Investment Trust Insider - Opening the door to investment trusts

Register to get unlimited access to our investor forum and all editorial content, including our e-zine and weekly email. Registration is free and only takes a minute.

Feeling satisfied: SLI’s Nimmo on the food trend powering his portfolio

Feeling satisfied: SLI’s Nimmo on the food trend powering his portfolio

Standard Life Investments’ UK smaller companies expert Harry Nimmo was quick to spot the changing tastes in British drinking habits. An early backer of upmarket mixer manufacturer Fever- Tree Drinks, he was attracted to the firm’s focus on provenance. Sourcing all ingredients for its tonics ethically and making a point of not adding any extra sweeteners were deemed big differentiators for the drink maker’s target market of premium alcohol consumers.

It’s a strategy that has paid off as Fever-Tree overtook Britvic in April 2017 as the UK’s most highly- rated soft drinks firm. Despite picking a winner, the smaller companies veteran is not resting on his laurels. Harry has developed the provenance theme further and ventured into the food industry.

“Food provenance is a very important issue as consumers want choice but they also want to know where their food and drink is coming from. Our Fever-Tree holding was one example of this but we’ve moved onto other opportunities such as Hilton Food, which is involved in beef production, and Cranswick which produces pork products. Both of these companies focus on provenance very highly and that’s important for us as we view it as a big growth market.”

Nimmo is not just interested in the food we eat, however, he also focuses on the health of the animals we keep. This is steadily rising up the agenda. His stake in Dechra Pharmaceuticals is a case in point. The firm’s CEO is a former laboratory assistant and van driver from Stockdale who spotted a gap in the market for creating animal equivalents for human pharmaceuticals and developing the dosages and formulations in-house for a veterinary application.

After a series of acquisitions and personnel changes, Dechra entered the pig and poultry market, for which it manufactures antibiotics and vaccines, in 2013. The firm viewed this as this a big growth market in light of the demand coming from emerging middle classes across Asia and South America.

Another holding in the area of animal health is CVS Group, the largest veterinary services provider in the UK which focuses on ‘making pets a priority.’

The group has six main business areas: practice division, diagnostic laboratories, pet crematoria, MiVet Club (a veterinary buying group), Pet Medic Recruitment and Animed Direct (an online pharmacy and retailer). Both Dechra and CVS ticked all the right boxes during Nimmo’s visits to the companies.

“There are three tenets to our thinking when we visit new companies. We like to see growth, visibility and momentum on earnings, and quality.”

He defines earnings momentum as the likelihood that forecasts from analysts will rise over time. And earnings visibility is identified as good surprises in terms of the future progression of earnings.

In quality, he looks for longevity of management. “We want proof that the management has developed a strategy consistently over time. This is about stability, about individuals that have built up the business over the long term for that company.”

Nimmo also has a strong focus on liquidity, ensuring he trades as little as possible, to avoid giving up gains because of liquidity. This means staying put in high conviction ideas.

“We buy what we believe are low risk companies and we trade less often, our holding period is very long, we hold stocks for five years on average, so we run our winners.”

He concludes: “The smaller companies arena is the realm of the stock picker, there’s a wealth of choice, you get exposure to growth potential, and to companies that can export their business model from the UK to the world at large.”

For further information, please visit our investment trust web site: www.standardlifeuksmallercompaniestrust.com

The opinions expressed are as of October 2017 and are subject to change at any time due to changes in market or economic conditions. This material is for informational purposes only. This should not be relied upon as a forecast, research or investment advice. The value of an investment can fall as well as rise and is not guaranteed – an investor may get back less than he/she put in. Past performance is not a guide to future performance.

Standard Life Investments Limited is registered in Scotland (SC123321) at 1 George Street, Edinburgh EH2 2LL. Standard Life Investments Limited is authorised and regulated by the Financial Conduct Authority.

www.standardlifeinvestments.com

© 2017 Standard Life Aberdeen, images reproduced under licence.

This article was provided by Standard Life Investments and does not necessarily reflect the views of Citywire

Fund managers in the news today
Events
  • Selectors take in the stunning views at the Citywire Switzerland 2012 event in Gstaad

    Selectors take in the stunning views at the Citywire Switzerland 2012 event in Gstaad

  • Alejandro Espina meets Rodrigo Ramirez from Banco General in Panama

    Alejandro Espina meets Rodrigo Ramirez from Banco General in Panama

  • Citywire Deutschland 2013

    Citywire Deutschland 2013

  • Sabrina meets Vania Mareuse from Bryan Ganier & Co in Paris

    Sabrina meets Vania Mareuse from Bryan Ganier & Co in Paris

  • Delegates fill up their plates with gourmet food at the Citywire France 2012 retreat in Chantilly.

    Delegates fill up their plates with gourmet food at the Citywire France 2012 retreat in Chantilly.

  • Jesus Sobral with Arnaud Sttutterheim of Persist in Amstemveen

    Jesus Sobral with Arnaud Sttutterheim of Persist in Amstemveen

  • Jesus Sobral with Rico Bosma, Wealth Managers Partners in Amstemveen

    Jesus Sobral with Rico Bosma, Wealth Managers Partners in Amstemveen

  • Beatrice meets Alessia Paradiso, GWA Sim in Rome

    Beatrice meets Alessia Paradiso, GWA Sim in Rome

  • Citywire's Beatrice Mancini meets the UniCredit team during her trip to Milan

    Citywire's Beatrice Mancini meets the UniCredit team during her trip to Milan

  • Angus meets Karla Borland, head of mutual funds and ETFs at Credit Suisse, in Singapore

    Angus meets Karla Borland, head of mutual funds and ETFs at Credit Suisse, in Singapore

  • Meeting with old friends from Erste Bank in Vienna

    Meeting with old friends from Erste Bank in Vienna

  • The global team headed to Asia in December 2012 to host the first Citywire event on the continent

    The global team headed to Asia in December 2012 to host the first Citywire event on the continent

  • Delegates at Citywire's Vienna event attend the group workshops and presentations

    Delegates at Citywire's Vienna event attend the group workshops and presentations

  • Citywire Global editor Amy Williams greets Reyl Singapore's Daryl Liew during her trip to Asia

    Citywire Global editor Amy Williams greets Reyl Singapore's Daryl Liew during her trip to Asia

  • Citywire's Beatrice gets in the frame with Chiara Bellon of Vontobel Europa in Milan

    Citywire's Beatrice gets in the frame with Chiara Bellon of Vontobel Europa in Milan