For the second part of our annual survey, we asked fund managers if they had changed their view on any stocks this year, for better or for worse, and what lay behind their decisions.

As with the winners and losers survey last week, the answers were often frank and once again we would like to thank everyone who took part.

Thomas Moore - Aberdeen Equity Income Trust (AEI)

THE STOCK THAT I CHANGED MY MIND ON

‘During the year we changed our view on real estate company Assura (AGR) which designs, builds, invests in and manages GP and primary care buildings in the UK.

‘We first bought the company in 2014 and the stock performed very well, so we sold it in 2021. Then the share price collapsed from the end of 2021 to the start of 2023 due to higher interest rates, which had a significant impact on the share price.

‘We bought the stock back last month as it is a steady business with some net asset value (NAV) growth and an attractive 7% dividend yield.’

Stuart Gray - Alliance Trust (ATST)

THE STOCK THAT I CHANGED MY MIND ON

‘In a diversified, high-conviction portfolio there are always going to be changes for different reasons. Some are driven by significant share price gains, such as Black Creek selling Heidelberg Materials.

‘Others can be due to market developments. For example, some stocks were more resilient than expected to a rising interest rate environment such as Walmart (WMT:NYSE) and British American Tobacco (BATS). These companies were sold to make room for more attractive opportunities with higher growth potential, such as Amazon (AMZN:NASDAQ) and Microsoft (MSFT:NASDAQ).’

Julian Bishop - Brunner Investment Trust (BUT)

THE STOCK THAT I CHANGED MY MIND ON

‘We have reduced our position in Novo Nordisk (NOVO-B:CPH). While the company has demonstrated mastery of a key therapeutic area, we are acutely aware it has become highly reliant on one pharmaceutical molecule (semaglutide, used in its treatments for both diabetes and obesity). Semaglutide enjoys patent protection, but this ends in the early 2030s.

‘On the opposite side we have been adding to our position in ASML (ASML:AMS), the Dutch semiconductor capital equipment company. They make some of the most complex machines on earth used to manufacture very advanced semiconductors. The end market is cyclical and recent sales weakness allowed us to pick up shares in this de-facto monopolist at attractive valuations from a portfolio investment case perspective.’

James Henderson - Henderson Opportunities Trust (HOT), Law Debenture (LWDB) and Lowland (LWI)

THE STOCK THAT I CHANGED MY MIND ON

‘We’re multi-cap investors and have reduced our exposure to some of the more secure, large-cap businesses, which had held up relatively well.

‘That’s meant reducing our holdings in utilities and perfectly good companies like Severn Trent (SVT), to take advantage of the deep discounts we’re seeing in mid-size and smaller companies. We’ve also put on some gearing, which is a sign of our confidence.’

Guy Anderson - Mercantile Investment Trust (MRC)

THE STOCK THAT I CHANGED MY MIND ON

‘While portfolio turnover is relatively low, we continue to evaluate each holding within our investment framework and will recycle capital as needed, as in the case of Spirax-Sarco (SPX).

‘Despite owning the company for many years, we exited our position in the first half of the year following concerns over the growth outlook, particularly in their Watson Marlow division which had benefitted greatly from increased demand during the pandemic.

‘Conversely, we have added several names to the portfolio this year, including airline and packaged holiday provider Jet2 (JET2:AIM) which we believe could be well positioned to benefit from strong consumer demand for holidays and could continue to gain market share due its strong customer proposition.’

Simon Barnard - Smithson Investment Trust (SSON)

THE STOCK THAT I CHANGED MY MIND ON

‘We sold Masimo (MASI:NASDAQ), the US medical device company, after becoming increasingly concerned about the behaviour of management against an activist investor who became involved with the company.

‘We were already worried by the management decision to acquire a company that had very limited overlap with the existing business, but became increasingly so when Masimo issued a profit warning soon after claiming that the business was operating well. We felt we could no longer trust the management team so we exited the position.’

Jamie Ross - Henderson Eurotrust (HNE)

THE STOCK THAT I CHANGED MY MIND ON

‘2023 has been another year where rising rates have negatively impacted the valuation of growth companies. You could argue this is fair, because rising long-term rates should have a negative impact on the valuation of long duration assets.

‘However, changes in market sentiment can create opportunities and we have been focused on finding high-quality growth companies that have been overly punished.

‘We have initiated positions in Swiss testing company SGS (SGSN:SWX) Dutch brewer Heineken (HEIA:AMS) and German sportswear company Puma (PUM:ETR). All three companies meet the quality threshold we look for, have attractive long term growth prospects, and have become too cheap in the current environment.’

Tom O’Hara - Henderson European Focus Trust (HEFT)

THE STOCK THAT I CHANGED MY MIND ON

‘We navigated banks badly earlier in the year by buying into them - unusually for us - right before Silicon Valley Bank’s implosion hit the sector. We thought they’d do very well in a European bull market.

‘We got it wrong and changed our minds, since when we’ve reverted to having no exposure. Net interest margin expansion has peaked, and banks face a future of more regulatory/government constraint and potentially repeated “one off” taxes on profits. Big fiscal deficits increase the risks of governments being greedy with sectors it views as easy targets.’

Richard Penny - Crux UK Smaller Companies Fund (BQV37J7)

THE STOCK THAT I CHANGED MY MIND ON

‘We bought and sold a number of shares for a profit during the year, banking gains of 135% in Inspecs (SPEC:AIM), 90% in Ten Lifestyle (TEG:AIM), 41% in Journeo (JNEO:AIM), and 25% apiece in Cakebox (CBOX:AIM) and On the Beach plc (OTB).

‘However, we also closed some positions at a loss including Seeing Machines (SEE:AIM) and WANdisco (WAND:AIM)’

Charles Montanaro - Montanaro Asset Management and Montanaro UK Smaller Companies Investment Trust (MTU)

THE STOCK THAT I CHANGED MY MIND ON

‘We didn’t change our view so much as change the portfolio strategy, reducing the number of holdings to between 35 and 40 high-conviction investments. We lost three longstanding holdings to bidders - Dechra Pharmaceuticals, Ergomed and Biffa - and there were just two new purchases, LondonMetric (LMP) and Bytes Technology Group (BYIT).

‘Our companies have performed broadly as expected, while share price weakness has allowed us to increase our investment in companies such as Marshalls (MSLH), DiscoverIE (DSCV) and Kainos (KNOS). In addition, a fundraising by XP Power (XPP) to strengthen its balance sheet allowed us to increase our holding.’

George Ensor - River & Mercantile UK Listed Smaller Companies Fund (B1DSZS0)

THE STOCK THAT I CHANGED MY MIND ON

‘It’s more a case of evolution than revolution, but this hopefully provides an insight into our company lifecycle investment approach. We invested in Renold (RNO) successfully as a ‘self-help’ story, but we recently moved the investment case from ‘recovery’ to ‘growth’ - adding to our position along the way - as margins have improved from sub-7% to 12% over the last few years driving a significant improvement in profitability.

‘While we still see scope for further margin improvement, in line with company guidance for mid-teens (percent), the company is now executing an inorganic buy-and-build strategy where it can both acquire cheaply and deliver attractive revenue and cost synergies, and we expect this to be the key driver of shareholder wealth creation going forwards.’

Disclaimer: The editor of this story (Ian Conway) owns shares in British American Tobacco

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