the times | Saturday January 1 2022 61
Money
footprint and has expanded into Jor-
dan, Sudan and Nigeria.
Michael O’Brien, the manager of
Fundsmith Emerging Equities Trust,
said: “The group has a strong balance
sheet from which to fund growth and
new branch openings have attractive
payback terms. Returns are helped by
the group concentrating test process-
ing at one ‘megalab’ in Cairo which
produces significant economies of scale
in the testing process. The group
carried out more than 27 million tests in
2020, serving more than seven million
customers. The average revenue per
test is around £5.
“The group’s offer is highly digital-
ised, with customers typically receiving
results on a mobile phone — a key
advantage in a market that is highly
fragmented and underpenetrated.
“The market benefits from a number
of structural growth drivers, rapid
population growth, the increasing
prevalence of lifestyle-related medical
conditions and greater health con-
sciousness.
“The group now provides a home
visit service, which increases conve-Molson Coors
shares have
recovered 40 per centALAMYI
t’s rather a position of privilege,
being able to have regular tête-à-
têtes with the brains behind
some of the most exciting funds
on the market. After talking to
fund managers I frequently find
myself wanting to buy in to the
strategy they have been explaining,
and adding their fund to my wish list.
This list is starting to get rather
long. Yes, putting money into a range
of different funds can help to spread
risk and seek opportunities. That’s
because in owning different asset
classes that behave differently during
the market’s ups and downs, a
portfolio should weather market
downturns better.
But this textbook approach does
make me wonder: what’s the right
number of funds to hold? Owning too
few funds means your money perhaps
isn’t diversified enough. Too many
and your portfolio can mutate into an
unwieldy mess.
Overlapping is an important
consideration when you start
snapping up funds left, right and
centre. If, for example, you invest in
20 funds, you could be holding as
many as 1,000 different stocks, and in
this pool it’s likely you will be
duplicating some of your investments.
You will probably end up with
something akin to an overpriced
tracker. There’s no point paying for
active fund management if you take
this kind of route to investing.
Especially because, after fees, it will
probably underperform.
You may be able to find out how
much overlapping there is in your
portfolio by using a tool on your
platform. At Hargreaves Lansdown
it’s called Portfolio Analysis, and atAJ Bell You Invest it’s called Portfolio
X-Ray. This can help you to analyse
the true contents of your portfolio,
whether it’s 5 or 15 funds.
When it comes to finding that
magic number of funds to hold,
there’s no one-size-fits all figure, it
appears. A rule of thumb is that a
beginner can start with just one fund
with a level of risk that fits their
appetite — maybe a broad global
equity fund or even a multi-asset
fund that invests in equities, bonds
and perhaps property, gold and
commodities.
As you get more experienced and
more comfortable making your own
investment decisions, the number of
funds will grow. Experts at Fidelity
suggest that an experienced investordecarbonisation of the world
economy — the Ninety One Global
Environment, for example. Then
there’s Pictet Water, which I find
interesting. It invests in water supply,
processing services, water technology
and environmental services. Water is
absolutely fundamental to economies.
Agriculture, health, and incomes
depend on it.
This is where it’s easy to get carried
away because some of these funds
have a really interesting backstory.
With a smaller fund count like mine, I
know I need to be careful not to go
overboard on thematic funds that
could then overtake the core ones.
For investors with bigger portfolios
who spot an enticing new fund idea
(or have their attention drawn to it in
this section) there’s always the option
to sell out of any weak links to make
room. The key is to ensure you have a
number of funds that you are
comfortable to — and have the time
to — monitor. It’s important to keep
on top of how the fund is performing:
has the manager changed or has its
strategy changed in any way? Check
that your fund choices give you
enough diversification.
I am sticking to the mantra that
less is more because, frankly, I like to
keep things simple. I’ll pick another
two funds for 2022 and see where that
takes me. Like several I hold online
with (perhaps too many) retailers,
there’s no harm in having a wish list
tucked away for a rainy day.
David Brenchley returns next weekI like to keep it
simple: how many
funds is too many?
with about £100,000 needs between
10 and 15 funds. Others suggest that
you can stretch to 20. Any more and
I suspect a portfolio becomes a little
unmanageable.
My Isa holds a modest six funds.
I started a few years ago with just
one — Terry Smith’s Fundsmith
Equity — and now have most bases
covered, with exposure to UK, global
and emerging markets in all shapes
and sizes — large-cap and smaller
companies. I also hold a responsible
fund because I believe in the power
of sustainable investing.
I’ve spoken to most of the
managers who now hold the key to
my financial future, but not all.
Like many working parents, my
Isa review is probably a little overdue.
But I plan to add more funds soon.
I’d like some thematic funds that
target specific investment ideas.
There are those that back businesses
that are contributing to theFundsmith returns
Source: Chelsea Financial Services201718 19 20 21 22020406080100120140%Holly
Thomas
Get rich slowlyh slowly
nience.The group’s recent results
showed that revenues in the first nine
months of the year rose 126 per cent —
and if the impact of Covid tests is re-
moved, 30 per cent.”Medlive Technology (China)
Share price Up 45 per cent in a yearMedlive Technology is China’s largest
online provider of pharmaceutical
information for doctors. The business
operates on a subscription and “per
click” basis.
“Its business model provides signifi-
cant benefits in terms of time, educa-
tion and clinical outcome to healthcare
professionals,” said Michael O’Brien,
the manager of Fundsmith Emerging
Equities Trust, which holds Medlive.
“Drug companies benefit from lower
marketing costs and greater regulatory
compliance. The group’s strategy
is based on increasing the engagement
with those physicians that use
the service.
“Medlive is well placed to benefit
from both the shift from offline
to online marketing and the underlying
growth of China’s healthcare market.
These include an ageing population,
rising per capita income, growing
healthcare awareness and the increas-
ing prevalence and treatment
of chronic diseases such as heart
disease and diabetes caused by lifestyle
changes.”Armac Locacao
Logistica e Servicos SA (Brazil)
Share price Flat over a yearArmac Locacao Logistica e Servicos SA
provides machinery and equipment
rental and leasing services.
Chris Tennant, a co-portfolio man-
ager for Fidelity Emerging Markets in-
vestment trust, which backs the firm,
said: “Armac benefits from a series of
competitive advantages and operates
in a market which is underpenetrated,
offering great scope for growth over the
long-term.
“While it is the number one player in
the heavy machinery rental market
today, the company’s market share is
only approximately 1 per cent, hence
the scope for significant gains, with
much of the competition operating on a
more fragmented, regional basis.
“Armac also has a winning model of
maintenance needed to keep the
machines running, which is challeng-
ing given the frequency of breakdowns.
Armac achieve a substantially lower
cost of maintenance vs competitors
because it buys spare parts directly
from the spare part producer, versus
competitors buying in the dealership.
“Competitors struggle with barriers
to entry which include the scale of
purchasing and the requirement to
invest in people and training to develop
strong internal mechanic employee
base and to buy spare parts directly.
“A significant portion of Armac’s
revenue comes from longer-term
contracts. The customer base is diversi-
fied across sectors so shorter-term
revenue contracts should not be
hugely cyclical.
“The company has an exceptionally
long growth runway and can continue
to grow at pace.”I have six funds in my
Isa. I am sticking to the
mantra that less is more
large market share. It also owns the
UK brand Carling.
Nick Kirrage, a co-manager of the
Schroder Global Recovery fund,
claimed that, despite the pandemic and
lockdowns hitting sales hard, a longer-
term view is paying off. “Molson Coors
is a classic example of the idea that if
you can look beyond the short-term
noise markets constantly serve, the re-
wards can be vast,” he said.
“Its debt arrangements had been re-
laxed in 2020, and the cocktail of rising
borrowing with a global pandemic
shutting all public places where people
could drink hit shares hard, and they
fell 40 per cent over the pandemic.
“We took a long-term view and saw a
cash-generative business that could
eventually thrive, providing that it was
active in using its cash to improve its
debt position in the short-term. Fast
forward 12 months and this is exactly
what has happened. The balance sheet
is much stronger, paying down its debts
via the free cashflow as well as the pro-
ceeds from some asset sales. Shares are
up 40 per cent from their nadir, and we
feel they have further to go.
“Here we have a market leader with
a loyal customer base, trading on at-
tractive valuation multiples with a
strengthening balance sheet. For us,
like with many of our investments,
balance sheet strength is key, and gives
a beaten-up business the one thing it
needs: time.”
Integrated Diagnostics
Holdings (Egypt)
Share price Up 33 per cent in a year
Integrated Diagnostics Holdings pro-
vides high-quality medical diagnostic
services with its main operations in
Egypt. Providing more than 2,000
types of tests in more than 400
branches, it is developing a regional