advise you of any change to our views.

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