In this series of profiles, we ask leading fund managers to reveal everything from their investment strategy, to their views on cryptocurrencies, famous business leaders they look up to, and what they’d never invest in.
This time our interviewee is Laura Foll, co-manager of Morningstar 3-star rated Lowland investment trust (LWI).
1. Which sector provides the biggest investment opportunity as we approach the end of 2021, and why?
While it’s always a case of “company by company” for us in terms of managing the portfolios (rather than favouring any individual sector), if I were to generalise, we continue to be positive on the industrials sector despite cost headwinds. What we are hearing in the majority of cases from companies is that order books continue to be very strong. Therefore, while there are supply outages in some cases and cost pressures in others, for as long as that strength of order book remains, cost increases can be passed onto the end customer (albeit often with a lag) and supply outages gradually resolved.
2. What’s the biggest economic risk right now?
On a short-term basis, supply chain issues. On a medium to long-term basis, climate change.
3. Describe your investment strategy
The strategy of Lowland Investment Company is to look for well-managed, often market leading businesses at the point of which they are out of favour across the breadth of the UK market (spanning from smaller companies listed on Aim, to large companies in the FTSE 100). When I say, “out of favour”, the way we would gauge this is to look at valuation – is this company trading at a discount to its own history, or to its relevant peers? Importantly though, while the investment process has a strong valuation discipline, decisions aren’t based on valuation alone and there has to be a route to future sales and earnings growth.
4. Which famous investor or business professional do you look up to, and why?
There are a lot of people internally at Janus Henderson that I look up to, but I won’t embarrass them! I admire a lot of the management teams of the businesses that we invest in – these are people that are managing large businesses day to day, and recently in very difficult conditions. I was incredibly impressed with how the vast majority of our management teams managed throughout the pandemic.
5. Name your favourite forever stock(s)
One of the first ideas I had that made it into the funds was AstraZeneca. I was originally focussed on healthcare and shortly after Pascal became CEO we added it into some of the funds on the view that expectations were low and he ‘might’ manage to turnaround the R&D track record. While I’d say we were right in our theory, my big regret is reducing materially at the point of the Pfizer bid and not buying enough back when the bid was ultimately unsuccessful.
6. What would you never invest in?
I would never say never, as I think it’s important to always keep an open mind in looking for new ideas. That being said, I’m always sceptical of companies where sales and/or earnings are forecast to be flat, as in my experience that tends to mean companies are, in reality, in decline.
7. Growth or value?
I find this debate frustrating and unhelpful, as it lumps different operating businesses into black and white categories and implies that companies on low valuations cannot have earnings growth, and vice versa, that companies with high growth characteristics cannot be good ‘value’.
8. House or pension?
If this is for me as an individual, I’ve focused first on buying a house!
9. What are your thoughts on crypto?
I don’t know enough about it to have a view and I’ve heard convincing arguments on both sides. I want to keep an open mind about the area and not be dismissive.
10. What can be done to increase diversity in the fund management industry?
Use less jargon. It can be intimidating and often the jargon masks quite simple concepts.
11. Please give an example of how you’ve engaged with a company you invested in where you were particularly proud of the outcome? (Or disappointed!)
A few years ago, one of our financial holdings, Provident Financial, was approached by Non-Standard Finance who wanted to merge with them. We engaged with both companies and concluded that Provident would be better off as a standalone business. We subsequently came out publicly against the deal (along with a number of other large shareholders) and the deal didn’t go ahead. It was a case where we did a lot of engagement and I think came to the right conclusion – Non-Standard Finance has materially underperformed Provident since the deal was withdrawn.
12. Best bit of advice you’ve ever been given?
“Be a sponge”, which was said to me on one of my first days as a graduate in the industry by a much more senior fund manager. The idea was never stop listening and trying to learn – a great piece of advice.
13. What would you do if you weren’t a fund a manager?
When I was younger, for a long time I wanted to be a doctor. I have no idea if I’d have managed it had I gone down that route!