Robin Angus, executive director of asset manager Personal Assets, says no to debt and no to acquisitions
Personal Assets Trust, an investment fund and a member of the UK’s FTSE 250 Index, matters to IT teams because it is run for individual investors, who could provide important demand for equity as institutional investors move into fixed income.
The fund’s returns have been consistently strong, and it has outperformed the average in its global growth sector over the past one, three and five years.
A shareholder who invested £100 ($155) 10 years ago and reinvested the dividends would have £192.90 today. Robin Angus, the executive director of Personal Assets, has a sense of humor that matches his fund’s performance.
What shall I tell my CFO to do with cash?
Focus on your owners, but be pragmatic, not ideological about dividends and buybacks. Nestlé, the Swiss consumer goods group, is an exception to one of my rules: in general, we prefer CFOs to pay dividends, because we cannot control the timing of share buybacks, many of which stopped in 2008, just as equity investors wanted some return during falling markets. Nestlé has been an exception: it has returned one third of its capitalization in the past five years through dividends and buybacks.
What do you care about on balance sheets?
We prefer to see no debt, so that companies work for shareholders, not bankers or bondholders. In the 1960s my family’s 100 year-old business collapsed because of borrowing, as interest rates rose and the business dwindled.
As for dividends, nothing concentrates the mind more than the need to pay them; the longer the track record, the more likely it is to become ingrained in the company’s culture. Where possible we look at dividend records over decades, not the last few years.
That’s demanding. But IR magazine will hold its US Awards in New York on March 22. Do any US companies fit the bill about dividends?
Yes: Coca-Cola has increased its dividend for 49 years. It’s not going to go away. On a light-hearted note, there are only a few things the world needs and always will, and one of them is Coca-Cola.
How do I best promote acquisitions to investors?
Don’t do any. Overpaying for acquisitions, whether through equity or debt, very often destroys value. More often than not, investors celebrate acquisitions in haste but repent at leisure.
Recently a friend sent me an email and complained that his employer bought a lot of businesses in 2007-2008 at the top of the market, overpaid for goodwill, acquired some companies that were peripheral to the firm’s core strategy, and later endured huge write-downs, big sell-offs and a near 85 percent fall in its share price.
IR magazine is holding an investor perception seminar in Canada in Toronto on February 1. Why did you add to your holding in Imperial Oil of Canada?
We wanted a stake in the oil & gas industry. Canada is, politically and economically, dependable and safe. The country has come through the crisis well, compared with other countries.
How do you pick stocks?
Of course, the macro picture is always of prime importance, so don’t miss the wood for the trees. But don’t overlook the stocks, either – that is, remember the trees, not just the wood.
We aim to protect and increase our investors’ wealth. So first we decide whether our markets and sectors beat cash. Second, we select stocks.
They must have real pricing power, so I am thinking of businesses such as BAT and Unilever. Defensiveness is our theme. We think the times are bloody awful, so we hold stocks such as Unilever and Tesco.
How can I convince you that the price is right?
Naturally, this is vital. In the early 1970s, everyone had to own the ‘Nifty Fifty’ US growth stocks. Some have performed well and are among our core holdings, such as healthcare products company Johnson & Johnson and Philip Morris, the tobacco firm that owns the Marlboro brand. But who remembers Xerox and Polaroid?
What should I do to sell my company’s culture?
Markets and commentators talk a lot of nonsense about culture. But it does matter, and Greggs, a food retailer and one of our UK stocks, has a distinctive ‘family feel’ despite its remarkable record of growth.
You spoke earlier about the macro themes. What do you think about inflation?
We hold index-linked government bonds as a defense in the current investment battle, in which we shelter in the trenches.
Other defenses include cash and gold – all right, you can’t eat, drink, smoke or plant the yellow metal, it pays no interest and costs money to store and insure.
But there’s no bubble: just 0.6 percent of global financial assets are in gold, compared with 3 percent in 1980.
