Troy's Brooke buys into ‘cashflow machine’ Aberdeen

Francis Brooke, manager of the £428m Troy Trojan Income fund, has initiated a position in Aberdeen Asset Management as he believes the company is transforming itself into a “cashflow machine”.

Aberdeen is one of several non-bank financial holdings in Trojan Income, which has returned 29.6% over the five years to 20 January versus an average loss of 0.2% for the IMA UK Equity Income sector, according to Morningstar.

The asset manager paid a final dividend of 9p per share in 2011, a year-on-year increase of 29%. Brooke said: “Aberdeen is very interesting. For a long time it was very acquisitive and issuing a lot of paper, but that period of development has come to an end. It is now maturing into a cashflow machine. That has been reflected in recent price moves.”

The holding accounts for about 1% of the portfolio and, although Brooke added he is unlikely to chase the stock at its current price, he views Aberdeen as one part of a wider exposure to the asset management sector.

He also has positions in Rathbones and Schroders: “I am happy to hold smaller individual amounts; I do look at these companies slightly as a package. Rathbones is very stable and its unit trust business is a pretty small part of what it does. Schroders’ international business has affected its share price performance but it is ultimately a very strong business with, crucially, a strong balance sheet.”

The asset managers form part of an “eclectic mix of high quality specialists” within the financials sector. HSBC is Brooke’s only big bank holding but he also has positions in property company London & Stamford, insurance broker Jardine Lloyd Thompson, and interdealer broker ICAP.

The manager has also been adding to companies including Imperial Tobacco and Scottish & Southern Energy, and has increased his position in gold miner Newmont Mining following its decision to link its dividend policy more closely to the price of the precious metal.

He bought more Tesco in December, prior to the company’s first profit warning for 20 years, and may add more. “For the time being Tesco is going to be an unexciting stock, but it is well supported by a well-covered dividend.”

Brooke is expecting the fund to deliver high single-digit dividend growth this year, but said its 2011 growth may lag the market which “has come from a much lower base”.