Dating and the humanisation of pets are among the more unusual lockdown-winning themes which have helped the popular Rathbone Global Opportunities (B7FQLN1) shake off volatile markets and significantly outperform its benchmark this year.

Run by Rathbone’s global equity manager James Thomson, the fund has returned 28.6% this year compared to just below 6% for its benchmark MSCI All Country World Index. It has delivered a five-year annualised return of 18.5%, again well ahead of the MSCI ACWI index.

It has ongoing charges of 0.78% and overall we think this would be a good long-term holding for someone looking for exposure to global equities.

WHAT’S DRIVING PERFORMANCE

A considerable amount of its performance this year has been driven by its top holdings, including Amazon which is up over 70% year-to-date as well as PayPal, which has almost doubled, and Adobe, another tech stock having a strong year.

But another holding to have rallied has been its eighth largest holding, Tinder and Match.com owner Match Group.

Shares in the dating company are up significantly this year, and have almost trebled since hitting a low on 20 March, with its subscriber numbers and earnings per share having beaten analyst expectations for the third quarter.

Speaking to Shares, Thomson says Match has been a clear beneficiary of lockdown and calls the company the leader in a ‘winner takes all’ industry.

He explains, ‘This is the way people meet each other now. Around 40% of people meet each other over the internet, up from 3% ten years ago.

‘The pandemic was an interesting exercise in human psychology. When lockdown happened, people thought it was terrible, “I can’t meet anyone, what’s the point of doing it over video”. But then the light bulb switched on and, particularly women, said “this is great, I can have a video call, see what they’re like, what their house or apartment is like, without going out, without wasting my time with creeps or the wrong person”.’

Thomson adds: ‘It’s also a liquidity story. The more successful you are, the more people sign up, and the more people sign up the more others will too as that’s where they’re more likely to find someone. It ends up being a winner takes all industry where the pretenders will struggle.’

BUYING OPPORTUNITY

In the midst of the pandemic-induced selloff earlier this year, which Thomson called the ‘best buying opportunity of my career so far’, he conducted over 100 trades and deployed a net £300 million, selling out of some lockdown losers and adding to the winners, as well as initiating some new positions.

He says, ‘I added to almost everything (in the portfolio) to get that cash invested – my investors wouldn’t forgive me if I didn’t invest it.’

One of the new ideas added this year has been US pet food company Freshpet, another stock which has more than doubled year-to-date, with the firm expected by analysts to grow sales 36% this year and increase earnings per share by a whopping 394%.

Thomson explains: ‘It plays on the growing humanisation of animals, they’re no longer just a pet but part of the family. And near-term the company has also seen a tailwind from increasing pet adoption during the pandemic.’

As well as dating and the personification of pets, the fund is also exposed to some of the more conventional pandemic winners, including two companies set to benefit if and when a coronavirus vaccine is successfully developed and approved – German drug equipment maker Sartorius, and Swiss biotech manufacturer Lonza.

Having bought into Sartorius in 2017, Thomson says its vaccine business was actually the ‘least attractive area of the business’ at the time, and believes the long-term shift away from mass-produced pills towards more tailored medicine is still the main growth driver for the company.

But he says: ‘Covid is the next area of super-normal growth for the company. It is involved in 80% of all the vaccines in development, so when there’s a vaccine that is developed and made available, Sartorius will most likely be involved. It’s a very exciting area of near-term growth for the company.’

While on Lonza, which has partnered with US biotech firm Moderna should the coronavirus vaccine it’s developing be approved, Thomson adds: ‘Biotech companies like Moderna, they don’t make the vaccine themselves, they outsource the manufacturing to companies like Lonza.

‘Lonza also has FDA approval, and when you’ve embedded yourself into the FDA approval process, it’s very hard to dislodge you. It’s a very sticky position – you’ll be their partner for life.’

FOCUS ON UNDER THE RADAR GROWTH FIRMS

Thomson’s style with the fund has been to look for ‘under-the-radar and out of favour’ growth companies, and avoid value and cyclical stocks, meaning he has zero allocation to banks, miners, insurance, utilities or telecom stocks.

The fund has a broad range of investors in different age groups, and Thomson says the typical investor will be someone with a five-year investment horizon who ‘doesn’t mind putting up with inconsistent performance over some of that timeframe’.

He explains, ‘I don’t mean the wheels coming off, but a fund actively managed like mine will have big gaps to the benchmark and that will create lumps in performance.’

Regarding the fund’s portfolio he continues: ‘The fund isn’t right for everyone as there will be times when it underperforms, perhaps spectacularly, when banks and miners and cyclicals bounce back and I won’t be there – that will create inconsistent performance. But over the long-term, if I stick to what I’m good at that will drive better returns.’

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