Investing in stocks and shares best rewards the patient. It’s an adage that most fund managers adhere to, irrespective of which stock markets they are trying to make money from.
In the past few days, I’ve spoken to two hugely regarded managers who passionately believe patience is one of the key ingredients to successful investment. They are Richard Penny, of Crux Asset Management, and Sam Vecht, of global investment giant BlackRock.
The two managers run money in different markets – chalk and cheese. Penny, who believes ‘time is our friend’, has been managing UK investment portfolios for the past 24 years – at M&G, Legal & General and since late 2018 at Crux. The main investment fund he runs there is UK Special Situations, a £197million vehicle that invests across the stock market in search of returns.
It means an eclectic portfolio that embraces the likes of Shell and Barclays as well as more exciting stocks such as Alternative Investment Market (AIM) listed leisure company XP Factory and financial tech specialist FD Technologies.
Meanwhile, Vecht is one of three managers with a hand on the tiller of BlackRock Frontiers, a £270million investment trust listed on the UK stock market.
Time is our friend: Patience is one of the key ingredients to successful investment
It invests in listed companies operating out of some of the world’s most embryonic economies – in many cases countries that have not quite yet made it to emerging market status. Its biggest country holdings are in Saudi Arabia, Indonesia and Thailand.
Penny says running a UK investment fund, holding a heavy dose of small to medium-sized companies, has been a challenge in the past couple of years. Investors have been net sellers of the market, depressing share prices, especially among smaller and mid-cap companies.
But his view is that at some stage, the tide will turn – and when it does the share prices of many stocks outside the FTSE 100 will bounce back spectacularly. If so, his patience (and that of his fund’s investors) through the tough times will be rewarded.
It has happened before, he says. For example, between March 2020 (the start of lockdown) and early January last year, his fund returned 151 per cent, compared to 76 per cent for the average of his peer group.
After the 2008 financial crisis, the fund he ran at the time (L&G UK Alpha) also outperformed over the next two and a bit years, delivering a return of 173 per cent compared to the average for rivals of 85 per cent. Although the past is no indication of the future, Penny says the upside potential in the next 18 months to three years is tremendous, with three-figure returns possible.
BlackRock Frontiers’ Vecht says investing in everything from lithium mining companies in South America through to casino operators in Cambodia is not without its risks. But through diligent on-the-ground research (he lives his life out of a suitcase), it has been possible to build a portfolio that will provide patient investors with attractive medium to long-term returns.
Patience, alongside diversification, is one of the keys to making money from equities.
Bank branches can prosper and Penrith is proof!
Reader Robert Wilson has just come back from a rather splendid holiday in Keswick, Cumbria. Although blown away by some of the Lake District scenery, the 76-year-old former local newspaper editor was also taken aback by the vibrancy of nearby Penrith’s high street, above.
While in the town, he counted at least eight banks and building societies vying for the custom of locals and other passers-by. Among them were local financial institutions such as building societies Cumberland and Penrith as well as big banks HSBC, Lloyds and NatWest.
Robert, from Newarthill in Lanarkshire, says it was heartening to see so many banks grace the town’s high street – given the large-scale closure of branches over the past couple of years (1,150 and rising).
Vibrant: Eight banks and building societies vye for the custom of locals and other passers-by in Penrith
‘I was pleasantly surprised,’ he told me last week. ‘I expected to see the odd branch with a ‘for sale’ or ‘to rent’ sign outside. But nothing of the sort.’ He now wonders whether it is the UK’s most bank and building society-friendly town.
Last month, another reader (Peter Rowlands) was similarly overwhelmed by the number of bank branches he stumbled upon in the seaside resort of Llandudno in North Wales. So, a challenge, dear readers. Is your town still a hotbed of banks and building societies? If so, do drop me a line at email@example.com. I will then come and pay you and your town a visit.
Joan’s right to want the best service
A big thank you to 85-year-old Joan White for contacting me about the article I wrote seven days ago concerning bank branch staff increasingly instructing customers to use machines rather than counter services.
Joan, from Waltham in Lincolnshire, says she has recently gone into her local branch on two occasions to deposit cheques – only to be told to use a cash deposit machine.
Human touch: Bank branch staff are increasingly instructing customers to use machines rather than counter services
So miffed was she that Joan has now started to use her local Nationwide Building Society branch when she wants to bank a cheque. Its service remains personal. Such a human touch still goes a long way, especially when machines fail to recognise deposits as happened at NatWest a few days ago.
One final thought. If you work in a bank branch where you are instructed to discourage customers from using the counter services, we would love to hear about it.
Nationwide’s halo could shine brighter
Although Nationwide Building Society does a lot of things very well – customer service, for example – its halo does not shine as brilliantly as it could.
For an organisation that has both the financial muscle and high street presence to give the banks a run for their money, it has gaps in its armoury that need filling.
It has no instant access cash Isa, a staple financial product. Customers wanting a cash Isa must instead either opt for a fixed-rate offering, or a restricted access account that can only be managed online. It also offers no business banking – a bugbear with many small firms when the society is the only remaining financial institution in town.
If I was a teacher and Nationwide my pupil, I would be signing off its end-of-term report with the words: ‘Could do better, so much better.’
A big thank you
While on the subject of the Lake District, a big thank you to Margaret Dawson who helped me out of a scrape eight days ago – not once but twice. First, she kindly offered me and two other travellers a lift to Windermere when our connecting train from Oxenholme was cancelled.
After big-hearted Margaret dropped us in Windermere, I then rocked up at the Wanslea Guest House in Ambleside, only to discover that I had left some important documents in the boot of her car that had slipped out of my rucksack.
No fear. Margaret soon emailed, having found my address in among the papers. Within half an hour, she popped up with my bits and pieces.
‘What goes around comes around,’ she said, thanking me for the anthurium plant I had bought for her by way of appreciation from the garden centre opposite my B&B. Do unto others as you would have them do unto you.
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