Fisher homes in on M&S
By Ian Fraser
Citywire
January 25th, 2008
Jim Fisher of investment boutique Saracen bought a chunk of shares in struggling Marks & Spencer on the back of a grim trading update from the retail bellwether.
Fisher, who is AAA-rated by Citywire, bought £3 million shares in the firm for his £210 million Saracen Growth (Saracen Growth Alpha Acc) fund.
He made the move shortly after a trading update from M&S on 9 January in which the group said business over the key festive period had been weaker than expected. This was compounded by a 2.2% fall in revenue in third quarter at stores open for at least one year.
The double whammy sparked a 19% dive the stock’s share price to below the 400p level, considerably beneath its peak of 743p on 18 May 2007.
“The market’s reaction to the sales figures was overdone,” said Glasgow-based Fisher, who launched the Saracen Growth Fund in March 1999, which has formerly been Citywire’s top performing fund in the UK All Companies sector but was knocked off its perch after a weaker performance in 2007.
“Everybody is running about like headless chickens and thinking short term. However if you take a six month, one-year, or five-year view, and can look through the current period, M&S shares have got be a buy.”
In the past week M&S shares have climbed 3% to 414p, partly on the back of speculation that retail billionaire Philip Green was again buying into the shares, which was subsequently denied by Green. Fisher said he intends to buy more.
Fisher said: “Following the fall of January 9, the shares were down 45% from that peak. I don’t see how this can be justified long-term; 70% of their stores have been refurbished, they’ve been returning capital to their investors, they’re doing overseas expansion – and this time they’re doing it with less risk.”
Fisher likes the retailer’s decision to go down the franchised route for its current batch of overseas stores – an earlier attempt at overseas expansion that involve managing overseas stores itself proved disastrous.
“At least with this second stab at international expansion, they’re not spending any of their own or shareholders money,” said Fisher.
“In the UK, they own all their own properties with only minimal sale-and-leaseback. They’re going to be throwing off cash. If like-for-like sales are not so good, I believe that is only a short-term problem.”
Given the continuing credit market turmoil and investors’ jitteriness, write-offs in the banking sector and over-borrowing by institutions and private individuals, Fisher acknowledges it is very easy to be pessimistic at the moment.
However, he does not think this is justified unless a full-blown recession is about to unfold – which he does not believe. “It’s easy for people to become overly gloomy in these uncertain and volatile times and that we talk ourselves into a bear market.”
This article was published under the headline ‘The Morning Interview: AAA-rated Fisher homes in on Marks & Spencer’ by Citywire on Friday, January 25th, 2008. To read the unabridged article click here .