The nature of investing has changed. Whereas allocating a proportion of your assets to key regions to create diversification was once vital, a firm’s location is now often irrelevant.
Efficient distribution networks, advanced technology and the evolution of the internet have made it easier for companies to generate sales across the world, whether they are based in Bristol or Beijing.
Visa is a prime example. It handles more than 20,000 payment transactions a second and is benefiting from the growing popularity of paying by card and shopping online. So far this trend has mainly been restricted to developed markets but as wealth rises in emerging markets and demand for credit and debit cards grows, a valuable source of future growth is built in.
This is the type of company sought by James Thomson, manager of the Rathbone Global Opportunities fund. He aims to invest in great businesses, wherever they are based across the developed world. He likes companies that capitalise on strong long-term trends and Visa is the currently fund’s biggest holding.
Following a period of underperformance in 2008, Thomson reviewed his investment process and now places greater emphasis on ‘weatherproofing’ the portfolio.
He believes businesses with certain characteristics can grow through thick and thin. He prefers firms with a business model that is understandable, scalable and capable of generating repeat revenues.
He also looks for companies that operate in areas where it is difficult for competitors to easily take market share. This gives them an element of pricing power.
In this regard, Thomson likes Rightmove, which is capitalising on changing consumer trends. The internet now generates more than 70 per cent of all leads for UK property purchases and Rightmove has an 82 per cent share of the market.
Management teams with an entrepreneurial flair and the prudence to reinvest profits wisely to grow the business are also important, says Thomson. However, in my view, one of the key attractions of the fund is his unique perspective on growth.
Running a growth fund means Thomson would not traditionally invest in classic value-type stocks but, in a demonstration of lateral thinking, he has found a route into traditionally defensive sectors while retaining the prospect of significant growth.
Virbac, a French pet pharmaceutical company, does not have the same clinical risks as human pharmaceutical companies and many of its drugs are modified versions of those already approved for human use, meaning it has less downside in terms of patent expiries and R&D costs.
Thomson also holds Intertek, which tests, inspects and certifies a huge range of products, from toys, smartphones and medical devices to batteries, military armour and car parts. The manager believes it will benefit from ever-increasing red tape and safety standards.
New positions are introduced at around a 2 per cent weighting as he wants them to have a meaningful contribution to performance. There will be between 40 and 60 holdings, meaning the portfolio is reasonably concentrated, although Thomson endeavours to ensure it remains diversified geographically and across industry sectors.
Since launch in 2001, the fund has grown by 118 per cent, compared with 46 per cent for its IMA Global peers.
At less than £230m, the fund remains nimble and flexible enough to take advantage of opportunities among companies of all sizes. Thomson will often see opportunities for growth that do not fall onto the radar of other investors and I rate his stockpicking ability highly.
The fund could be an excellent core growth holding for this year’s Isa or Sipp.
Richard Troue is investment analyst at Hargreaves Lansdown