For this European stock manager – Richard Simmons – the future of stocks matters more than their value
Richard Simmons BG, Opalesque Geneva:
London-based Derby Street Managers buys a selection of undervalued European and UK stocks based on the capacity and quality of the deal rather than traditional relative value or low P / E and price-to-book ratios. Your selection style paid off.
“In many cases, cheap securities based on traditional value metrics are of very poor quality and non-cash,” portfolio manager Richard Simmons told Opalesque.
“We don’t see a category called ‘value stocks’,” he adds. “Value is really the philosophy of buying things for less than their true value, whether it is an old-school” value “such as a high P / E ratio or high P / E ratio can still be a value; it is yours Future that counts. ”
Derby Street managers consider an investment “ideal” if it meets three criteria: it has limited downtrend, very large upside potential, and a solid business model. Two out of three can be enough. However, where the likely outcomes are more symmetrical, they demand a higher rate of return.
The managers buy three groups of companies, he explains their differentiation: “Fantastic companies with high growth, companies with undervalued or hidden assets; and liquidating companies, solvent companies that sell their assets and return capital to shareholders.
“Our lens is identical in every set. What is the likely range of the future values of corporate cash flows, and what kind of time-weighted return would we get if we invested at a certain price? The first set can provide high returns for our fund over very long periods of time – we’ve held some stocks for over fifteen years. The third set can provide much higher returns, but over short periods of time – one year to five years. The second sentence is somewhere in between, with more resilience. ”
Richard Simmons, a manager with over 22 years of investment experience, will be hosting Opalesque’s next webinar, Small Managers – Big Alpha on Tuesday, May 11th.
The Cayman-domiciled AIFs UK Equities and European Equities from Derby Street are managed by Richard Simmons. It relies heavily on internally generated research and fundamental analysis. He manages portfolios with high persuasiveness, low turnover and patient long-term investments. In addition, as an emerging fund manager, he can invest in smaller and more niche topics than the average fund.
The Derby Street strategies are long-only, fundamentally value-oriented and unrestricted. The European Equities Fund, which manages € 3 million (US $ 3.6 million), was launched on February 22, 2013. It has returned + 0.3% in 2020, + 10.7% in Q1-2021 and + 196% since inception.
The UK Equities Fund invests principally in UK and other sterling related securities, including fixed income securities. Also launched in February 2013, the £ 13 million ($ 18 million) fund returned + 3.7% in 2020, + 8% in the first quarter and + 71% since inception.
The Euronext100 index, the benchmark, rose 8% in the first quarter, -3.5% in 2020 and + 47.6% since February 2013.
There’s no fundamental difference between UK and European stocks, but there are interesting differences between countries, says Simmons. “Germany has a surprisingly dying stock market for such a successful country, possibly because so many of its successful companies are privately owned. There are more interesting listed companies in Italy than in Germany! Britain is the most dynamic and largest stock market, but the biggest companies are poor quality – banks, commodity producers, insurers, mutual funds, supermarkets, pharmaceutical companies. Mainly mature companies. But there are constant surprises at the bottom of all markets, as they are usually the most innovative and dynamic companies. ”
Derby Street Managers Ltd is an appointed agent of Eschler Asset Management LLP.
Shares in the first quarter
European stocks rose in the first quarter, according to Shroders. Hopes for a recovery in the global economy supported sectors that performed poorly in 2020, such as energy and financials. Consumer discretionary stocks also performed well, particularly automakers, as Volkswagen announced ambitious targets for electric vehicles. Underperformers were defensive areas less tied to the economic recovery, such as utilities and real estate.
UK stocks also performed well. Low-valued, economically sensitive market areas prolonged the recovery that had been recorded since November. This was reflected in very strong performance in commodities, energy and finance. Banks performed particularly well on better-than-expected results and a sharp rise in bond yields as the global economic outlook improved.
Small managers – big alpha
With larger amounts of capital pursuing the same alpha strategies and further undermining alpha, savvy investors turn to smaller and / or emerging managers in search of alternative sources of return. Opalesque presents a carefully vetted selection of investment managers worth a look.
– Nadine Korehnke, Quantumrock
– Elias Nechachby, Icon Asset Management
– Paul Lucek, Ridgedale
– Richard Simmons, Derby Street
When: Tuesday, May 11, 2021 at 10:30 a.m. ET
Free registration here: www.opalesque.com/webinar/