Waiting for the right moment

Currently, he is avoiding areas where the fundamentals are deteriorating due to excess capacity and pricing pressure. As a result, he has been unable to find any good ideas within retail, financials, technology or healthcare.

Instead, he is focusing the fund on sectors such as oil and gas and basic materials. It is a long-running theme, accounting for more than 30 per cent of the fund, that he describes as “the picks and shovels” approach.

“It is where I am buying companies that provide services and equipment to the oil companies, mining industry and farmers,” he explains. “These are the areas that are experiencing pricing power and increased capital spending.”

As returns improve for these commodity-driven industries, the level of spending will also increase. “They also have multiple years of visibility,” he adds. “An oil services company knows what its book of business looks like for the next three to five years. That gives me a greater level of comfort that fundamentals are strong.”

However, along with the vast majority of funds in the IMA Global Growth sector, Mr Thomson’s fund has slipped into negative territory over the past year. It is a situation he blames on holdings outside his favoured sectors.

“I have had some exposure to the aerospace sector, which has deteriorated because investors assume aircraft orders will be cancelled as a result of the weakening economy and high oil prices,” he says. “That has been a difficult area for me.”

Looking ahead, he does not expect life to get any easier in the short term.

“It will be a pretty tough year but I am going to focus on the companies and fundamentals that are still improving,” he says. “You can find pockets of excitement so I am still smiling as I cross the minefield.”