Rathbones’ Thomson: Five of the best to buy on a dip

The Manager of the £135m Rathbone Global Opportunities fund, James Thomson, reveals his top five growth stocks to buy when markets fall.

Thomson, one of the top global investors who has returned 21.7% over one year, against a sector benchmark of 13.1%, looks to take advantage of market weaknesses by snapping up undiscovered, under the radar or out of favour growth companies.

He has recently ramped up his cash position, having slashed it from 14% to 2% at the end of April, and is now running around 10% in the asset class.

Thomson plays to three central themes in his portfolio: internet superstars, addiction, and unloved retail. He generally avoids utilities, banks, pharmaceuticals and the insurance sectors completely. Technology is the only sector Thomson pinpointed as consistently providing winners in terms of finding undervalued, growth names.

Below he highlights a range of stocks that should perform well if markets suffer a sell off.

1.Petrofac: This is an oil services and engineering company that does the majority of its work in the Middle East and Africa. National oil companies are increasingly focusing on developing smaller fields but are reluctant to share the reserves with outsiders. Petrofac can help these companies develop these fields and share in future success without exposing themselves to oil prices or risky exploration.

2.AB Foods: AB Foods owns value retailer Primark, still one of the fastest growing high street franchises, and it is proving very popular in Europe. A confluence of high cotton prices, weak consumer spending and poor weather, which affects their sugar business, gives the bears ammunition, but these headwinds will fade away in the year ahead.

3.Swedish Match: The company sells a popular form of chewing tobacco known as ‘snus', which more than 20% of Swedish men use it on a daily basis. The company recently launched a range of individually foil-fresh wrapped and sweet cigars in the United States, which has been a huge success. Defensive earnings streams with innovation and adaptability are providing exciting growth potential.

4.Sky Deutschland: This pay-TV service in Germany is very similar to Sky in the UK. High definition channels and exclusive rights to the Bundesliga (until 2012) have encouraged German consumers, who are historically reluctant to pay for TV, to take up contracts. Years of heavy investment and management mistakes are now behind them, and if they can repeat even a fraction of the success of its sister company in the UK, the sky's the limit.

5.Noble Group: A mini Glencore, providing a wide range of commodities and raw materials to China and emerging markets. The company hedges a significant portion of its exposure to commodity prices and thus provides a more protected way of playing emerging market commodity demand. China's sovereign wealth fund bought a significant shareholding in the company and could be a source of co-investment for future acquisitions.