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The ‘get rich slow’ fund – Threadneedle European Select

We were thrilled to host Dave Dudding, the long-standing manager of the Threadneedle European Select fund, at our headquarters recently. He discussed his investment process and the companies he invests in – read on to discover more.

Gary Smith
23 June 2015

The brand is everything

Threadneedle merged with its US-based affiliate Columbia to create Columbia Threadneedle at the beginning of 2015. However, Dudding pointed out that despite the change, the way he manages money has not altered and it won’t alter in the future.

It was interesting that the conversation began by discussing Threadneedle’s own brand, because a dominant theme throughout the meeting was the quality of the companies that Dudding invests in. Dudding prefers companies with a strong brand (which he believes differentiates a business), long-term pricing power and a competitive advantage.

On the other hand, he avoids businesses that don’t inspire brand loyalty. One of the industries that Dudding tends to avoid is banking, for that reason – people can simply log on to a price comparison website and find the cheapest option. He believes this is a trend that is ‘going to get worse’ and so he looks for alternatives.

Dudding is a stockpicker, and his aim is to find strong companies that have growth potential and hold on to them. This is how he believes he makes money, and he expects a long-term investor to ultimately have the advantage over a short-term trader, because the latter risks losing money.

Dudding thinks L’Oréal ‘is worth it’ as its shares sit within his top 10 holdings – he believes that L’Oréal is an example of a great brand that is resilient and has pricing power, with growing customer demand for its products.

Swiss watches, Swiss chocolate

Richemont, a Switzerland-based luxury goods company, is also among Threadneedle European Select’s top 10 holdings. Dudding explained that Richemont’s watch-making business has a heritage dating back to the 1780s, and he expects the company to grow faster than businesses such as Nestlé. He observed growing demand for its watches in Europe, the Middle East and the Americas.

Although the company is currently out of favour with investors and reported a drop in annual net profit in May, Dudding believes its long-term pricing power, and brand, is undiminished. He tends to buy great businesses when they are unloved by the market and their shares drop.

Dudding cited another Swiss brand as a stock he likes – Lindt, the maker of the gold-wrapped chocolate Easter bunnies. Dudding believes the company produces high quality chocolate, its marketing is consistent and it can charge premium prices because people will pay them. Ultimately, people trust the brand.

An aspect of Dudding’s investment approach is not to overpay for a high-quality company’s shares. Paying a relatively low price means that not only does he retain its investment, he also grows it faster. Dudding waits patiently for the right time to buy shares in Lindt and other such companies – if a business has one bad year, its share price drops, providing a good entry point into the stock.

But what about performance?

Going beyond specific stocks and looking at the fund as a whole, Dudding believes he can make money by staying invested for the long term and not worrying about ‘what the people next door are doing.’ He stands by this essential element of his style. Dudding placed himself in the shoes of an investor and noted that his wife invests in the fund. He mentioned that she doesn’t worry about how well it performs over a short period of time – she wants to be assured that she will not lose money over the long-term.

Dudding believes that UK investors understand and embrace this approach; perhaps this is why the fund is popular amongst our clients. It currently has a five-star rating from our research team, which means it’s a fund we have strong conviction in.

You can watch Dudding discuss the fund in our informative video here, where he speaks with European sector specialist Victoria Chernykh. To invest in any fund available via our Investment Selector please click here.

You can give us a call on 020 7189 2400 to discuss this fund or your investments. Alternatively request a call back or email us at best@bestinvest.co.uk

The value of investments, and the income derived from them, can go down as well as up and you can get back less than you originally invested. Different funds carry varying levels of risk depending on the geographical region and industry sector in which they invest. You should make yourself aware of these specific risks prior to investing. This article does not constitute personal advice. If you are in doubt as to the suitability of an investment please contact one of our advisers. Past performance is not a guide to future performance.