On the eve of the US election, Thomas, manager of the firm’s £3.35bn UK Select Opportunities Fund, lists “labour costs, demand, talent, technology, availability and the depth of capital markets, currency, transportation and energy costs” as making the world’s largest economy an attractive place to do business.
He points to a supply shock of cheap US shale gas as a significant aid to the recovery while, in Texas at least, a strong rebound in new orders for homes holds hope for the long-awaited housing recovery.
From a UK perspective, Thomas has invested in Wolseley, alongside wider exposure to a recovery in construction and the economy as a whole.
“Around 50% of Wolseley’s profit comes from the distribution of building materials in North America, and [FTSE 250-listed] Ashtead is the second-largest plant hire company in the US, where secular change to rental, from owned, equipment is evident,” he says.
A different mantra
Thomas abides by the mantra, ‘things will not get better or worse, they will become different’ which he says aligns him with identifying change and how to benefit from it. He says this can come in the form of the development and adoption of new technologies, such as 3D printing or nanophotonics. It can also be driven simply a change in management of companies; an example is FTSE 250-listed Filtrona, a provider of specialist materials, of which he owns 7.4% in his fund.
He explains: “In January 2011, it was announced that Colin Day would join the company on 1 April that year as chief executive. He was previously chief financial officer of the FTSE 100 company, Reckitt Benckiser Group Plc. He has change the way business is managed at Filtrona.”
“Day has changed targets and incentives, reporting lines and management structures and innovation. Some merger and acquisition activity has enhanced the strategy and better financial performance had been the result. This has combined with a re-rating of the shares, which have risen by 90% to the fund’s year end, since the announcement of his appointment”.
Never a stopped clock
Given the backdrop of slower growth, especially in Europe and China, and recent profit warnings, Thomas accuses some economists and politicians of “wallowing in stagnation and distress”; while he stresses that many of the businesses he meets are adapting to change.
“Commerce is dynamic, never a stopped clock,” he says. “Look at what is happening to the high street and multi-channel retailing. Communication networks using routers, ethernet and internet now consume 10% of the world’s electricity output. At the aggregate level, global growth is depressed, but evidence of a US recovery, combined with a change in the ‘post, post industrial society’, or the ‘information society’, leads to some degree of optimism over the medium-to-long-term.”
