Harry Nimmo: how I'm playing the market rally

Harry Nimmo, manager of the Standard Life Investments UK Smaller Companies fund, a pick of Citywire Selection, shares his stock picks.

Slowdown fears disappearing

Standard Life Investments UK Smaller Companies manager Harry Nimmo says that concerns about exposure to cyclical stocks, meaning those whose fortunes are closely tied to moves in the wider the stockmarket, have all but disappeared after the strong rally by global equity markets in recent weeks.

As a long-term growth investor, Nimmo admits that such markets have been more beneficial to value investors, and have meant his fund has lagged the sharp rally, but he is adamant that his long-term growth focus will continue to win out in the end.

‘People worrying about a slowdown have almost gone, and value investors are having a field day but we would rather stick with our long term winners,' Nimmo said. 

'Most of the sharp upward movement has been in the so-called "dash for trash" and we always tend to lag in a sharp recovery, but investors are more forgiving if you underperform in a rampant bull phase.’

Retailers performing

By long-term winners, Nimmo means the likes of online gaming stock Paddy Power (PAP.L), his largest position, and online retailer Asos (ASOS.L).

Nimmo trimmed his holding in Asos back to around 3.5% late last year as it had grown beyond his normal 5% stock limit, but after posting better-than-expected numbers in late January the stock is now almost back to 5% of the fund again.

‘It had been sold off [on slowdown fears] and by mid-December it had fallen to £11.50.[On 2 February] it was trading at £18.41. Another of our favourites, Mulberry (MUL.L), has grown from £14.50 to £18.70,’ he said.

Overall the fund has about 20% in online businesses and a total of around 10% in what Nimmo considers to be 'best of breed' retailers such as soft furnishings supplier Dunelm DNLM.L) and JD Sports (JD.L).

Impressed by Oxford Instruments

Over the past quarter Nimmo has been adding to scientific and electronic instruments supplier Oxford Instruments (OXIG.L) and software security specialist NCC (NCCG.L).

Oxford Instruments is now 2.3% of the fund, while NCC has been increased to 1.7% of the fund, equating to a 10% stake in the company. ‘[Oxford Instruments] has done well selling into China, which is trying to improve its research and development capabilities.’

Nimmo points to a turnaround in the company’s fortunes around five years ago when it brought in a more business-minded chief executive, Jonathan Flint. ‘Up until then it had been boffin-led, but it has now been transformed into a very impressive, much sharper business,’ Nimmo said.