“If you buy a good company in a good industry, as their competitors are good as well, it’s often hard to differentiate and returns are not always good. But if you can find a great company in a relatively bad industry, they are going to kill their competitors. That’s often when you can see amazing returns because you buy them on the cheap and they can produce outstanding results.
“Ryanair is a case in point because, since inception, returns have been around 23% p.a., which has been hard to beat since the mid-1990s, and, frankly, this is going to continue.”
Another favoured sector is information technology, in particular hard drive manufacturers Western Digital and Seagate Technology, which are top-five holdings with huge pricing power. Counterintuitively, Walewski says these firms should benefit from the rise in cloud computing, with the creation of large data centres outside of the home.
While Alken’s funds have hefty assets under management, Walewski says this does not affect his performance and he is still able to invest down the cap scale, within limits.
“We look at everything, and talking to mid-cap management is particularly interesting,” he says.
“If you talk to only the big companies you don’t necessarily see all the trends and you miss things. In many sectors, it is often the smaller companies that stand to do better. Yes, sometimes our size can be a limiting factor, and we can’t buy more because of liquidity, but we’ll buy 3-5% of the company and that’s it.”
He adds: “We don’t just talk to the managers but we talk to their competitors, customers and suppliers. It takes time but we invest when we feel we have an edge on the market and a better understanding of what’s going on. We are looking for something the market doesn’t really understand, and we try to be contrarian.”
Credit where it’s due
One contrarian idea that has come up recently is a move back into financials.
