There have been three main changes to the fund Moore says, the first is that, while the fund has always been good at getting the top down view of markets right, that doesn’t always translate into calling markets correctly. So, he says, work has been done to broaden out the thematic thinking taken by the fund.
The second change is a greater focus on bottom up stock picking, Moore says, based on a five factor traffic light system.
The first factor is the firm in question’s prospects for rising turnover; the second is a check on whether or not unexpected cost increases get passed on to customers; third, the team determines whether or not management makes decisions that the team feels will build real intrinsic value; fourth is how much financial headroom there is in the balance sheet; and finally, whether or not there are low expectations in the current share price.
This bottom up approach, when combined with the top down view means, Moore says that, not only is the team fishing in the right ponds, but it is also catching “tasty fish rather than old boots”.
The third evolutionary change within the fund is an increase in the emphasis placed on dividend growth. While current dividends are important, Moore explains, they are not enough on their own to provide long term growth.
Indeed, Moore is so convinced of the importance of dividend growth that he has put an explicit target on it for the fund. While he caveats that it is dependent on market forces, his ambition is for the fund to deliver 5% dividend growth per annum.
Asked whether or not that is ambitious given the low growth environment currently in evidence, Moore agrees that it is getting harder because you have seen a number of companies growing dividends faster than earnings, which is clearly not sustainable over the long term.
