Shares to buy, hold or sell: Standard Life's Harry Nimmo

Harry Nimmo, manager of Standard Life UK Smaller Companies trust, talks to David Brenchley about the stocks he has been buying, holding and selling recently.

Star fund manager Harry Nimmo has been at Standard Life Investments for 32 years. He has headed the firm's smaller companies team since 1993 and managed the £270 million UK Smaller Companies trust (and its open-ended sibling) since Standard Life won the mandate to manage it in 2003.

Buy: Hilton Food Group

In 2015, the investment "matrix" used by Nimmo steered the trust towards more UK-oriented businesses and away from oil and gas companies and mining firms. Over the course of the year, the process was successful - last year was one of the trust's better years.

However, that focus caused Nimmo's trust to underperform the benchmark slightly in 2016. The matrix is now pointing him away from UK-focused firms and towards those with strong international earnings.

This has led Nimmo to start building a stake in meat-packer Hilton Food, which he bought for the first time in July 2016 at 579p. The share price has edged up since to 590p today.

Hilton has gone from providing around 30% of Tesco's meat requirement to about 70%It's a highly focused and very international business, says Nimmo. The firm derives just over a quarter of its revenue from the UK, and the rest from Europe and Australia.

Hilton has a very close relationship with its customers, including Tesco in the UK. Nimmo says it came into its own during and after the horse meat scandal of 2013.

He says: "Meat providers came under intense pressure from the supermarket groups to reduce prices, [but] Hilton took the view that it couldn't do this and was very strong on avoiding all bad practices in the industry."

Given the scandal, he believes the firm "has benefited from its high standards on provenance and in working closely with its chosen customers". Hilton has gone from providing around 30% of Tesco's meat requirement to about 70%.

Hold: First Derivatives

Software and services company First Derivatives is another firm with a good matrix score, and Standard Life UK Smaller Companies has held it since November 2014. It is a firm Nimmo knows well, having held it in his open-ended fund for a longer period.

It became a constituent of the closed-ended fund at a price of 1,245p. The price has climbed to 2,160p in the two years since. Nimmo says: "It still has a good matrix score, even though it has done well. We don't have a problem with that. The fact that a share has gone up a lot doesn't mean you should exit the company."

Recent results showed revenue up 34% and the dividend up 20%First Derivatives is another international company - it has operations in Australia, Singapore, Hong Kong and elsewhere.

It has branched out into analysing digital marketing data as well as building applications relating to energy and utilities.

Its "fast data" associate company, Kx, based in the west of the US, has developed applications to analyse share price and volume movements in real time, enabling investment banks, exchanges and regulators to spot unusual activity and either put the brakes on or stop trading activity.

Nimmo says: "The company released results recently, and they were pretty good: revenue was up 34% and the dividend up 20%, and it has been pretty steady like that."

Sell: Computacenter

Computacenter is not a bad company, says Nimmo, but it has "done a job for us" since the trust bought in at just over 100p back in 2009. Nimmo has been selling out over the past year or so at between 720 and 800p, producing a capital gain of up to eight times.

The decision to sell was "a matrix call". The company has businesses in Europe, but these have struggled, so the company is very UK oriented, with "probably more than 90% of profits coming from the UK".

'We held it for a long time and made a lot of money, [but it's] time to move on'Computacenter supplies IT hardware to large organisations, quite often firms with a financial bent.

The original investment case was based around a very robust business model that has served Computacenter well over the past 10 years and includes an emphasis on recurring business on long-term contracts. Nimmo also liked its tendency to pay special dividends.

At its share price peak of more than 800p, though, the firm had grown to a market capitalisation of more than £1 billion, which Nimmo says is "very much the bigger end of our area, so really, a poor matrix score". He adds: "We held it for a long time and made a lot of money, [but it's] time to move on from that one."

This article was originally published by our sister magazine Money Observer here

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.