Bag top returns with CFP SDL UK Buffetology Fund

IC TIP RATING

Tip style: GROWTH

Risk rating: MEDIUM

Timescale: LONG TERM

This fund has outperformed the Investment Association (IA) UK All Companies sector average every calendar year since 2012. And over one, three and five years cumulatively it has beaten its benchmark, the FTSE All-Share Index, with returns of 22.4, 56 and 143.7 per cent.

The fund has a good risk/reward profile and a high three-year Sharpe ratio of 1.38. The Sharpe ratio measures how much return a fund generates for each amount of risk it takes, with anything above one representing a good score. Data provider FE Trustnet, meanwhile, rates this fund's risk rating as 67, which is significantly lower than the FTSE 100's score of 100.

Castlefield CFP SDL UK Buffettology aims for an annual compounding rate of return superior to the performance of the UK stock market over five to 10 years. Its manager, Keith Ashworth-Lord, seeks to buy "excellent businesses at excellent prices", which meet a variety of criteria.

These companies must, for example, have a business model that is easily understandable, produce transparent financial statements, demonstrate consistent operational performance with relatively predictable earnings, generate high returns on capital employed and be able to convert a high proportion of accounting earnings into free cash.

Mr Ashworth-Lord believes great investment opportunities occur when good companies are surrounded by unusual circumstances that cause their share prices to be under priced, so he will often invest on market dips. He runs a concentrated portfolio of 27 to 35 holdings and looks to keep portfolio turnover down, so trading costs eat less into returns.

Typically, he only sells a stock in three circumstances, as follows:

• If there's been a permanent deterioration of the business, its growth prospects or management;

• If an alternative, better investment proposition has come up but cash is needed to invest in it; and

• If a mistake has been made and the reality of the business is a lot less favourable than originally thought.

Mr Ashworth-Lord has demonstrated sustained stock-picking skill and an ability to beat the market over the long term. According to FE Trustnet data, he delivered a cumulative total return of 138.3 per cent over five years, compared with 60.5 per cent for a composite of his peer group.

"Any investor who believes Warren Buffett's style of investing has the potential to deliver superior returns over time may find this fund worth considering," says Sheridan Admans, investment research manager at The Share Centre. "The manager has over 30 years of equity market experience and is a seasoned practitioner of 'Business Perspective Investing' as championed by Ben Graham and Warren Buffett."

As of 28 February, Castlefield CFP SDL UK Buffettology's top three sector allocations were travel and leisure, financials and support services. But it also had a significant cash weighting of 14.85 per cent. Mr Ashworth-Lord says this is due to strong inflows this year and the takeover of one of the fund's holdings, Lavendon.

The fund has recently made new investments in Revolution Bars (RBG), Craneware (CRW) and Next (NXT), as well as adding to existing holdings to deploy some of this cash.

Castlefield CFP SDL UK Buffettology has a high ongoing charge of 1.53 per cent. However, its consistently high returns mean investors are well compensated for this.

So, if you are looking for strong, reliable growth, Castlefield CFP SDL UK Buffettology Fund's proven investment strategy, good management team and strong consistent returns make it an attractive option. Buy. EA

Source: Morningstar as at 25/04/17, *Sanford DeLand Asset Management. as at 28/02/17

Performance

Source: Morningstar, as at 24/04/17

Top 10 holdings, as at 28/02/2017 (%)

Source: Sanford DeLand Asset Management

Sector breakdown, as at 28/02/2017 (%)

Source: Sanford DeLand Asset Management