Stock-picking has never gone out of style for Julian McManus, portfolio manager on the Janus Henderson global alpha equity team, even if his preferred investment style is none.
“We want to avoid style bias,” McManus said by correcting for any overt influence of well-known factors such as growth or value on the manager’s concentrated global shares strategies.
“At the end of the day we’re stock-pickers,” he said.
In Wellington last week sounding out local institutional investor appetite for the Janus Henderson style-neutral, compact global equities approach, McManus said the strategy aims to generate outperformance from “idiosyncratic” risks above all.
And the research-heavy process, which leans on a team of 35 specialist analysts based in the Janus Denver headquarters, can scour out-of-the-way places for stocks primed to deliver a target criteria of generating free cash-flow growth that is “underestimated by the market”.
The search, for instance, has seen US-listed iconic pest control business, Rentokil, included in the Janus Global Alpha fund despite some negative “market noise” about the lingering after-effects of its 2022 merger with the equally viscerally branded, Terminix, McManus said.
Rentokil has been discounted by the market despite experiencing the same climate-based tailwinds that have lifted its main rival, Rollins, to new highs.
“Climate change has extended the breeding season for many pests,” McManus said, pushing up demand – and revenue – for the extermination services of Rentokil and its ilk.
But it’s not all about rats and mice. For example, the Janus strategy also taps into the biggest investment theme of the day, artificial intelligence (AI), without taking the direct route through the richly valued ‘magnificent seven’ US companies.
In an article earlier this year, McManus and co-portfolio manager, Christopher O’Malley noted: “… while many investors have turned to the Magnificent Seven for exposure to AI, it is important to remember that this complex technology is dependent on many tools and resources, not all of which are derived in the U.S.
“Furthermore, many of these non-U.S. tech firms now trade at a discount to their Mag 7 peers, given the equity market concentration of 2023.”
Since inception in 2012, the core Janus Henderson Global Alpha Equity fund has returned 12.15 per cent net of fees on an annualised basis (in US dollars) compared to the benchmark MSCI All Country World Index of just under 11 per cent.
The strategy has seen a bumper start to 2024, too, outperforming the index by more than 6.5 per cent net during the first quarter of the year.
As well as the US$3.6 billion Global Alpha Equity vehicle, he oversees three other Janus Henderson international share strategies – with overall assets under management of US$8 billion.
Prior to joining the manager when it was just Janus in 2004 (the group merged with Henderson 13 years later) McManus ran a couple of long-short Japanese equity funds for the Florida-based Everest Capital following a formative six-year stint with Lazard in Tokyo.
“I started with Lazard in post-bubble Japan,” he said. “While the Japanese index has only risen above the bubble highs now, some companies with powerful business models have performed well throughout.”
In a market increasingly dominated by cut-price passive players, McManus said there was still a place for active global equity managers dedicated to their craft – if not fashion.