Mark Slater has moved to overhaul the largest holdings in his top-performing MFM Slater Growth fund after major gains in some of his highest-conviction plays.
The portfolio was the second best-performing fund in the Investment Association UK All Companies sector in 2014 – beaten only by his own MFM Slater Recovery.
But conscious of major returns delivered by some of his biggest positions, the manager has since hacked away at several of the large plays that had achieved their potential in favour of new names.
The revamp has changed the complexion of the fund’s top holdings, and left pharmaceutical firm Hutchison China Meditech (HCM) as the only large position, double the size of the second-biggest holding.
Mr Slater has built a reputation for taking large bets on stocks he has high conviction in, with names such as Entertainment One and Oxford Instruments at times taking up nearly 10 per cent of the fund’s assets.
But those plays have now been reduced to very small positions.
The manager said that in 2014 “we took a lot [of money] off the table”, selling stocks such as Diploma, Judges Scientific and Weir Group, and he had since “added a lot of new names”.
The fund’s top 10 has now been filled with a number of stocks bought in the past year, such as data services provider Redcentric, television producer ITV and plastics and fibre manufacturer Essentra.
The new positions are between 2 and 4 per cent, still well below the nearly 8 per cent holding in HCM.
Mr Slater said he did not tend to invest too much into a company when he first bought in, preferring to build the position over time as his conviction increased.
He said the dominant position of HCM in the portfolio was atypical and that some of the new additions should grow to join it in time.
But as things stand, the movement in the share price of HCM exerts considerable influence on the fund.
The firm was a significant contributor to the fund’s outperformance in 2014. As its share price rose 126 per cent, it contributed 8 percentage points of return for the vehicle.
Given that the fund generated a return of 17.6 per cent in the year, beating the FTSE All-Share index’s rise of 0.6 per cent, HCM contributed nearly half of the MFM Slater Growth fund’s outperformance.
The manager has also backed the firm to continue outperforming.
He said that if any of the 10 drugs in its research and development pipeline gained approval, the stock would soar once more.
As part of his recent overhaul of the portfolio, Mr Slater said he had also gotten rid of positions that could have been in danger from an uncertain result at the upcoming UK election.
“It was a very deliberate move to sell any company in industries that have become political footballs,” he said.
The move means more than two thirds of the economic exposure of the stocks in his portfolio was outside the UK, so he was now “not overly worried about the election”.
