I’m a fund manager: Why Migo’s Charlotte Cuthbertson is backing a uranium miner and won’t touch bitcoin

Deciding on where to put your money at the moment isn’t easy.

The stock market is erratic, property prices have fallen in many areas and inflation has decimated people’s savings for more than two years.

You might think those in the investment management industry have a better understanding of how to thrive under current circumstances.

Each month, This is Money is putting a senior fund or investment manager to task with a number of questions that’ll require them to go out on a limb.

We want to know where they’d invest for the next 10 years and what they would avoid. 

We will quiz our willing professional investors on the future of inflation, interest rates and the property market.

In the hot seat: Each month, we put a fund manager to task with a number of tough questions

Among other things, we will ask them for their views on gold, Tesla and bitcoin.

This week, we spoke to Charlotte Cuthbertson, co-manager of Migo Opportunities Trust.

Migo Opportunities Trust invests in discount opportunities in the closed-ended sector where the managers believe there is a catalyst to extract the value. 

The trust is able to invest in any geography or asset class providing it is held in an investment trust structure. 

1. If you could invest in only one company for the next 10 years, what would it be? 

Charlotte Cuthbertson replies: Bank of Georgia. We hold Georgia Capital (CGEO), an investment trust which has a large holding in the bank.

Georgia’s economy is in a sweet spot, benefitting from a growing middle class and increasing wealth, which allows the population to starting buying goods and services such as private health, car insurance and private education, thereby boosting the economy and creating a virtuous circle. 

This growth phase may remain in place for many years. Bank of Georgia is a huge beneficiary of this and comes with none of the legacy banking issues we see in many of our big Western banks.

Georgia on My Mind: Georgia’s economy is in a sweet spot, benefitting from a growing middle class and increasing wealth, according to Charlotte Cuthbertson

2. What about for the next 12 months? 

The aftermath of the Fukushima disaster in 2011 saw uranium prices plummet and a pullback in new mine development. 

However, the global push to cut carbon emissions has since revived interest in nuclear power and we are reaching a point where uranium production now can’t keep up with demand.

This has been exacerbated by energy security concerns given Russia’s and Kazakhstan’s roles in the supply chain, and turmoil in Niger, one of the other significant producing countries, is disrupting supplies of uranium to the French power industry. 

Due to these factors, the uranium price has more than doubled over the past 12 months, and it is widely expected it will be forced even higher as demand outstrips supply. 

We invested some time ago so have benefited from these conditions and taken profits recently, but believe it remains an attractive sector. 

NexGen, a major uranium miner, is well placed to benefit from this trend, especially as they’re one of the lowest cost producers.

High demand: The basic fuel for a nuclear power reactor is uranium – a heavy metal able to release abundant concentrated energy

3. Which sector are you most excited about? 

I’m talking my own book here of course, but it has to be investment trusts, where it’s possible to buy great assets on big discounts. 

Trusts unlock doors to exciting, often-overlooked asset classes like shipping, aircraft leasing, and infrastructure – areas practically off-limits to most open-ended funds and individual investors. Many of these themes benefit from long-term structural tailwinds.

Discounts have already started narrowing since their peak in 2023. We expect this trend to continue, fuelled by anticipated interest rate cuts and the increasing presence of activist investors, such as Saba Capital, putting pressure on boards to take action to bridge the valuation gap.

We firmly believe that investors will look back at the sector today and reflect that it represented a golden opportunity to buy discounted investment trusts. 

Of course, while our excitement is undeniable, there’s always a lot of late-night analysis and legwork meeting companies before we take an investment decision.

Charlotte Cuthbertson, co-manager of MIGO Opportunities Trust thinks valuations on large cap US tech stocks are high

4. What sector would you be avoiding? 

Valuations on large cap US tech feel very full to me. 

Maybe it is wishful thinking, but I’d like to hope there is more to markets than simply buying into the likes of Microsoft and Nvidia.

5. Which country offers the best value for investors?

Clearly the UK is very undervalued in comparison to its developed market peers. 

Should the constant selling from institutional investors abate we could see some great performance from the UK stock market. 

We’ve already seen a lot of M&A this past year where private equity buyers have begun catching on to how lowly-rated these companies are.

6. Should investors target growth or value stocks? 

I think there is always an argument for not being too far one way or the other. 

Great companies can be either value or growth, and it was clear in 2022-23 many people’s portfolios were too far in one direction.

7. Tesla – will it ultimately be boom or bust? 

It’s unlikely that Tesla would ever be part of our portfolio as we focus on out-of-favour investments with a catalyst for improvement. 

Tesla seems to remain very much in favour, and there is no doubt it will remain a dominant player in the electric vehicles market going forward, but that doesn’t mean it should be valued as if it’s the only player in town. 

I can’t see why other car companies can’t be just as competitive with their EV offerings. 

The situation reminds me of the Indian Nifty 50 Index where it took stocks a generation to actually grow into their valuations.

Over-hyped? Cuthbertson expects Tesla to remain a dominant player in the electric vehicles market going forward, but says it shouldn’t be ‘valued as if it’s the only player in town’

8. Scottish Mortgage – would you buy, hold, or sell? 

I don’t agree that Scottish Mortgage has necessarily been unreliable. It has done exactly what the manager told you it would do – invest in growth companies with a big portion in unlisted. 

All that happened is the wider macro and market dynamics changed and its investment style became no longer in favour. 

This happens to all asset classes at different times. We’ve put a small toehold into Schiehallion (MNTN) which is a Baillie Gifford trust with a similar growth-focused mandate, but exclusively invested in private companies.

9. Is property market ‘safe as houses’ or due a crash? 

The trend is for houses to be converted into flats to meet demand. In terms of residential, ultimately there is not enough supply in the UK for everyone who wants a house – and certainly not an affordable one. 

It’s supply and demand dynamics. There are some areas of property which will do very well but areas, like offices for example may continue to struggle. 

The wider macro and market dynamics have changed, making Scottish Mortgage’s investment style become no longer in favour says Charlotte Cuthbertson

10. Gold – should this form a part of everyone’s portfolio and why?

Gold is a very decent hedge. I don’t have a particularly strong view, but we’ve seen a lot of money printing over the past decade and, because gold has an intrinsic value, it could come in useful if the Government or Bank of England ever lost control of money supply and inflation.

11. What about bitcoin? 

Never invest in something you don’t understand. That is firmly in this camp for me. I can’t work out how to calculate the intrinsic value of a bitcoin so will be steering clear.

12. Do you think Brexit has cost the average UK investor? 

It’s difficult to deny that the UK stock market has been in the doldrums since 2016, but it is too early to quantify any long-term Brexit benefits. 

Markets hate uncertainty and realistically that is what Brexit has looked like for many years, which undermined confidence.

13. Will interest rates return to rock bottom again? 

I think the era of incredibly low interest rates is over. Most Governments, economies and individuals have too much debt for interest rates to rise above recent highs without it undermining the entire financial system – but the likelihood of zero or negative rates returning is unlikely.

Supply and demand dynamics: There are some areas of property which will do very well but areas, like offices for example, may continue to struggle, according to Charlotte Cuthbertson

14. Do you think inflation is here to stay? 

Geopolitical risks are often inflationary, and I believe we are moving into a world that is much more volatile and uncertain than the one we have had for the past two decades. 

Two percent inflation is an arbitrary figure which doesn’t necessarily create the best-performing economies. 

As I mentioned above, inflation at slightly higher rates than we’ve seen will help the debt problem over the longer term as that debt is inflated away.

15. Has the Bank of England done a good job?

Everyone thinks they would have done a better job of being the governor of the Bank of England. 

But then I also shout at rugby players in the Six Nations when they miss a tackle or drop the ball, as if I could have done any better. 

In hindsight, the Monetary Policy Committee seemed slow on the uptake in terms of the stickiness of inflation, but they certainly weren’t the only ones. 

Going forward, it will be important to cut rates when inflation eases, navigating cooling with overheating the economy, especially ahead of the more uncertain environment that comes ahead of any general election.

16. You inherit £100k tomorrow. What would you do with the money? 

I’m saving to move up to a house rather than a flat, so I would add it to that pot. 

My savings are currently 60 per cent invested in various markets and some cash earning interest, which suits my risk appetite and investment time horizon.

This post first appeared on Dailymail.co.uk