Contrarian strategy for “Deep Value” shares (Photo: Freepik)
Who has the courage to invest in a share that has lost more than half of their value? And where everything goes wrong? The Schroder Global Recovery Fund ventures exactly – and relies on companies that are on the ground. But is that a clever strategy or just a risky game with fire?
Contrarian strategy for “Deep Value” shares
The Schroder Global Recovery Fund (ISIN: LU0956908312) is a prime example of a contrarian strategy. Fund management around Simon Adler and Liam Nunn is specifically looking for companies that are on the ground – be it through profit warnings, scandals or industry crises. The focus is on “Deep Value” shares that, despite solid fundamental data, are in the shadow of the stock exchange stars. Patience is the top priority here. Buying against the trend is easy to stay disciplined is the real challenge.
The fund’s investment process is clearly structured: First of all, undervalued shares are identified, then a thorough risk analysis and an evaluation of the profit potential is carried out. A diversified portfolio is then put together and all decisions are documented to learn from the experience. “We are looking for companies that had to take heavy setbacks,” explains management. “If the long -term perspectives are correct, there are attractive return opportunities here.”
Focus and top positions: Where the bargains lurk
The portfolio usually includes between 30 and 70 individual titles, with the weighting on globally diversified markets. While US shares make up the largest proportion of the $ 386 million funds, there are also significant positions in Great Britain, Japan, Germany and other regions. Cyclical consumer goods, communication, health and financial values dominate at industry level.
This broad allocation creates space for recreational spreaes. However, the strategy naturally also brings phases of increased fluctuations. Investors should therefore have a certain level of patience and risk inhabitants if the hoped -for increase in value does not occur immediately.
The top spares include Mohawk Industries, a worldwide leading manufacturer of floor coverings, the share of which has more than halved within 5 years, and Molson Coors, a global beer group that has to deal with declines of sales and economic uncertainties. Volkswagen is new in the portfolio, whose stock broke down after a winning warning. Fund management sees improvement potential for Margen and Cashflow.
Performance check: The numbers speak (not always) for themselves
Since its laying in October 2013, the Schroder Global Recovery has been able to keep up with the All Cap World equity fund sector, but lags that MSCI World afterwards. The sheet has turned over the past 5 years: Value shares were asked again and the fund increased by 56 percent-a little more than 46 percent sparkling wine. In the past 12 months, the performance was 14.6 percent with a volatility of 10.8 percent.
Conclusion: more chance or more risk? The Gretchen question
The Schroder Global Recovery is a bet on the resurrection fallen angel. The strategy could pay off for investors with nerves and endurance, especially if the companies invested recover from their difficulties. However, the risk remains that some stocks will persist. The fund is therefore more suitable for patient value investors who are willing to swim against the electricity and search for a supplement to growth-oriented mainstream funds.
Disclaimer:
No investment advice. No call to buy or sell securities.