Each month, we put a senior fund or investment manager to task with tough questions for our I'm a fund manager series to find out how they manage their own money.
We want to know where they'd invest for the next year - and next 10 years - and what pitfalls to avoid.
This week, we spoke to James Knoedler, portfolio manager of the Evenlode Global Equity fund.
The fund invests in companies that it perceives as growth opportunities with competitive advantages with the aim of delivering attractive long-term returns to investors.
They mostly invest in large or mega cap companies, including brands such as Mastercard, Microsoft, Experian and Diageo.
1. If you could invest in only one company for the next 10 years, what would it be?
Mastercard. More and more payments will move onto its network as people switch from cash and cheque, and increasingly it will pick up other money flows, notably between bank accounts, where there is currently not a robust mechanism to cover fraud.
The widespread move from face-to-face to digital transactions means that there is more demand for fraud and security solutions from banks and merchants.
Mastercard has an unrivalled position in all of these areas.
2. What about for the next 12 months?
As a firm, we don't buy shares with 12 month holding periods in mind – we don't have an edge in understanding near-term price moves.
That said, I think Amadeus, which is the world's leading provider of airline ticket distribution and IT, is attractive given the ongoing pickup in business travel, the distressed state of its competitors, and the opportunity to sell more solutions into both airlines and hotels.
It's still trading below its pre-covid level despite its competitive position having improved immensely post covid.
3. What sector would you be avoiding and why?
We avoid sectors where it is hard to differentiate your product and have genuine pricing power.
In real estate, energy, banking, insurance, and materials, clients of these companies typically buy solely on price as it is very hard to have unique, non-copyable features – it is very hard to differentiate a 4.2 per cent mortgage such that someone will pick it over a 4 per cent mortgage, or get someone to buy barrel of Brent-grade crude for a dollar more than your competitor's barrel.
4. Do you think the UK market is currently cheap?
We don't have a top-down view on the attractiveness of the UK market. We do have 20 per cent of the fund invested in UK-listed companies, but all of them are globally relevant with a small of their revenues in the UK, and none is enormously cheaper than its global peers.
We find there are islands of value in plenty of markets at the moment – there is very high dispersion in stock markets globally, it's more of a question of sectors than countries to us.
5. Should investors focus on growth or value stocks?
We don't like the growth/value binary. For us, a company that is good value is one that has good and sustainable growth prospects – not necessarily great ones, but at least with a predictable path to growing as fast ast the world economy for a long time.
If you can't grow at this modest pace, it is quite hard for your equity investors to enjoy the power of compounding, Einstein's eighth wonder of the universe.
6. What about active or passive investing?
Markets are likely human beings reliably inefficient, so there remains an opportunity for active managers with a distinctive style discipline.
For investors, we would argue the most important binary debate is not passive versus active, but money versus time weighted returns.
If you look at Morningstar data, the biggest 'easy win' for investors is to be committed buyers and holders, whether active or passive.
If you look at passive ETF versus passive mutual funds, passive mutual fund investors had much better money-weighted returns, as ETF investors trade more and hence are more likely emotionally to sell the dip and buy the top.
7. Nvidia. Is it a bubble about to burst?
I can't say if it's a bubble or not, but we don't own it and would not be buying here on this balance of risk and reward.
The current price discounts a pretty rosy scenario for monetisation of AI at enterprise, for incremental rewards for model training, and for competitive intensity.
The next couple of years are basically inked in as amazing. The question that lurks on everyone's minds is the long-term durability of the business.
8. What company could become the next Nvidia?
Alphabet. They invented the technology behind large language models and continue to have the best infrastructure and biggest reserves of permissioned data.
They have been slow to act on this, but we would argue that there has not been meaningful foreclosure of the opportunity – there's still all to play for with AI.
9. Will the magnificent seven still be dominating in 10 years?
Not all of them. Some have very durable competitive advantages, others are operating in historically tougher sectors, or have more mature products.
But as a group they have some pretty incredible business models.
Amazon and Alphabet sit in the middle of unusually powerful and hard to replicate networks.
They are also 'keystone companies' which drive the profitability both of other large companies, like Apple and Samsung, and of a huge ecosystem of software developers, Youtubers, and third-party merchants, which makes both competing with them and regulating them very difficult.
10. Should gold form part of everyone's portfolio?
We are absolutely not in the business of giving personal investment advice, but for my own account, I only invest in things which generate cashflow.
Gold’s been around forever and has uses in industry and jewellery, but I have no more idea of how to value it and understand its relative attractiveness at different prices than I do of how to build space rockets – I stick to my circle of competence.
11. What about bitcoin?
No. This is an asset without any fundamentals – in the case of a stock or a bond, these mean profits, in the case of commodities like oil, gold, or coffee, this is the demand from consumers.
I don’t want to invest in something where the entire investment depends on there being a marginal buyer out there.
12. Will interest rates return to rock bottom again?
We don't have a house view on this. There are pretty strong reasons to believe that the zero rates of 2010-2022 will not be back in a hurry, which on the whole is a good thing as it implies better nominal economic growth, but we are not going to take big bets on any particular outcome.
13. Do you think inflation is here to stay?
Again, we are agnostic on this one. We try to create portfolios which don’t rely on a certain macroeconomic outcome to do well.
That said, at least some of the inflation was the result of post-covid reopening and then the Ukraine invasion, and with any luck these shocks will not recur.
14. You inherit £100k in your twenties. What should you do with the money?
Making the Herculean assumptions that first, I did not plan on buying a house in the next 10 years and second, had a safe and predictable gainful job, I would put it almost entirely in the stock market, in companies which had a good pathway to durable growth over 10 years or more and were not trading at crazy valuations.
At this age, it makes absolute sense to be all in on the compounding power of equities, rather than having some allocation to bonds.
That said, I would keep a certain amount in cash for rainy days and avoid leverage.
15. What's your greatest ever investing mistake?
As a junior analyst in the early 2010s I spent way too much time reading perma-bears predicting the imminent collapse of the stock market and the universe, and stayed in cash, missing out on a great time for stocks. The lesson being that time in the market beats timing the market.
It’s unlikely that the next 40 years can be as good as the last 40, but all else equal, I’d rather have money in the equity of profitable and growing companies than in cash or bonds.
On the flip side, I am glad I eventually just bought equities. Some have been great, others haven’t, but on the whole it is better to be invested than to sit and assume you will get a better entry point down the road.
Compare the best DIY investing platforms and stocks & shares Isas
Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.
When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming.
Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts.
When weighing up the right one for you, it's important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.
To help you compare the best investment accounts, we've crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you.
We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.
>> This is Money's full guide to the best investing platforms and Isas
Platforms featured below are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence.
| Admin charge | Charges notes | Fund dealing | Standard share, trust, ETF dealing | Regular investing | Dividend reinvestment | ||
|---|---|---|---|---|---|---|---|
| AJ Bell* | 0.25% | Max £3.50 per month for shares, trusts, ETFs. | £1.50 | £5 | £1.50 | £1.50 per deal | More details |
| Bestinvest* | 0.40% (0.2% for ready made portfolios) | Account fee cut to 0.2% for ready made investments | Free | £4.95 | Free for funds | Free for income funds | More details |
| Charles Stanley Direct* | 0.35% | No platform fee on shares if a trade in that month and annual max of £240 | Free | £11.50 | n/a | n/a | More details |
| Fidelity* | 0.35% on funds | £7.50 per month up to £25,000 or 0.35% with regular savings plan. | Free | £7.50 | Free funds £1.50 shares, trusts ETFs | £1.50 | More details |
| Hargreaves Lansdown* | 0.45% | Capped at £45 for shares, trusts, ETFs | Free | £11.95 | £1.50 | 1% (£1 min, £10 max) | More details |
| Interactive Investor* | £4.99 per month under £50k, £11.99 above, £10 extra for Sipp | Free trade worth £3.99 per month (does not apply to £4.99 plan) | £3.99 | £3.99 | Free | £0.99 | More details |
| iWeb | £100 one-off fee (waived until Dec 2024) | £5 | £5 | n/a | 2%, max £5 | More details | |
| Accounts that have some limits but attractive offers | |||||||
| Etoro* No investment funds or Sipp | Free | Investment account offers stocks and ETFs. Beware high risk CFDs. | Not available | Free | n/a | n/a | More details |
| Trading 212* | Free | Investment account offers stocks and ETFs. Beware high risk CFDs. | Not available | Free | n/a | Free | More details |
| Freetrade* No investment funds | Basic account free, Standard with Isa £5.99, Plus £11.99 | Freetrade Plus with more investments and Sipp is £9.99/month inc. Isa fee | No funds | Free | n/a | n/a | More details |
| Vanguard Only Vanguard's own products | 0.15% | Only Vanguard funds | Free | Free only Vanguard ETFs | Free | n/a | More details |
| (Source: ThisisMoney.co.uk July 2024. Admin % charge may be levied monthly or quarterly | |||||||
