A 15-minute listen.   

George Godber and Georgina Hamilton are fund managers of Polar Capital’s UK Value Opportunities Fund. From our studios in Wapping, London, the managers talk through the fund’s philosophy, the top-down factors influencing UK markets presently and the need to “stick to the knitting”, and finding bargain opportunities amid the value traps.

Polar’s UK Value Opportunities Fund is a multi-cap value fund, currently split roughly one third between FTSE-100, 250, and small-cap – a balance that shifts with the sands of time depending on where the managers see value.

This year has been broadly tough for value with top-down themes and geopolitics weighing heavily on sentiment, and the market tending to reward stocks with higher P/Es. But with the UK looking cheap relative to history and other world indices, it has also proved a fertile hunting ground for value picks, as Godber remarks:

“It’s been a difficult year for value, in some respects – but if you look below the surface, you get these massive lightning rods of sentiment which have created huge opportunities in some of the domestic shares because they’re dominated by everyone focusing on Brexit. It gives you this great chance to pick up superb franchises.”

Hamilton adds: “The UK has lots of cheap shares at the moment, across a broad range of sectors: we’ve added to banks, healthcare, food and retail.” She also notes an “interesting phenomenon” that small-caps versus FTSE-250 are trading at their biggest discount since the global financial crisis, and that with value opportunities also seen in the mega-cap top end of the FTSE-100, it creates an “interesting barbell” of opportunities.

Hamilton and Godber get on to mergers and acquisitions, remarking that “M&A has been about fundamental buyers, not private equity guys fiddling around with spreadsheets”, and walks Octo through some of the recent takeovers.

Also discussed in the interview is their strict criteria for liquidity, capacity constraints, and their 3-step process to avoiding value traps.