HEAD-TO-HEAD: Janus Henderson versus Threadneedle

123456

Investment approach

The Janus Henderson fund employs a much more blended approach the Threadneedle fund, and lead manager John Bennet buy stocks of various styles, according to Parekh.

Unlike on the Threadneedle fund, which is focused on bottom-up stock picking, Bennet aims to add value through both stock selection and also tilting the portfolio towards sectors that he thinks will outperform, Parekh said.

He pays close attention to global macro and sector trends, as these give him valuable insights into the prospects of European companies.

“Companies that have good or improving profit margins and/ or cash flow return on investment (CFROI) are typical hunting grounds,” said Parekh. “Bennett is willing to buy lower quality names if the company is improving.”

Attractively ranked stocks are subject to the team’s fundamental analysis, which aims to identify businesses with “genuine pricing power, strong cash generation, good management, and compelling valuations”.

The investment horizon is typically 18 to 36 months, as Bennett is conscious that longer time horizons may lead to value traps. He also aims to add value by investing in under-researched opportunities in the mid- and small-cap space where the investment case is not necessarily related to any of the sector themes, according to Parekh. While most investments are in individual stocks, he can take positions in index futures (typically sector-related) to hedge risk over the short term.

The strategy is a little more benchmark aware than the Threadneedle one, with active share usually hovering around 60 and more balanced sector exposures, noted Parekh. Bennett has increased the concentration in the portfolio more recently and is expected to have between 40 and 60 names with a 4-5% maximum individual position size.

The process employed by Benjamin Moore, portfolio manager on Threadneedle European Select Fund, was developed by former long term manager David Dudding, according to Parekh.

“In a nutshell, the process seeks high quality companies that have at least some growth. The manager prefers companies that have a strong competitive advantage and pricing power that can be backed up by a solid balance sheet,” he said.

“Moore looks for firms exhibiting sustainable competitive advantages, which results in a bias toward businesses operating in industries composed of just a few firms with strong pricing power and high barriers to entry.”

He and his team prefer to invest in companies within these industries because of their more predictable revenue streams. Equally, the manager shies away from companies exhibiting high but volatile growth, cyclicality, or value characteristics.

“These qualitative aspects cannot be easily found using screens. As such, no formal screens are used, meaning that stock research can be intensive, which highlights the need for a stable team,” said Parekh.

The manager is happy to hold more defensive, lower growth names, such as Nestlé or L’Oreal. This means that there tends to be an overweight to consumer sectors and technology. On the other hand, sectors such as energy, utilities and real estate have virtually never been held in the portfolio, according to Parekh.

The portfolio is fairly concentrated with only around 40 names in the portfolio and a maximum position size of 5-6%.

Fund characteristics

Sector allocation:

Source: Morningstar, 31 October 2021

Country allocation:

Source: Morningstar, 31 Oct 2021

Top 10 holdings:

Source: Fund factsheets, 31 October 2021

123456