New role, same philosophy
I recently joined Stellar Asset Management to spearhead the firm’s expanded AiM IHT service and bring its AiM fund management in-house for the first time. But while this particular role and the in-house fund management may be new, for me, not much else has changed. My DNA in stock-picking is very much the same, as are my deeply-held and well-defined philosophies on the AiM market. For those who haven’t spoken with me before, and those who have, I wanted to share some initial insights into the vision I have for Stellar’s emboldened AiM IHT service.
Firstly, I am very fortunate to have an excellent foundation upon which to build. I was quietly impressed at Stellar’s performance and growth as a spectator over the years. Jonathan Gain and his team have superbly blended energy with experience, and the result has been a highly dynamic firm with an unwavering focus on the results it achieves for clients. My plan is to take its existing strong service and enhance it further.
This starts with having total control over the end-to-end process, from the onboarding to the servicing of clients, to (hopefully) generate consistently strong performance at good value. And good value is particularly important to me. Throughout my career, it has been imbued in me to fight over every quarter of a penny when it comes to buying stocks. Equally, I do not believe you have to charge the earth in this business. I want this service to be renowned for transparency and fair value, as Stellar has always strived for too. A great service at great value.
The AiM market is the ultimate stock-pickers market and I will be employing my two decades’ worth of experience as I embark upon researching and buying stocks for Stellar’s portfolio. Currently, with the exception of a select few stocks, I do not see compelling value at the upper end of the AiM market. Much of the large cap proportion of the market is fraught with business relief risk, overrun with other IHT-minded investors and replete with yesterday’s darlings.
Instead, I will be focusing on finding tomorrow’s winners amongst the smaller capitalised stocks. In my view, the best value is to be found in companies below £200 million market cap. These companies have not had pumped up P/E valuations and they are far less populated with IHT investors. The disconnect between the share price and the company’s intrinsic value is greater at this end of the spectrum and opportunities are more abundant too. Why wouldn’t you want to fish where the fish are?
When I research stocks, the factors that stand out to me are founder-led management teams, the company’s ability to exist for a long period of time, strong returns on capital, high cash generation and dividend paying ability. I also make room for more Value-orientated situations, focused on turnarounds and special situations, but only where I can identify an intelligent fanatic at the helm. When I build a portfolio, I want to build it for a range of different outcomes and ‘blend’ stocks accordingly that ‘zig and zag’ at different times. For me, proper diversification means disliking different parts of your portfolio at different times. If all of your stocks rise at the same time, it is clear they are too correlated.
Ultimately, I want to build a service that maintains the integrity of performance for our clients and maximises client returns, rather than merely boosting assets under management. That is why we will cap the strategy; to preserve our unconstrained, go-anywhere ability. There is no purer demonstration of putting the client first, yet such constraint is unfortunately rare in the AiM IHT space.
Written by Stephen English
Stellar Asset Management Limited does not offer investment or tax advice or make recommendations regarding investments. Prospective investors should ensure that they read the brochure and fully understand the risk factors before making any investment decision. The value of investments and the income from them may fall as well as rise and is not guaranteed. No assurance or guarantee is given that any targeted returns will be achieved. Forecasts of potential future results are not a reliable indicator of actual future results.
Stellar Asset Management Limited of Kendal House, 1 Conduit Street, London W1S 2XA is authorised and regulated by the Financial Conduct Authority.