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Fund managers' best UK equity investments of 2018

How many of these did you invest in this year?

Investors have been fleeing UK assets as uncertainty over Brexit and the future of the Tory government rises.

However, there are a number of fund managers who have taken advantage of the opportunities created in this environment and found top notch investments.

Here are the best investments of 2018 for these UK equity stars:

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Investors have been fleeing UK assets as uncertainty over Brexit and the future of the Tory government rises.

However, there are a number of fund managers who have taken advantage of the opportunities created in this environment and found top notch investments.

Here are the best investments of 2018 for these UK equity stars:

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Citywire AAA-rated Paul Jourdan, manager of TB Amati UK Smaller Companies

‘One of our top performing stocks this year has been Diversified Gas & Oil (DGO). 

‘During 2018, DGO put in place a new bank debt facility on favourable terms, making a series of large earnings-enhancing acquisitions.

'This has taken the market capitalisation from £69 million when it floated to around £645 million today, and from a company forecast at initial public offering to make Ebitda of $15.2 million (£11.9 million) in 2018 to around $145 million rising to around $250 million in 2019. 

‘As well as a reasonable share price gain, DGO has also produced healthy dividends, with a yield of more than 7% at today’s share price. The most complex point to weigh up with DGO relates to decommissioning liabilities, the cost of plugging and abandoning the wells in the future, which spread out over the next 70 years.’

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AA-rated Paul Mumford, manager of the Cavendish Opportunities, AIM and UK Select funds

‘Rock Rose, which is a North Sea oil and gas producer. My best investment has got a negative cost value – I got more money back than I put in and the value’s gone up. 

‘I bought my initial holding in the TM Cavendish AIM fund in August 2017. The company purchased Idemitsu UK from Idemitsu (the North Sea assets of the Japanese company) for $29 million (£22.8 million) in October 2017. The subsidiary held cash of $139.7 million.

‘In January, Rock Rose paid a special dividend of 150p per share and I bought an initial holding for TM Cavendish Opportunities fund at 340p in February.

‘The current share price is 675p, but that undervalues the company still, because it’s built production of 9,000 barrels a day.

‘There are risks, such as if decommissioning costs more than anticipated or oil prices go down to $20 a barrel. Part of Rock Rose reserves have been put aside for decommission and they feel they can meet those costs with the cash flow expected over the next few years.

‘It’s my best investment ever, not just of 2018.’

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AAA-rated Victoria Stevens, co-manager of Liontrust UK Micro Cap

‘One of our best investments this year has been UK small cap Bioquell. The business is a provider of bio-decontamination solutions primarily to the pharmaceutical, life sciences and healthcare industries.

‘We invested in the company as we perceived its intellectual property to be a substantial intangible barrier to competition – one of the cornerstones of our economic advantage investment process.

‘Bioquell had previously struggled to translate its theoretical barrier to competition into sustained financial outperformance, until a new management team entered the fray a few years ago and substantially tightened up the business’ commercial and operational focus.

'Momentum has since returned to both the underlying business performance and the share price, which has more than doubled so far in 2018 thanks to a series of analyst earnings upgrades and, most recently, the announcement of a £140 million takeover offer from US-based Ecolab.’

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AAA-rated Brendan Gulston, co-manager of LF Gresham House UK Micro Cap and Multi Cap Income fund

'One of our investments this year was UK legal services business Knights Group. The company, which operates under a commercial structure and not an equity partnership, has seen strong share price performance since its IPO in June this year, rising in excess of 30%.

'As a high-conviction holding, this has had a material impact on our performance. Knights Group operates in a large addressable market and has good quality earnings streams, with diversification across customer, fee earner and areas of legal service. On top of this it has a high degree of repeat revenue from existing customers.

'Management has driven a strong growth strategy – combining recruitment of quality regional lawyers, as well as acquisitions at attractive multiples. The management team is in tune with what motivates lawyers, as well as the levers the business must pull to meet KPIs.

'Knights Group is a core holding for our micro cap and income strategies and offers the prospects of multi-year, long-term profit and cash flow growth to support an attractive and growing dividend stream.'

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AAA-rated Keith Ashworth-Lord, manager of CFP SDL UK Buffettology

‘The fund’s best investment in 2018 proved to be Craneware. The shares rose from £14.65 on 1 January to £27.65 currently (+88.7%).

'The shares soared after excellent results and very favourable remarks about both the outlook and new business secured.’

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AAA-rated Richard Power, manager of Octopus UK Micro Cap Growth

‘My best investment of 2018 has been Future, a multi-platform media company. What has been remarkable is that it operates in parts of the market that have terrible headwinds.

‘The other thing it has is consumer exposure. The click-through revenues have been driving margins. Their niches are around cameras. Retailers pay them a commission to direct traffic.

‘The management team is fantastic and have done a number of acquisitions. Their shares have been a great performer. It feels like there are more upgrades to come.’

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AA-rated Matt Evans, manager of Investec UK Smaller Companies

‘Diversified Gas & Oil (DGO) has delivered earnings and value enhancing deals. What is key is that they have delivered operational efficiency and improvements which should drive enhanced production and future longevity of the wells and thus create further value. The current valuation underappreciates their consistent cash flows which I expect to continue well beyond the current forecast period.

‘DGO is well placed to continue to acquire conventional assets from onshore US focused shale players. It has proven the model, raised significant financing, both debt and equity, and offers a very valuable outlet for those companies looking to dispose of their conventional wells.’

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Related Fund Managers

Paul Mumford
Paul Mumford
1/13 in Equity - UK Medium Companies (Performance over 3 years) Average Total Return: 44.12%
Keith Ashworth-Lord
Keith Ashworth-Lord
2/157 in Equity - UK (All Companies) (Performance over 3 years) Average Total Return: 49.26%
Matt Evans
Matt Evans
18/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 34.97%
Brendan Gulston
Brendan Gulston
9/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 48.01%
Victoria Stevens
Victoria Stevens
13/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 47.59%
Richard Power
Richard Power
6/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 50.91%
Paul Jourdan
Paul Jourdan
3/52 in Equity - UK Smaller Companies (Performance over 3 years) Average Total Return: 57.49%
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