Hargreaves Lansdown fund manager Steve Clayton has revealed the stocks he has bought with the £298 million raised from investors in his HL Select Global Growth Shares fund, which launched earlier this month.
The online stockbroker decided to follow in the footsteps of fund manager Neil Woodford and disclose all its positions, not just the standard top 10 holdings, when it launched the first of its Select range of funds in 2016.
Unlike its longstanding £8.3 billion multi-manager fund range, Hargreaves Lansdown's three Select funds, all run by Clayton, invest directly in the shares of companies rather than funds run by other managers.
Clayton has already splashed cash on 30 stocks in two weeks. He is targeting a concentrated portfolio featuring between 30 and 40 companies. Just under a quarter of the portfolio, or £70 million, is sitting in cash the manager is still looking to invest.
A sector breakdown shows healthcare supplies make up 8.1% of the portfolio, followed by systems software at 5.7%, while interactive media and services, application software, and data processing and outsourced services make up 5.6% of the portfolio each.
The biggest geographic weighting is to US which accounts for nearly three-quarters of the fund and 19 of its stocks.
The largest holding is Danish medical devices firm Coloplast (COLOb.CO), making up 2.9% of the portfolio.
Clayton is impressed by Coloplast’s ‘relentless focus on quality’ the ‘rising prevalence of the conditions it serves among an ageing population position it well for more growth in the future’.
The US stocks in Clayton’s (pictured) portfolio have a strong ‘technology tilt’, with internet giants Amazon (AMZN.O) and Google owner Alphabet (GOOG.O) both featuring in his top 10 holdings.
Clayton picked Alphabet, the fund's second largest holding, as its ‘sheer scale and net cash on the balance sheet’ means it can invest in its core business as well as making bets on side projects like its driverless car venture Waymo.
ServiceNow (NOW.N), the third biggest position, provides IT services via the cloud, such as human resources, security and customer services that Clayton believes ‘will grow like topsy’.
Microsoft (MSFT.O), also held by Fundsmith Equity, rounds out the tech giants held by the fund. Clayton said Windows and Office software were ‘eternal franchises that we see throwing off cash far into the future’ and highlighted potential in the Azure cloud-computing platform.
While technology companies of all types make up a huge swathe of the fund, Clayton also wants to cash in on the opportunities brought about by an ageing population, primarily the rising number of people needing healthcare.
Masimo (MASI.O), which supplies blood oxygen monitors, and West Pharmaceuticals (WST.N), which dominates the market in sealing solutions for liquid pharmaceutical packaging, feature in the fund.
Clayton has eschewed traditional banks in favour of ‘companies serving the vital payments market’ such as Paypal (PYPL.O), another Fundsmith Equity stock that is also held by Citywire AA-rated Nick Train in his £6.7 billion Lindsell Train Global Equity fund. Mastercard (MA.N) also features in Clayton's portfolio.
Closer to home, Clayton has picked three UK-listed stocks for the fund; litigation finance group Burford Capital (BURF), which is backed by managers Woodford and Mark Barnett, drinks business Diageo (DGE) and analytics company Relx (REL), both of which are held by Smith and Train.
Like Smith and Train, Clayton likes Diageo for its strong brands and steady dividend. He added that recent management changes had improved the distribution model and ‘increased focus on free cashflow’.
‘These changes are now bearing fruit, underpinning our confidence in the group’s ability to grow sales and profit margins, while continuing to return cash to shareholders,’ he said.
Clayton’s focus on well-known brands continued to the East, where he bought Chinese internet company Tencent (0700.HK) and Japan’s leading beauty company Shiseido (4911.T), another Lindsell Train favourite.
‘We’re still building our positions in a couple of nice Australasian businesses, so we’ll tell you about those at a later date,’ said Clayton.
The remainder of the portfolio is made up of:
- Defence equipment supplier Raytheon (RTN.N)
- Software developer Adobe (ADBE.O)
- Dental aligner maker Align Technology (ALGN.O)
- Design software developer Ansys (ANSS.O)
- Online stockbroker Charles Schwab (SCHW.N)
- Online travel company Booking (BKNG.O)
- Industrial gas producer Linde (LIN.N)
- Health technology business Koninkliijke Philips (PHIA.AM)
- Technology-based management consultants Accenture (ACN.N)
- Luxury brands stable LVMH Moet Hennessy Vuitton (MC.PA)
- Ratings agency Moody’s (MCO.N)
- Fibre optic cable maker Amphenol Corporation (APH.N)
- Video games creator Ubisoft Entertainment (UBI.PA)
- Water technology company Xylem (XYL.N)
- Bioscience business Christian Hansen (CRH.CO)
- Aircraft simulator maker CAE (CAE.TO)
Hargreaves Lansdown raised a record amount with its newest fund launch, with the near-£300 million raised eclipsing the £251 million gathered at the launch of the HL Select UK Income Shares fund, and the £168 million for the HL Select UK Growth Shares fund.
The UK Growth fund has delivered 36.3% since launch in December 2016, placing just outside the top 10 of the 232-strong Investment Association's UK All Companies sector. The UK Income fund has endured a trickier time, with a return of just 4.3% since launch in March 2017, a mid-ranking return in the UK Equity Income sector.