This is a profile on Tom Dobell who is effectively our largest shareholder as he manages the M&G fund. It inspires confidence that he will never behave like Graham French who was responsible for destroying our share price when he sold indiscriminately and wouldn't communicate such that a placement could be made.
he likes long-term oilers !!!
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Tom Dobell, who has managed M&G Recovery for the past 13 years, urges patience. He is the epitome of the long-term investor who barely looks at quarterly company results and despairs at the short-termism that afflicts the stock market. He typically holds on to investments for six years – an eternity compared to the hyperactive trading which has driven the average holding time of a Wall Street stock to 22 seconds, and not much longer in London. On the day we speak, one of his long-term holdings has come up trumps. Dobell is the biggest single shareholder in British engineering group Invensys, owning 9% of its stock, and it has received a £3.4bn bid from French rival Schneider Electric. Ten years ago, the group was in crisis, with mounting debts and losses. But over the past year Invensys's share price has nearly doubled, with first Siemens buying its rail signalling business and then the Schneider bid. EasyJet has been another big success. Dobell owns 5% of the company, and at times has been the arbitrator in the bitter battles between the firm's combative founder Stelios Haji-Ioannou, who still has 37% of the stock, and the board of the company. Haji-Ioannou felt easyJet was splashing out too much on planes and not enough in dividends for shareholders – and Dobell was sympathetic: "Stelios is very capable and astute, but has found it hard to let go … I had a number of meetings with [easyJet chief executive] Carolyn McCall in which we made it clear we felt Stelios was justified. It took about six months, but we saw how she dealt with easyJet's liability issues, operating performance and cash flow. She scaled down the rate of fleet growth and paid a special dividend. EasyJet was making a 10p per seat profit, now it is making £5 a seat in profit." EasyJet's shares have taken off since Dobell bought into the airline in 2010, leaping from about 450p to 1,400p this week, and he reckons they remain a good stock to hold. But this has failed to offset what Dobell calls "a number of self-inflicted stock selection setbacks" elsewhere. His biggest headache is the £450m of BP shares, the fund's biggest holding, which have gone nowhere for years. The 2010 Deepwater Horizon oil spill in the Gulf of Mexico has cost BP an astonishing £27.7bn – a bill that keeps rising. BP shares have traded at 400p-450p for the past two years, still markedly below the 640p before the disaster struck. "It has been a troublesome investment due to the brutal US 'justice' system, where the company has been abused by politicians, lawyers, the press and the competition," Dobell says. "BP has tried to do the right thing cleaning up the mess and paying damages, but they have been systematically humiliated." So why has he held on so long? "We are not very good quitters; we are long-term investors. Having taken its medicine, we feel BP has an outstanding, almost impregnable, position in the oil fields of the Gulf of Mexico." Dobell says the market has been unkind to the sorts of companies he holds. During the prolonged economic crisis investors have wanted companies with certainty and security, rather than those which have fallen on hard times but are likely to recover. "During a long period of sluggish growth, the sort of companies I invest in have been even less desirable than normal," he admits. Mergers and acquisitions, which have traditionally favoured recovering companies, have also been largely absent in the past few years. In an interview last year, when performance issues on the fund were already apparent, Dobell asked investors for patience. Since then the fund has lagged again, giving investors a return of 14% compared to the 25% gain for the average UK fund, and 65% at the best, run by Standard Life. A year on he is still asking for patience. How much longer should investors wait? Dobell says he "profoundly and emphatically" believes his stocks represent good long-term value. "A number of factors have contributed to making this a pretty challenging time, although I am not asking people to be sympathetic. We have a clear and understood set of investment principles, which I agree are going through a tough time. Since I have managed the fund we have had 11 years of good performance and two-and-a-half years of underperformance. We have been going through a period of extreme adjustment, both in the market and in the economy. So after 44 years do we throw out the strategy and become momentum-led? No. We will stick this out until we have to." The average investor in M&G Recovery holds the fund for 17 years, Dobell says, and over any long-term period have done well out of the fund, although he insists he is not complacent. Top advisers polled by Money (see below) reckon investors should hold on, and some say that after the prolonged underperformance now is actually a good time to buy in. Others, however, are less sanguine: earlier this year Jupiter's highly respected fund-of-funds team dumped its holding in M&G, concerned about Dobell's big weighting to oil and gas companies. Apart from BP, Dobell has held on to Tullow Oil, which has fallen from a peak of 1,550p in February 2012 to 1,040p this week, and Gulf Keystone, down from around 230p to 170p over the past year. Unlike other big investors who rarely get directly involved in a company, Dobell has had a very public spat with the board of Gulf Keystone. He was angered by the chief executive's £23m pay package over the previous two years, despite missing targets and making losses. "The company was being run for the benefit of its directors rather than its shareholders," he says. He was instrumental in placing four new directors on to the board. "It has taken up a lot of my time, but I'm very pleased we have sorted out a lot of the corporate governance issues." But if he is a battler against rewards for failure, what about his own? After two years of disappointing returns surely he won't be receiving one? "I have been paid a bonus, but it was based on prior performance and has a lot of deferred elements. My bonus will be pretty thin to non-existent if performance doesn't come through."
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