Mr Dobell’s scorn is quite different from the populist claptrap produced by politicians almost every day (yes, Vincent, I mean you). During a lost decade in which the FTSE 100 index of Britain’s biggest shares fell by 15pc, M&G Recovery more than doubled investors’ money.
So the opinions of its manager about who is to blame for the mess we are in and the prospects for Britain’s economic recovery – or the risks of a double-dip recession - are better informed than most. He recently celebrated his tenth anniversary at the helm of the flagship fund of M&G - the company that introduced unit trusts to Britain - and emphasises that he buys or shuns individual shares rather than backing an economy.
But this usually quietly-spoken farming man from Somerset is emphatic that the pessimists are wrong and that those who believe them are not only selling Britain short but missing major opportunities to make money.
Speaking before this week’s better-than-expected gross domestic product (GDP) figures eased fears of economic stagnation, he said: “Detractors are ten a penny and, unfortunately, a lot of people see the glass as half empty but I am pretty optimistic and believe there are great opportunities for some British companies.
“We look to identify unloved businesses with honest hard-working managers, good strategies and the cashflow that comes from that. The aim is to buy low, when they are being bashed from pillar to post, and then sell high when they have bounced back.”
A dramatic recent example of the risks and rewards of this strategy is the oil giant BP; now the fund’s biggest single holding. Mr Dobell recalled widespread panic and pessimism when BP’s share price fell by 50pc after the Gulf of Mexico disaster.
He said: “We were already investors, because we believed the company was halfway through its recovery from earlier setbacks, but we doubled our holding during the carnage when we saw some behaviour I absolutely loathe. Politicians, lawyers, hedge fund managers and many elements of the media descended on the company.
“BP took 100pc of the blame when it only owned 65pc of the assets. The management took full responsibility for a horrendous accident in which 11 people died and an environmental tragedy.
“But they got very little sympathy or support from anybody – including, I regret to say, the British Government. I had several meetings with BP’s management and took the opportunity to buy 40m shares at an average price of 363p.”
At the current price of about 426p, that’s a paper profit of nearly ￡25m. Not bad for a few weeks’ work but not relevant either from Mr Dobell’s point of view – or, he believes, many of his investors.
He explained: “M&G’s approach, formulated over 40 years at Recovery, is to take a long-term view and ignore short-term noise in the stock market. It’s a big advantage to have an average holding period of five years, compared to about eight months for the typical investment institution.
“I am not an economist or an accountant; I am a stock-picker. It’s very simple what I do but the power of compound investment is massive and the returns can be huge if you get it right over time.
“Our typical investor has been with M&G for about 17 years. He or she probably does not work in financial services but is doing their best for their family, trying to pay off the mortgage or bullet-proof their pension.
“We are trying to provide a savings platform for them, rather than trying to pretend we can be top of the pile all of the time. People are going to need to save more in the future and, if we do well for the customer, M&G will do well and I will get paid.”
The dangers of excessive debt and the difficult years ahead as Britain recovers from the consumer credit binge are topics on which Mr Dobell is outspoken: “I am not party political but the last administration did a lot of damage. Thank God we were relieved of their stewardship of the economy.
“Unfortunately, we had become complacent that our place in the world was assured. The mistaken idea that rising house prices and hopes of winning the lottery might be a plan for retirement are national characteristics that will have to be amended.
“The truth is we are going to have to work hard and save hard. But it was not UK Plc that went bust; it was the government finances that were in tatters because we were living beyond our means. The man in the street was also being encouraged to borrow too much and it is difficult to see how that could have been sustained.
“Now companies are already adapting more realistic financial strategies for recovery – and many members of the public are doing the same. Britain enjoys many advantages of language, technology and a stable democracy, so we will continue to have a huge amount to offer the world.”
Asked for a specific stock that represents those hopes for the future, he cites Vodafone, the global telecommunications giant which is another of Recovery’s top 10 holdings. Mr Dobell explained: “I didn’t hold any Vodafone when its share price touched ￡4 in March, 2000. Back then, the company represented about 8pc of the market and the pressure to hold some was massive.
“But when the telecommunications, media and technology bubble burst and the shares slipped below ￡1 I began to accumulate. At Vodafone’s current price of 167p, the shares are still well below half their peak value. It’s been quite a slow recovery but I believe there is a good chance that shareholders will benefit as the company participates in the digital age we are already seeing.”
All this is music to my ears, as a humble saver with a Self Invested Personal Pension (SIPP) that contains modest direct holdings of BP, Vodafone and HSBC. I tell Mr Dobell that it’s reassuring for this small investor to see that I have picked up over the years five of his giant fund’s 10 biggest holdings – the other two being GlaxoSmithKline and National Grid.
But, of course, there is much more to Recovery than that. The fund is diversified over 96 shares with a good deal of the outperformance generated at the smaller end of the FTSE All Share index of 700 funds plus some exposure to the corporate minnows of the Alternative Investment Market. Mr Dobell cites a 17-year-long holding in the former tiddler, Tullow Oil, which grew into a Footsie giant. He
invested because of “inspirational management and a terrifically talented team”, rather than rumours about the black stuff, and the stock remains a top 10 holding to this day.
That raises an important point about exposure to international growth opportunities which can be obtained from shrewd selection of shares traded in London. Mr Dobell explained: “In 1969, when Recovery was set up, 5pc of earnings came from overseas and, when I took over in 2000, about 50pc of earnings came from overseas.
“Today, it’s about 75pc to 80pc but that’s not to say British companies have given up investing in the UK. I believe that this country is still a centre of excellence in many industries and we have the advantage of a peaceful, democratic economy with an important element of shareholder power and performance disclosure rules.
“These characteristics give us a terrific role to play in the future of the world. I feel uneasy that it has become a consensus view that emerging markets are the place to look and I am sceptical about the idea that emerging markets are a panacea.
“I profoundly believe that the growth in global population from 5bn to 8bn over the next 25 years will cause great shortages of commodities, such as food and water, and this scarcity might well lead to economic and physical conflict. China’s emergence as an undemocratic superpower with a communist party system is potentially a source of grave concern.”
So, is he betting the farm on British shares bouncing back after a decade in the doldrums? He winces: “We are bottom-up stock-pickers. Betting is for the race course.”
CV
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Family: Married with one son and two daughters.
Education: Writtle Agricultural College, Chelmsford, Essex.
Drives: “A 10-year-old blue jalopy. It’s a Renault Megane, I think. Not really interested in cars.”
Hobbies: Supports Somerset County Cricket Club and farms in Essex.
Favourite film or book: “Pass.”
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