Fund Manager Focus by Rob Langston

Noble-Nesbitt says his approach to investing is ‘pragmatic, flexible and value-driven’ and believes great value can be derived from analysing individual stocks.

‘I tend to invest in stocks because I like the individual characteristics of the stock, but I do spend a lot of time looking at what’s going on in the world,’ he explains. ‘I spend a lot of time looking at the dynamics of larger companies – smaller companies often feed off what is going on.’

Noble-Nesbitt says there are a number of attractions for the smaller companies fund manager, due to the sheer number of companies available for investment.

One of the companies favoured by Noble-Nesbitt at the moment is Timeweave, which constitutes 5.7 per cent of the Special Situations portfolio. He says the company’s principal asset is a 50 per cent stake in AMRAC, which owns exclusive licences to broadcast sound, pictures and video from 31 racecourses around the country.

The fund manager says the company has a lot of cash on the balance sheet and a recently appointed chief executive, David Craven, formerly of government-owned bookmaker Tote.

Blooming profits
Another company Noble-Nesbitt favours – and has done so for a while – is book publisher Bloomsbury, which is a 4.9 per cent holding in the fund.

He says that the publisher is a profitable business and has been trading well.

However, he says one of the attractions of Harry Potter publisher Bloomsbury is its growing presence in the online arena, which Noble-Nesbitt says is growing quickly. The e-book rights for the popular children’s series about a wizard have yet to be awarded, and it has been reported that Bloomsbury would be part of any deal.

Two stocks within the financial sector also feature in the manager’s top ten holdings: inter-dealer broker Tullet Prebon and mortgage lender Paragon.

Ripe for consolidation
Tullet Prebon, headed by City veteran Terry Smith, makes up 5.6 per cent of the fund’s portfolio and is described by Noble-Nesbitt as a ‘well-run business’. He says the stockbroking industry is likely to undergo some consolidation within the next few years.

‘It’s far too cheap really,’ he says. ‘What is Terry Smith’s endgame? Maybe he’ll buy things in the meantime, but ultimately the sale of that business is not beyond the realm of possibility.’

Paragon – a buy-to-let specialist and established name within the mortgage industry – is a different proposition, according to the fund manager.

Noble-Nesbitt says the company is currently trading on a discount to net asset value but believes the company could see a strong rebound if it is able to access the securitisation market and increase lending.

The manager says the fund’s exposure to the financial sector, which makes up a 15.9 per cent segment of the portfolio, is informed by the value in those stocks he has invested in.

Noble-Nesbitt has also been wary of being drawn into much of the hype around the price of gold despite the number of gold mining companies in the smaller companies market.

‘I don’t tend to pay much attention to investment bank views on when the market is going to peak and crash,’ he says, adding that the main reason for holding gold is as a hedge against market volatility.

The manager says there may be value to be had in the junior mining space, but says with the outlook for the price of gold still unclear, it would be difficult to value gold mining companies at the moment.