UK equity
Through a distinct philosophy and robust process, we aim to find those opportunities that we believe are most likely to result in attractive returns for investors
Potential, Valuation and Timing
Our PVT investment philosophy recognises the three key criteria that we believe enable us to discover the most promising investment opportunities regardless of market conditions.
We evaluate all stocks according to a combination of these clearly defined and continuously monitored investment factors. This enables our team to maximise returns and minimise risk.
Potential
The potential of a company represents its ability to create economic value for shareholders. Economic value is enhanced by a growth in profits, cash flow or asset backing. We look for companies with above average value creation potential.
Valuation
Valuation represents the gap between the stock market’s valuation of the company (i.e. its current share price) and its underlying economic worth. This gap is what we call the pricing anomaly.
Timing
Timing addresses the issue of when is the right time to buy and sell. It aims to minimise the risk of being too early into an investment, and to optimise the period of time held and returns generated once an investment has been made.
Categories of potential
Over the years we have found that companies that can deliver above average potential divide into four categories; these relate to where a company is in its ‘life cycle’:
Growth – the delivery of strong revenue and profits growth
Quality – a business franchise that delivers a superior return on investment
Recovery – the process whereby a company produces a recovery in profits to ‘normal’ levels following decline
Asset-backed – the delivery of asset backed growth to a long-term investor.
"We are, first and foremost, bottom up stock pickers, but the PVT philosophy provides an unemotional analysis of an investment, detached from swings in markets and investor sentiment that can come from macroeconomic events and the news"
Hugh Sergeant, Head of Value and Recovery strategies
Investment process
We are practical investors who live and breathe the evaluation of company prospects. We also believe there are repeatable investment cycles that can be systematically exploited, so we combine quantitative research with fundamental stock-specific analysis.
Our proprietary quantitative analysis tool allows us to quickly and systematically review vast amounts of complex data efficiently, scrutinising a universe of UK and global equities in order that we can track down and target the best opportunities to investigate further.
We then use the knowledge, expertise and, importantly, experience of our team to carry out fundamental research to validate every PVT idea to find those that will work best in our portfolios.
Verification process
There are four stages to PVT idea verification:
Screening
Our quant tool's findings are discussed at our weekly team meetings. We’re looking for high scoring stocks. Once identified, one of the team is nominated to manage the verification process for that stock.
Validation
We test the PVT score and investment thesis through analysing the key drivers of PVT relevant to the type of company we’re looking at.
Company meetings
Company meetings are an integral part of our process but we don’t believe in having meetings simply because we can or to screen the market. Instead, we meet with companies when we need answers to specific questions such as the key drivers of return on capital and growth.
Debate
We believe that team debate is an important process in ensuring effective testing of the validity of a stock’s PVT investment case, its strengths and weaknesses.
In the weekly verification meetings, all new ideas are presented, debated and questioned before any investment is accepted into the portfolios.
The importance of an effective sell discipline
As well as identifying exciting opportunities that we want to buy, we also monitor every company already in our portfolios to know when the time is right to exit or sell a position.
We systematically monitor the PVT scores of all portfolio holdings in our quantitative analysis tool. When scores fall significantly, we re-verify the investment case and debate the investment’s position at the weekly meeting. A systematic sell discipline is critical. Our selling process is driven by the same PVT philosophy. Shares where potential is deteriorating, where valuations are less attractive following a period of outperformance, or where timing is no longer optimal will all be examined.
"The longevity and consistency of a stable investment process continues to reap benefits for us and our clients. It allows us to remain true to our investment beliefs and insulated from the distraction of day to day market movements. By combining quantitative analysis with the knowledge and experience of our fund management team we ensure that our focus is always exactly where it needs to be – on finding great investment opportunities."
Dan Hanbury, Head of Small Cap and Income strategies
UK equity investments
You can access our UK equity strategies through five funds and one investment company.
ES R&M UK Equity High Alpha Fund
ES R&M UK Recovery Fund
ES R&M UK Equity Income Fund
ES R&M UK Equity Smaller Companies Fund
ES R&M UK Dynamic Equity Fund
R&M UK Micro Cap Investment Company
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Investment team
Hugh Sergeant
Head of Value & Recovery Strategies, PVT Equities
Hugh Sergeant
Head of Value & Recovery Strategies, PVT Equities
Hugh graduated from the London School of Economics with a degree in Economics. He joined Gartmore in 1987 as a UK equities graduate trainee and moved to Phillips & Drew in 1990, managing UK equities throughout his twelve years there. In March 2000 Hugh was promoted to Head of UK Equities at UBS Global Asset Management and Chairman of the UK Equities Committee. He joined Société Générale Asset Management in 2002 as Head of UK Equities. Hugh was one of the founding members of R&M Asset Management in 2006. Hugh is Head of Value and Recovery strategies within the PVT Equities team and manages the UK Equity High Alpha, UK Recovery, Global Recovery and Global High Alpha strategies.
Dan Hanbury
Head of Income & Smaller Companies Strategies, PVT Equities
Dan Hanbury
Head of Income & Smaller Companies Strategies, PVT Equities
Graduating from Loughborough University in 1996 with a First-Class Honours Degree in Mechanical Engineering, Dan began his career at Schroders on the UK Fund Management desk before joining the research department as an analyst in the UK Research Team. He joined Investec Asset Management in 2000 and was responsible for the UK Smaller Companies Fund and the UK Unconstrained portfolios. Dan was a founding member of R&M Asset Management in 2006, when he launched the UK Equity Smaller Companies and UK Dynamic Equity strategies. Dan currently manages the UK Equity Smaller Companies, UK Equity Income and UK Core strategies.
William Lough
Portfolio Manager, PVT Equities
William Lough
Portfolio Manager, PVT Equities
Will graduated from the University of Oxford with a First-Class Honours Degree in Modern History, before joining R&M as an equity analyst in 2009. In 2013 he was promoted to Director of Research and in 2014 became alternate Portfolio Manager on Hugh Sergeant’s Recovery and High Alpha strategies. Will is currently the lead Portfolio Manager on the UK Dynamic Equity and International High Alpha Strategies and co-manager on the Global High Alpha Strategy. Will is also the alternate on the UK Recovery Strategy.
George Ensor
Portfolio Manager, PVT Equities
George Ensor
Portfolio Manager, PVT Equities
George graduated from Bristol University with an Upper Second Class degree in Chemistry in 2008 before joining Smith & Williamson Investment Management as a graduate trainee where he worked for five years as an analyst and Private Client Investment Manager. George joined R&M in March 2014 as a UK equity analyst and is currently Portfolio Manager of the UK Micro Cap Investment Company. George is a CFA charter holder.
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