Bestinvest says
This is a core option for investors seeking large/mid cap UK equity exposure. Manager John Wood developed his unique investment approach whilst working alongside the well regarded Robert Shelton at Newton. His demanding criteria mean only his strongest ideas are included in the portfolio, which will be concentrated as a result. However, his cautious approach typically leads to low volatility and an element of downside protection in falling markets, whilst strong fundamental stockpicking skills mean he has still outperformed over the market cycle.
The fund invests primarily in the FTSE 350 universe, looking for companies that can provide a strong absolute upside on a two to three year view. The process starts with a number of long term macro-economic and industrial themes identified by the managers, which tend to be fairly stable over time. They search for businesses that will benefit from these themes, though ideas not linked to the themes may also be included in the portfolio. They then screen for quality, defined as companies able to generate predictable and growing cash flows. Quality assessment involves looking at such factors as pricing power, volumes and management. Such is the discipline of the process that typically only about 60-70 stocks fit these selection criteria. These are then subjected to valuation control, which emphasises absolute rather than relative value. The managers focus on sustainable rather than one-off levels of three metrics in particular: return on equity, free cash flow and sales growth.