Select a region
Stock picker, James Hanbury, toured the Channel Islands recently with Guernsey business, Odey Wealth Management, to discuss the unconventional way his analysts choose businesses in which to invest.
Mr Hanbury, a Partner and Portfolio Manager at Odey Asset Management, discussed his “bottom-up” approach to stock selection with an audience of investment managers and trustees in Jersey and Guernsey.
As a high conviction manager, with a concentrated portfolio, who can take either side of a trade (i.e. sell or buy a stock ), this approach differs from other main stream managers, who often hold blue chip companies that are already widely covered by broker research rather than investing in under-researched companies.
With a proven track record of swimming against the tide, Mr Hanbury explained that following the crowd and buying when companies were doing well and selling when they were doing badly was not necessarily the right approach.
He explained that Odey prefers to get “under the skin” of the companies - by frequently meeting management to identify the true intrinsic value of a business.
Mr Hanbury is attracted to owner-managed businesses with Odey having built a 16-strong analyst team who research companies which may not, at first glance, look like they were (or would be) successful.
Mr Hanbury said: “I love understanding the inefficiencies in the market and we constantly look for companies that are undervalued.
“Many managers and their clients are often too short-term; we like to look at companies going through tough times and then consider the longer view; owners work hard in those tough times and we are happy to have more volatility if we have got to know the business and we can see that their strategy will turn things around.”
He said Odey had taken large stakes in businesses which others said they wouldn’t “touch with a bargepole”.
“If a business has an owner that is hungry for growth and has excellent risk controls, manageable debt, the right management and the risk/return is attractive we will take a position,” he said.
Mr Hanbury cited online trading business Plus500 as one such business likening it to Ryanair 15 years ago as being a dynamic company in which to invest.
To prove his contrarian market view he explained he had a significant investment in Sports Direct; he praised owner Mike Ashley and held the business up as a typical Odey investment.
“The politicians and press took Mike Ashley from hero to zero but here is a man who is one of the most talented entrepreneurs and retailers in the UK today. He made a bad hedging decision around Brexit but he took the hit not his investors.
“He is selling brands everyone said were dead at 30% below anywhere else; he is the owner-manager and puts everything into making the business work,” Mr Hanbury said.
“The market’s view, that Sports Direct’s underlying free cash flow (FCF) as a percentage of market capitalisation was 7.9%, was not our view; after the release of some assets we valued the FCF as a percentage of market cap at nearer to 17%. I like being where the perceived risk is high but the actual risk is significantly lower.”
Mr Hanbury presented Liberty Media Formula One as one of his top 10 stock holdings, explaining the company’s potential of “marrying a dream team of new management team with technology, media, marketing, merchandising and race management. It won’t happen in a year and we share the current management’s five year view.”
Odey Wealth Management Channel Islands Managing Director, Geoff Marson, said: “James is a highly knowledgeable, entertaining speaker and we knew he would engage with our trustee and investment management clients as well as our private clients.
“Certainly trustees consider an investment strategy such as Odey’s for similar reasons to our private clients and investors - it allows them to add a different style of manager into the mix of managed trustee assets.
“We like to consider Odey to be different from other investment managers.”
