Fund manager Williams says weak euro gives Ireland chance to recover
Published 29/04/2010 | 05:00
SHARESCOPE has always had a soft spot for Gervais Williams, the thoughtful, courteous and successful champion of small caps both here and in the UK.
Mr Williams is undoubtedly one of the most astute observers of the Irish scene and when he speaks about Ireland the wise investor listens.
Examples of previous insights include his 2006 statement in this newspaper that he would no longer invest in Anglo Irish Bank because the share price no longer made sense, and his statement in May of last year that he had begun buying Irish banks as falling stock prices made them a bargain.
He also tipped Smurfit Kappa as his biggest holding. There can be few readers who do not wish they had acted on those three pieces of advice.
This week, the 51-year-old investor told the 'Investors Chronicle' in a thought-provoking interview that he remains positive about the opportunities here despite last year's gains which pushed his Gartmore Irish Growth Fund up by 60pc. "Ireland got absolutely stuffed rigid. But they have done something about it," he told 'Investors Chronicle'.
"I'm quite excited, the weakening euro will give the Irish economy a chance to pick up."
Warming to his theme, he added that share prices here have been crucified but Ireland is "pregnant with gain" and his fund is geared at the moment. Turning to the UK market where he specialises in buying shares in small companies for Gartmore's UK and Irish Smaller Companies fund, Mr Williams says "obscene amounts of money" will be made from British small caps over the next five years.
The fund manager admits that small caps have underperformed the market over the past 20 years but says they have outperformed the market over the past half century, something he terms an "inconvenient reality" which is about to reassert itself.
Mr Williams basic belief is simple: large companies usually grow at little more than a small premium to the economy while only their smaller rivals have an opportunity to really outperform the average.
He also likes the fact that many small caps have large cash piles which enables them to raise capital and offers the chance of very high returns on profits.
"It's so embarrassing for some people to have AIM companies in their portfolios, but that is where all the money is going to be made.
"This will bring capital down; as small-cap outperforms, then people will want to re-allocate their assets."
Mr Williams is not a fan of sectors or economic trends. The 200 or so stocks which he and a team of five other analysts evaluate are picked on their own merits.
The trained engineer isn't a fan of China incidentally. "It's just too sexy for us; we like to get under the rocks.
"There is enough risk around, we don't need to be that risky," is how he delicately puts it.