Free Spirit manager used market jitters to snap up UK PLCs


Volatility in global markets on 6 February gave the manager of the SDL Free Spirit fund the opportunity to offload some of her high cash holdings and buy more of her high-conviction stocks.

Rosemary Banyard, director at Sanford DeLand Asset Management and manager of the SDL Free Spirit fund, said the big market dips on 6 February, when the UK followed Wall Street down, enabled her to use some of her cash holdings to bulk up existing names.

Ms Banyard commented that while she did not time markets, she said it was important to keep watch when there is volatility and share prices are "winging about wildly", and use this opportunity to look for underpriced stocks. 

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This is why, on 6 February, when an estimated £50bn was wiped off the FTSE 100, Ms Banyard put more money into smaller and mid-cap holdings such as FTSE 250 company Fidessa, which has since been bid for at a big premium, financial company Mortgage Advice Bureau and distributor Diploma. 

As at 15 February, Diploma was the 10th largest holding in the portfolio, at 2.96 per cent. Craneware was the top holding, at 4 per cent.

Last year, Ms Banyard told FTAdviser she was "keeping her powder dry", when markets were looking overvalued and prices seemed stretched. At the time, she had 15.7 per cent in cash.

Ms Banyard said used SDL's internal metrics to help see when valuations might dip below intrinsic value. "When that happens, I will plunge in and add to the portfolio. "

Ms Banyard also said it was important for people to not lose their heads in volatile markets. 

She told FTAdviser: "You need a focus on the businesses that I am investing in. I am always looking for businesses with barriers to entry. This shows itself in high margins and high returns on capital employed. 

"It helps to understand if you have a really good, profitable business, which gives you comfort. Also, when markets are winging around a lot, it is important to look at cashflow. We forecast it forward and discount it back at 10 per cent, which gives an absolute valuation.

"It won't be exact but it can give you comfort in volatile markets, an anchor of a valuation point."

Ms Banyard added if there were one truism she has learned in 20 years, it is that investors should be able to explain in three sentences the reasons for investing in any one stock or share; if not, they need to question why they own it, she added.

"If you were having to explain it to someone who does not know the stockmarket, and you cannot do so in about three sentences, in words someone else can understand, probably, in retrospect, you should not have bought those shares."