Simon Laing has eight years experience in managing US equities and is able to add value beyond the analysts’ research. After working as an equity ana
lyst for three years, he co-managed US equity mandates at Newton from February 2000 until October 2002, when he took sole charge. Laing is backed up by an experienced alternate manager in Alex Stanic who has thirteen years’ investment experience and has been managing a number of global equity mandates since joining the firm in 1999. Laing can also glean ideas from his colleagues on the global equity desk, a department we regard highly at Newton.
Laing looks for stocks that are trading cheaply by assessing the company’s value in relation to its earnings, using EV/EBITDA ratios as a guide. That said, Laing is willing to buy a stock if its EV/EBITDA ratio is artificially high because the company is posting depressed earnings in the short-term but he still sees some growth potential or scope for improving profit margins. Indeed, the fund’s exposure to growth stocks has, on average, been higher than its Morningstar US Large Cap Blend equity peers during his tenure. Millicom International Cellular exemplifies Laing’s growth tilt relative to his peers – the stock was trading at high multiples before the downturn but is set to benefit from a growing customer base in emerging markets and widening profit margins over the longer term.
Laing’s strategy has led the fund to beat its average peer in the Morningstar US Large Cap Blend equity category by 1.31 percent, on an annualised basis, from the beginning of October 2002 to 31 October 2008 – this performance ranks the fund in the top quartile of its peer group. However, the fund has lagged its FTSE North America benchmark and the S&P 500 Index since Laing took over. It is worth pointing out that only a handful of funds have managed to beat these indices over the same period. The fund’s compact portfolio of 45-55 stocks and its added exposure to growth stocks has meant the fund’s outperformance versus its peers has been achieved with a higher level of volatility and we expect this to continue going forward.
Taking all into account, Newton American has the ingredients of a sound fund for those who prefer active management, although we believe one can make a strong case for simply going with an index fund when it comes to US equity exposure. We think Laing’s experience, coupled with the backing of a strong global equity desk and deep analyst bench, gives this fund a strong chance of outperforming its peers over the long term.
