Harry Nimmo: Farewell

It is difficult to step away though, as I feel investing is in my blood.

38 years is a long time to be in investing and to be with the same company.

Certainly, much has changed over the period.

When I started, Telex and fax machines were the latest thing, handwritten dealing notes were standard, and the investment department’s one Topic machine provided share prices.

However, a great deal about running successful businesses and investing in them remains the same and will continue to do so.

abrdn set to return to FTSE 100

With smaller companies, I have always taken a ‘bottom up’ approach and we have managed our funds with the same systematic investment process for over 25 years.

The process has proved itself through five market cycles; it is stable, back tested and investors trust it. It is a behavioural finance approach and we use it to stay consistent.

My aim is to get involved with companies when things are growing and improving.

I am big on one-on-one meetings because I want to understand a business and its people.

A company that under-promises and over-delivers tends to outperform. Companies, markets, sectors are all dynamic, changing all the time.

I came into investing after a stint in oil and gas construction in the Middle East.

I had bought some shares, and my father did too.

I have a Geography degree and an MBA, so a grounding in the language of business, investing and accounting.

I have not seen a correlation between successful stock-picking and massive intellect, but you do have to see the wood for the trees.

I joined the investment department of Standard Life, a mutual life assurance company.

An investment subsidiary came next, followed by demutualisation and finally the merger with Aberdeen and the name change to abrdn.

There have been ups and downs over the years.

abrdn’s Harry Nimmo to retire after four decades

The industry has faced many challenges, notably the rise of passive funds and remorseless fee pressure.

However, smaller companies still offer the potential for outsized returns for long-term investors willing to take higher risk.

Passive funds struggle with small caps due to illiquidity, which leaves room for well run, active small cap funds.

Our small cap business now encompasses European, Global and Midcap funds and is a meaningful ‘franchise’ within abrdn.

When I was young investor back in 1986, I was off to Australia, so missed Bill Gates visiting Edinburgh to promote the listing of Microsoft.

As the technology analyst, I told my manager to meet Gates and ‘fill our boots’ with the company.

On my return, I was dismayed to find my manager had not attended the meeting and we had bought nothing!

The price went up 80% on listing and I thought we had missed the boat.

A $300m market capitalisation is now more than $1900bn today.

It is something I have seen many times – the best back-tested factor is earnings forecast revisions.

A company showing earnings upgrade momentum can do so for extended periods.

We get on board and stay on board. Run your winners. And, conversely, cut your losses. We look for the ‘multi-baggers’, the stocks that go up hundreds of percent.

We also like founder-run businesses, as Microsoft was, as they tend to be excellent businesses with strong cultures, market insight and long-term thinking.

Running a business requires constant vigilance as so much can go wrong – liberal accounting, disarray in senior management, competitors, regulation changes, over-leveraged balance sheets, inappropriate acquisitions.

Quality and predictability help to keep the downside at bay.

The last 30 years has been a period of immense transformation.

The internet has changed everything and given smaller companies an advantage as they can adapt and invent new business models.

If you are a success in the UK, you can potentially go global.

Over the years, I have enjoyed and learned from the writings of Edwin Lefevre and Warren Buffet. I also like to read exposés of what went wrong at a company.

There is a wealth of information now available online for investors, but fortunately many are still happy to trust to the knowledge and experience of a thoughtful fund manager.

Harry Nimmo is a fund manager at abrdn