Thomson is bullish on the domestic recovery in the developed markets and his fund – which is a top-quartile performer in the IMA Global sector over one, three, five and 10 years – is littered with UK and US consumer-facing stocks.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
While the US is his largest regional weighting, the manager says that the UK’s recovering consumer sector is one of the most interesting themes within his portfolio.
“My UK exposure, overall, has come down recently because I have been selling down some of the more traditional oil and gas names, but I am still very bullish on the UK economy,” he said.“Within my allocation, I have been focusing on UK companies that are superstar stocks that are really shaking up their industries. These are the cheerleaders of the UK market and should be seen as a great source of pride for us.”
With that in mind, Thomson highlights three “superstar” UK stocks for investors to consider for their portfolio.
ASOS
The online retailer ASOS, which is listed on the FTSE AIM and has a market cap of £5.7bn, has delivered almost unrivalled share price performance to its investors since the start of the millenium.
According to FE Analytics, the stock has returned 28,861.57 per cent since it was first listed in October 2001.
Investors would also be sitting on four-figure returns if they had bought the stock five years ago.
Over one and three years it has returned 147 per cent and 262 per cent, respectively.
Performance of stock vs index since Oct 2001
Source: FE Analytics
Thomson says that the stock, his third largest holding, can continue to perform strongly.
“ASOS’s share price has rocketed. Over the years it has gone up from 3p to £63,” he said.
“However, over that period ASOS still only has a 0.75 per cent share of the UK’s retail clothing market.”
“It has had that blockbuster growth, but still has less than 1 per cent market share; to me that shows it has a lot of potential growth ahead.”
There are 12 other funds, aside from Rathbone Global Opportunities, that count ASOS as a top-10 holding.
One is FE Alpha Manager Harry Nimmo’s Standard Life UK Smaller Companies fund, with Nimmo describing the stock as his best ever investment.
Primark (Associated British Foods)
Thomson's fifth-largest holding is Associated British Foods, which is the parent company of Primark.
The popularity of Primark has soared here in the UK over recent years and Thomson says that it should continue to perform very well now it is expanding into Europe where there is great demand for the company's discounted products.
“We like companies that are doing something innovative and really appeal to the consumer,” he said.
“Primark is like that. They have just opened a number of new stores in France and, how can I say this, the French can be pretty forthright in their views on fashion.”
“However, outside their stores in Dijon and Marseille, there were almost riots as it was the first time they were able to get hold of those types of products.”
“They are really grabbing at the heart of what consumers want, plus, it also gives us exciting overseas exposure,” Thomson added.
Along with Primark, Associated British Foods also owns British Sugar, which produces half the UK’s sugar quota.
Performance of stock vs index over 1yr
Source: FE Analytics
The FTSE 100 company has a market cap of £23bn. It has performed well recently, having delivered a return of 65 per cent over the last 12 months.
All in all, seven other IMA funds count it as a top-10 holding, one of which is Marlborough UK Multi Cap Growth.
Rightmove
Rightmove, the online real estate FTSE 250 company, is Thomson’s second-largest holding. He says there are a number of reasons why he rates it so highly.
“Firstly, Rightmove is a company that is shaking up its industry,” Thomson said.
“The old way of advertising properties was through newspapers, billboards and fliers, but now people will just look for a house or flat on the internet. Rightmove completely dominates its industry, as it has an 80 per cent market share.”
The manager says that because of its dominance, the management has the power to push up prices for advertising.
He also says that, given its niche, it can continue to grow without any real problems.
“It could double in size, but because it is an online business, its cost base won’t go up. They may buy a few more servers, but they don’t need more space, offices or employees. The internet allows them to do that,” he said.
Like other stocks exposed to the recovery in the housing market, such as Barratt Developments and Persimmon, Rightmove has had a stellar run recently, having returned close to 60 per cent over 12 months.
The manager says that it does now look slightly expensive. Therefore, while he has no intention of selling, he will use inflows into the fund to dilute the position by topping up his other holdings around it.
“It has a punchy valuation now, but then good-quality companies don’t come cheap. It certainly isn’t cheap any more, but that’s why I run a portfolio, not just one stock,” he added.
Our data shows that 16 other funds count Rightmove as a top-10 holding.
They include Old Mutual UK Mid Cap, Barclays UK Lower Cap and Harry Nimmo’s Standard Life UK Smaller Companies fund.
