Offshore Investment Brokers
Alexander’s top ten holdings currently make up 41.5 per
cent of the fund. His belief that buying the new economy of
IT, telecoms and media is buying the future is currently the
overriding theme of the fund. “If you combine information,
telecoms and media, it makes up 64 per cent of the fund. If
you add in pharmaceuticals it is up to 71 per cent,” he
says.
“IT is the way forward. It is a must have. It has been
suggested in the US that 60 per cent of US GDP will be conducted
via e-commerce in the next decade.” The Henderson fund
is more heavily weighted towards the service end of IT. “Indeed,
our entire portfolio is very service-based - way over 75 per
cent,” Alexander says.
He has little faith in stock market indices. His fund is overweight
in IT - 41 per cent against a smaller companies index weighting
of 7 per cent. “I’m not interested in the composition
of indices today. They are backward looking. Some 30 per cent
of the All Shares Index is banks,” he says. “A large
part of the investment community still doesn’t hold the
stocks I hold. London is very pessimistic as an investment community.
As a culture we are not entrepreneurial, although I think that
is changing.”
Offshore Investment Brokers - US Style
“I think what I’m trying to get over is that I run
the fund on a US-style growth or future-looking basis and leave
stocks alone once I’ve bought them. Decide where the profits
are going to be and go for it.” It has certainly been a
successful formula. In the overall portfolio the book cost is
US$15.5 and the market value is US$32.
But don’t get the impression that Alexander is blinkered
and ignores stocks in areas other than IT. One non-IT company
Alexander has backed is Clinton Cards. “I like the fact
it has got 20 per cent of the greeting cards market. It is a
market leader and we have made money on it. It has gone up three
times,” he observes. Alexander also likes the fact that
the company has global aspirations. He might also mention leisure
centre group Fitness First, which he bought when it had a market
capitalisation of £28 million (it is now £330 million).
Offshore Investment Brokers & Alexander's Fund
Alexander’s fund defines a small company as having
a capitalisation of below £600 million. Another reason for
Alexander’s success is his ability to get inside the skins
of the companies he is investing in. “I try to think of
myself as a businessman, as a partner in their businesses. I see
them as companies not as stocks,” he says.
He rarely visits companies, however. “The asset is intellectual
property. You need to understand this business. I’m interested
in the corporate culture,” he says. “I think the
migration of corporate profitability is going to run away from
the manufacturing goods sector. The greatest value added will
be at the service end.”
Unfortunately, the investing public is yet to be convinced
by the smaller companies argument. The fund is currently only
US$30.8 million in size and, despite the minimum investment
being only US$2,500, many of its investors are high net-worth
individuals. Alexander reveals that on occasions he has had
to sell stocks because of redemptions. This is undoubtedly because
of the volatility that investors see as being intrinsically
linked to such investments.
Offshore Investment Brokers - Alexander
But Alexander is convinced this is the wrong attitude. “Volatility
is what you pay for the future,” he says. “People
think something lowly priced with a multiple yield is good value
but I think this is backward looking.
“Look at the composition of the Dow Jones index. Old
America is going out and new America - Microsoft etc. - is coming
in.” Alexander’s vision of the future is that we
will see the retiring of the ‘old world’ through
takeover. The small-cap area is becoming increasingly dynamic
as each day goes by, he suggests. “There is a culture
of emerging growth companies going straight to the stock exchange
and bypassing the venture capitalists.
“We notice value is being destroyed in the large cap
areas faster than anyone thinks and is being created in small
caps. In large cap areas people are behind the curve all the
time,” he says.
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