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Small cap star Mumford seizes on Footasylum crash

Small cap star Mumford seizes on Footasylum crash

Star small cap manager Paul Mumford has seized on the collapse in the shares of Footasylum (FOOT) by adding to his position in the beleaguered footwear retailer, predicting the stock could treble.

Shares in the 'athleisure' retailer tumbled 60% this week after its second profit warning in three months. They are down 87% this year and were today trading at 34p, having peaked at 258p in January.

Citywire AA-rated Mumford holds the stock in his top-performing Cavendish AIM fund and added more this week.

‘I’ve taken some more at a cracking level,’ he said.

Mumford highlighted the £24 million of cash sitting on the Foot Asylum balance sheet and the ‘quite good’ turnover of £95 million, as well as its online offering but noted there were problems.

‘They had ambitious plans since coming to market,’ he said. ‘They got their stock positions wrong and had to discount, and the summer period has not been bright for them, and now store openings have been put back so they will not feel the full effect of the Christmas period.’

However, he said the sharp falls seen this week were an ‘overreaction’ but if he has got it wrong ‘it is only 1% of the fund’.

‘Over a four or five year period you have, potentially, something that could double or treble,’ said Mumford.

Adding to Foot Asylum plays into Mumford’s enthusiasm for the retail sector. ‘I love it,’ he said.

‘I prefer [retail] to grotty old biotechs where you are gambling on permissions that do not come through or mining where you are gambling on commodity prices.’

He highlighted Quiz (QUIZ), which has an online and high street presence, as a favourite. Cavendish holds the stock, which floated last year, in both his AIM fund and the Cavendish Opportunities fund.

Although the company has to pay a £400,000 debt to bankrupt House of Fraser for its concession stands at the department store, Mumford said the company has ‘really got it right’.

‘It’s a very well run company and has an online side that is quite exciting,’ he said. ‘The advantage is that it is fairly quick to recognise trends. We avoid the Asos (ASOS) and Boohoos (BOOH) because of the ratings but Quiz is at quite an attractive level.’

'Dog' retail stocks

While Quiz is an online upstart aimed at the younger consumer, Mumford admitted that some of his ‘dog’ retail stocks mark him out as ‘a masochist’.

They include Moss Bros (MOSB), the suits retailer whose shares have halved this year. Mumford (pictured) bought more for his Opportunities fund this week.

‘It’s sorted out its supply mix up and it has decent growth… but the shares are on the floor because of profit warnings,’ he said.

In the same vein, he snapped up more shares in Laura Ashley (ALY), the home furnishings and clothing retailer whose shares are down 42% over the last 12 months.

The company has suffered margin pressures but Mumford said the clothing division was doing well and it had ‘decent ideas’, such as including tearooms in some of its shops to attract sales.

While Mumford said some of his stock choices may seen ‘nutty’, particularly given the sentiment around retail, the ‘dogs are spread around the kennel’.

‘One of these dogs will come out barking like mad and bite your leg,’ he said.

The Cavendish AIM fund has delivered 91% over the last three years, the third best performance of 47 funds in the UK Smaller Companies sector. 

Cavendish Opportunities has returned 48% over the same period, a mid-ranking performance in the UK All Companies sector.

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Paul Mumford
Paul Mumford
1/13 in Equity - UK Medium Companies (Performance over 3 years) Average Total Return: 64.60%
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