Five years after stepping up to manage the fund, Bullas can boast a return between July 2012 and 2017 of 142%, beating the fund’s benchmark – Numis Smaller Companies ex IT – by more than 30% and outstripping the FTSE 100 by more than 84%, according to FE Analytics data.
It has grown from a small fund of £18m to a respectable £270.2m at the same time: an impressive rise by anyone’s standards.
Bullas attributes the popularity and performance of the fund to his high-conviction, valuation-driven and risk-aware strategy, which has clearly paid off.
It holds only 45 stocks, whittled down from a wide-ranging universe of options. One of the “beauties” of the small-cap world, Bullas says, is having the pick of more than 1,000 companies as well as the FTSE Aim.
One of his “two pillars” for investing, alongside valuation, is risk, and looking for the downside is a constant when it comes to Bullas’s analysis of companies, whether it be market risk, levels of debt on balance sheets or an unstable management team.
“What we are looking for all the time, being sceptical Yorkshiremen as we are, is the downside risk. I am inherently more of a cautious small-cap investor, so I like to understand where it can go wrong. What are the holes here? Where are the risks? What is the big risk of losing money here?
“I’ve learnt over the years that it is very easy to get excited by the upside.”
Best of both
While the key tenets of his process are clear, less easy to pin down is the type of investor Bullas is: he is neither value or growth but a mix of both.
“We are value investors but by that I mean we look for value growth stocks, which are attractively priced but also traditional value stocks. This means we are somewhere in the middle in terms of our style. We offer exposure to value and growth without going too far to either extreme.”
The search for these value and growth stocks means a lot of groundwork analysing company reports and balance sheets, examining their markets and grilling the management teams.
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