This fund will hold a concentrated portfolio of UK stocks that reflect the best ideas of the fund manager. The objective of the fund is to outperform the FTSE All Share, by taking significant positions in companies that are trading at large discount to what the manager believes is their ‘intrinsic’ value.

Using lessons from master investors such as Ben Graham, Warren Buffett and Phil Fisher, the fund aims to outperform the FTSE All Share by taking concentrated positions in quality companies that are trading at a significant discount to their intrinsic value.

The strategy employs screening followed by intensive company research to confirm the candidates for the portfolio. It dispenses with shortcuts, such as price-to-earnings multiples, which Collins Stewart believes are fundamentally flawed.

It will also utilise ‘Quest’, Collins Stewart’s proprietary stock research tool, which provides a unique method of analysing wealth creation and valuation.

Minimum investment: £5,000
Initial charge: Up to 5%
Annual mngmt fee: 1.5%
Contact: Visit the website www.collinsstewartfunds.com

James Davies says:
Focus funds, or ‘best ideas’ funds have been a popular choice among investors in recent years. Funds that adopt this approach will select a relatively small portfolio of stocks (around 30 in the case of the Collins Stewart UK Focus Fund), making the fund’s performance closely aligned to the stock selections of the fund manager.

The fund is managed by David Shapiro, who joined Collins Stewart in August last year, and brings with him 20 years of experience as a fund manager at asset management houses like Morley and UBS.

Shapiro classes himself as a true value investor, in that he looks to identify companies he believes the rest of the market is undervaluing. He describes his investment style as ‘buying pound coins for 50p’, and considers his approach to investing as a strategy rarely employed by UK fund managers. In addition, he looks to hold onto stocks for a three- to five-year period, eschewing what he sees as the short-term trading employed by too many fund managers.

Although the fund can invest across the market cap scale and is unconstrained, Shapiro admits that initially he sees the most value among the larger-cap stocks: ‘I currently believe that UK large-cap stocks are screaming value, but I would be missing a tremendous opportunity if I was to ignore some of the small-caps that have been indiscriminately sold off in the credit crunch.’

The Collins Stewart UK Focus Fund is likely to appeal to those with a patient approach to investing, who are prepared to bide their time in order for performance to show through. While value investing can become a bit of a trap in the hands of a poor (or unlucky) fund manager, it can also deliver large rewards over time.

I do not think that value investing is quite as rare in the UK as Shapiro and Collins Stewart are suggesting; and there are plenty of good quality ‘value-seeking’ funds in the UK. Shapiro’s credentials certainly check out, and the current market conditions undoubtedly present some fantastic opportunities for good value investors.

3 Stars
James Davies is investment research manager at Chartwell Investment Management