ARGONAUT ABSOLUTE RETURN: Fund sails to 37% profit in past three years thanks to the expertise of investment boss Barry Norris
Investment house Argonaut Capital has been around for 15 years. It’s had its fair share of business associations and disassociations, most recently with Standard Life Investments, but today it’s very much a one-man investment band.
The company’s investment heartbeat is Barry Norris who learnt his trade at asset managers Baillie Gifford and Neptune.
He owns Argonaut outright and runs three investment funds from London offices with assets between them of £100million.
Norris, 46, is outspoken, disparaging about most of the retail investment funds industry – with the exception of Terry Smith’s Fundsmith and Baillie Gifford – and does things his own way.
Nowhere is this more evident than on Argonaut Absolute Return, a £23million fund designed to generate rolling three-year positive investment returns irrespective of what is happening to stock markets.
He does this by investing in companies in the hope of their share price rising. But he also shorts stocks whose price he believes will fall. When they do fall, the fund makes money.
He says: ‘My view is that if I am going to compete for investors ‘ money, I must offer something unique. Argonaut Absolute Return is a portfolio diversifier.
‘It makes money when equity funds are suffering from plunging share prices. Also, anyone buying my funds is buying my expertise – I’m responsible and accountable for all the decisions and all the investment performance.’
The performance numbers look impressive. Over the past three and six months, Argonaut Absolute Return has recorded overall returns of 11.2 per cent and 23.7 per cent respectively, while over three years it has recorded a profit of nearly 37 per cent.
To put these numbers into perspective, the respective returns from the FTSE All-Share Index are losses of 5.8 per cent, 15 per cent and 6.7 per cent.
Norris describes the fund’s investment philosophy as ‘earnings surprise’.
This involves looking for companies that will surprise markets when they report their earnings, causing their share price to move sharply and the fund to make a resulting profit.
The ‘surprise’ could be negative or positive – with earnings lower or greater than expected by everybody else.
In recent months, the fund has benefited from short positions in both German payment processor Wirecard and London listed NMC Health.
In the past few days, Wirecard delayed publishing its 2019 results for a third time against a backdrop of accounting irregularities while NMC Health, a former constituent of the FTSE100 Index, was earlier this month put into administration.
Norris is comfortable making money for investors from shorting. He says: ‘People such as myself play a key role in exposing companies that are not acting honestly.
‘I don’t think the market vigilante aspect to our work is acknowledged by regulators. Without us, the economic damage would be greater.’
Although the fund has made good returns from holding shares in technology giant Amazon, food delivery service Just Eat and Russian gold miner Polyus PJSC, Norris is busy building stakes in companies that should do well as the world moves out of lockdown.
He’s bought holdings in UK house builders Berkeley, Redrow and Taylor Wimpey in the hope their fortunes improve sharply as new houses start getting built again and sales pick up.
He is also confident about the prospects for computer chip component makers as demand is propped up by greater use of home computers and 5G mobile phone technology. Holdings include US listed Micron Technology and German based Siltronic.