Philip Rodrigs is betting on coronavirus beneficiaries to help his Raynar Flagship strategy get off to a flying start, after finding "a lot more high-conviction ideas than I might have reasonably expected".
Rodrigs told Investment Week he had been surprised at some of the low valuations still ascribed to some UK small-cap stocks that were likely to see increased demand from the Covid-19 pandemic, particularly benefiting from an uptick in the number of employees working from home.
The two largest holdings in Raynar Flagship are satellite broadband provider BigBlu Broadband and video conferencing system LoopUp, which accounted for 13.1% of the portfolio as at 30 June.
"By the [strategy's] launch date of 1 June, Covid-19 was not a mystery; it was well known," Rodrigs told Investment Week.
"What was also well known was that homeworking is a massive thing, everyone was experiencing it and logically I would have thought all of the stocks that play into that theme would already have been very strongly re-rated in valuations.
"So I was very pleased that we got to the launch date and there was still very attractive prices on offer for those investments."
Work from home stocks
LoopUp in particular has been an early winner for the strategy, rising from a purchase price of 111p to about 180p today after a series of positive trading statements.
Rodrigs said the firm was "comparable to Zoom", noting LoopUp was well established and well used, particularly within the professional services sector, in both the UK and the US, having "a strong core client base".
"It is clear from trading that they are a direct beneficiary of increased usage due to that increase in home working," Rodrigs explained.
"I have obviously been meeting with management teams virtually, and on many occasions we have been Zooming, but we have also been LoopUping.
"LoopUp is well used in the professional services industry and has been for some period of time because it enjoys a very high quality, low latency international network.
"One key differentiator, of course, is that as of the end of June, Zoom was valued 750 times more than LoopUp."
Another beneficiary from the home-working theme, Rodrigs continued, was BigBlu Broadband, which is the number one re-seller of satellite broadband services across Europe and has a market-leading position in Australia, too.
"Clearly, if you want to LoopUp or to Zoom, you need good connectivity and it is the case that if your residence is not near good-quality broadband, then one of your few alternative options is to use satellite broadband.
"Clearly, people in remote locations are increasing their demand for high-quality broadband and looking at satellite as an option."