Simon Barnard says this is the biggest buying opportunity since March 2020 after sharp falls for ‘growth’ stocks.
Smithson Investment Trust manager Simon Barnard has deployed all his cash pot in the hope that stock markets have bottomed out and the investment trust will maximise returns when they recover.
Speaking on interactive investor’s Funds Fan podcast, Barnard said he had been extremely active in the past couple of months. He said the sell-off has presented the second-best buying opportunity since the trust launched in 2018 – behind only the March 2020 Covid crash.
The trust had 2.4% in cash as of January 2022, and as of the end of April that figure was 0.6%. Barnard said: “We have used all our cash. This has been the second-best buying opportunity that we have seen after March 2020, when we were very active.
“We communicate to shareholders that we have very long holding periods and low stock turnover, about 10% a year, which means a 10-year average holding period. But in March and April 2020 turnover was 20%, this year the numbers will be similar for the first half of the year.”
- Funds Fan: star fund manager bargain buys, and Smithson interview
- Smithson manager calls for patience as expensive stocks crash
- Financial advisers name their favourite investment trusts
Barnard sold water heating and water treatment solutions AO Smith shares to help fund these purchases and has trimmed holdings in companies that have been performing well this year.
Barnard said: “We have been reducing positions in stocks that have held up well and have recycled money into companies whose shares prices have done particularly badly but where we are very optimistic.
“One was Danish medical devices Ambu. It has been investing in sales and research and development. It has taken on a lot of cost before new products are launched but we are now just at the point where they will sell those new products, so hopefully revenue and profits will now increase.”
Smithson Investment Trust is popular among DIY investors, partly due to its link to Terry Smith, the founder of the investment firm behind the trust, Fundsmith. The trust applies the investment philosophy of Terry Smith’s Fundsmith Equity fund, but instead focuses on global smaller companies deemed too small for the original Fundsmith.
However, performance has collapsed this year as investor appetite for expensive shares has reduced. Smithson shares are down 35% and there is an 11% discount between the share price and the value of its investments.
- How Terry Smith is investing as markets crash
- Growth shares versus value shares: the investment styles explained
But Barnard said he was not worried about the falling shares and believed that even in the face of rising interest rates, his portfolio was worth paying up for as the companies had high profit margins and net cash on their balance sheets.
He also revealed what Smith is telling his investment colleagues during this challenging period: “Terry Smith has been very supportive. He is a very calm individual and has explained that in his view markets will come back over time – but, of course, none of us know when that will happen,” he said.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.