Christopher
Johnson:
You
hold
fossil
fuels
across
the
portfolio,
so
in
the
fund
I
mentioned
and
the
investment
trusts.
And
climate
change
is,
I
would
say,
the
greatest
challenge
of
our
time.
How
do
you
justify
investing
in
oil
and
gas
companies
with
everything
going
on?
Laura
Foll:
Really
good
question.
What
you’ve
always
got
to
bear
in
mind
is
we’re
running
these
funds
through
the
UK
benchmark
and
the
FTSE
All-Share
has
about
11%
in
fossil
fuels.
So,
we,
in
all
of
the
funds
that
I
manage
across
the
four
funds,
are
underweight
fossil
fuels.
So,
we
have
less
in
the
benchmark.
And
so,
the
question
is
why
do
we
have
them
at
all?
So,
we
do
hold
less
than
the
benchmark,
but
why
are
they
there?
It’s
a
case
of
portfolio
balance.
We
hold
–
and
this
is
quite
nuanced,
bear
with
me
–
we
hold
quite
a
lot
in
the
industrial
sector,
again
across
all
the
different
funds.
We
are
overweight
that
industrial
sector.
And
these
are
companies
that
use
a
lot
of
fossil
fuels
and
need
to
use
a
lot
of
fossil
fuels.
They’re
trying
to
move
away
from
it,
but
in
some
cases
they
can’t.
So,
think
huge
furnaces
that
need
to
heat
up
to
1,000
degrees
plus,
and
you
can’t
do
that
at
the
moment
without
using
gas.
And
we
have
a
lot
of
these
companies
in
the
portfolio.
The
oil
and
gas
weighting
is
almost
a
hedge
for
those
industrial
companies.
So,
what
I
mean
by
that
is
you
get
to
a
Ukraine
year
where
suddenly
the
fossil
fuel
price,
oil,
gas
spikes
beyond
what
anyone
thought
would
have
happened.
Those
industrial
companies
had
a
really
tough
time
because
they
are
using
a
lot
of
those
fossil
fuels.
Their
input
costs
suddenly
jump
up
unexpectedly.
You
have
to
have
something
else
elsewhere
in
the
portfolio
that
can
shoulder
some
of
that
and
do
better
in
those
types
of
times.
And
in
2022,
it
was
those
fossil
fuel
companies
that
acted
as
a
balance
for
the
portfolio
and
helped
shoulder
some
of
that
burden.
So,
the
way
I
think
of
it
is
it
is
underweight,
but
we
need
to
have
a
small
position
in
this
area
for
those
years
like
the
Ukraine
year
that
no
one
saw
coming.
If
it
had
been
six
months
before
Ukraine,
no
one
would
have
forecasted
gas
doing
what
it
did
or
oil
doing
what
it
did.
But
in
a
way,
it
was
good
that
we
did
have
those
fossil
fuel
companies.
Because
as
much
as
we
need
to
move
away
from
them
in
these
very
high
temperature
applications
and
in
lots
of
other
applications
as
well,
we’re
not
there
yet.
Those
companies,
those
industrial
manufacturers
aren’t
there.
CJ:
I
also
wanted
to
get
your
perspective
on
GSK.
It’s
another
top
holding
that
is
across
the
portfolios
that
you
run.
Are
you
concerned
about
the
impact
of
the
litigation
against
GSK
over
its
heartburn
drug
Zantac?
LF:
Definitely
the
biggest
overhang
on
the
shares
at
the
moment.
And
the
way
I
think
of
it
is
there’s
litigation
–
there
is
no
way
that
I
can
see
and
go,
well,
the
litigation
cost
is
going
to
be
2.3
billion
and
this
is
what’s
priced
in.
It
always
has
to
be
very
sort
of
fingernail.
But
if
you
look
at
the
way
the
shares
are
trading,
they’re
already
pricing
in
what
looks
like
a
very
substantial
liability.
And
there
will
probably
be
a
liability.
And
as
a
shareholder,
and
particularly
a
shareholder
that
has
a
long
time
horizon
–
so,
I’m
thinking
of
these
shares
five
years
would
be
roughly
my
time
horizon
–
I
can
think
as
a
shareholder,
yes,
there
probably
will
be
a
liability.
It
could
be
a
few
billion,
I
don’t
know.
But
the
GSK
balance
sheet
could
shoulder
that.
The
shares
already
looked
like
they’re
pricing
in
a
few
billion
at
least.
And
moving
away
from
litigation,
they
seem
to
be
making
real
progress
on
their
pipeline.
The
longer-term
question
mark
around
GSK
has
been
they
haven’t
had
as
much
success
as
someone
like
AstraZeneca
in
terms
of
moving
on
their
pipeline.
Astra
has
had
huge
success
with
some
of
its
oncology
products,
and
GSK
has
lagged
in
that.
But
they
are
now
making
progress
with
things
like
an
RSV
vaccine,
their
shingles
vaccine
is
selling
very
well.
So,
they
do
seem
to
be
making
progress.
And
I
think
people
have
almost
forgotten
that
because
they’re
so
focused
about
the
Zantac
liability.
CJ:
I’m
also
interested
in
M&S.
So,
its
share
price
is
currently
rallying.
So,
what
is
driving
its
success
at
the
moment?
What’s
going
on
there?
What’s
the
story?
LF:
It’s
really
a
story
of
management
change.
And
it
began
with
Archie
Norman,
who
is
the
chairman.
He
came
in
a
couple
of
years
ago.
He
brought
with
him
a
new
management
team.
And
M&S
has
been
one
of
these
companies
that’s
had
potential
for
such
a
long
time.
It’s
had
so
many
almost
turnarounds
and
then
it
hasn’t
quite
worked.
And
it’s
kept
a
surprisingly
high
market
share
in
clothing
for
all
this
time.
The
food
business
has
been
running
well
for
quite
a
long
time.
It’s
kept
its
sort
of
slightly
luxury
positioning
in
food.
Lots
of
people
go
there
for
a
bit
of
a
treat
and
might
crave
me
or
whatever
it
is.
But
the
clothing
business
is
the
one
that’s
been
much
more
volatile
in
terms
of
its
delivery.
And
Archie
Norman
comes
in
and
makes
some
changes
that
I
think
to
you
and
me
or
to
most
people
would
seem
completely
logical.
The
things
like
they
had
30
different
pair
–
roughly
30
different
pairs
of
black
men’s
formal
trousers.
So,
you’d
go
in
as
a
customer
and
you’d
just
be
completely
bewildered
by
which
one
am
I
supposed
to
buy?
And
he
went
in,
and
he
reduced
the
SKUs,
the
number
of
items
bought
a
long
way.
So,
they
ordered
deeper,
and
a
smaller
number
of
items
makes
it
clearer
for
the
consumer.
You
get
the
economies
of
scale
in
terms
of
buying,
which
means
that
you
can
reset
the
pricing.
So,
anyone
that’s
gone
into
the
store
–
I
find
this
when
I’m
buying
my
kids’
clothes,
I
get
my
kids’
clothes,
it’s
much
more
competitively
priced
than
it
was,
say
5,
10
years
ago,
you
know,
much,
much
–
to
a
noticeable
degree.
And
they’ve
started
regaining
market
share
because
it’s
a
better
bought
item,
it’s
more
competitively
priced.
So,
they’re
regaining
market
share
on
clothing
and
they’re
also
regaining
market
share
on
food.
They’ve
done
a
similar
thing
in
food
where
they’ve
reset
the
pricing.
But
none
of
it
feels
rocket
science.
It’s
just
about
returning
to
being
a
well-run
retailer
and
you’re
seeing
that
come
through
in
the
numbers
and
in
the
valuation
as
well.
CJ:
I
also
wanted
to
ask
you
about
Shein,
possibly
IPO-ing
on
London
Stock
Exchange.
What
is
your
view
on
that?
Do
you
think
it’s
a
positive?
Do
you
think
it
actually
will
go
through?
There’s
a
lot
of
controversy
around
the
supply
chain
of
Shein.
What’s
your
view
on
this
story
unfolding?
LF:
So,
we’ll
look
at
it
as
an
investment
case.
I
think
my
view
as
someone
who
hasn’t
looked
at
it
in
a
great
deal
of
detail
is
that
the
life
cycle
of
these
online
retailers
is
very
short.
So,
if
we
look
at
things
that
–
we
don’t
own
ASOS
and
we
don’t
own
Boohoo,
but
they
went
through
brief
periods
of
doing
phenomenally
well
and
of
getting
the
attention
of
that
younger
demographic,
but
it
didn’t
last
very
long.
They
went
through
a
very
high
valuation
at
that
point
where
they
were
growing
very
fast,
but
honestly
it
lasted
–
that
good
period
lasted
a
couple
of
years
and
the
shares
have
come
off
a
long
way
from
their
highs
in
both
those
companies.
So,
I
think
valuing
these
very
fast-growth,
newer,
online-only
companies
is
very
challenging
to
know
what
valuation
you
put
on
that
because
the
longevity
of
them
does
not
look
particularly
compelling.
CJ:
Why
do
you
think
that
is?
Is
it
because
maybe
consumers,
they
like
the
Boohoo’s
originally
and
then
they
may
move
back
to
the
Zara’s
and
the
H&M’s
of
the
world
they
maybe
have
a
bit
more
of
affinity
to?
What’s
going
on
there,
you
think?
LF:
It’s
incredibly
competitive.
If
you
think
about
that
younger
demographic,
it
has
to
be
a
very,
very
competitive
price
point.
I
mean,
you
do
see
that
with
Shein,
the
prices
are
very,
very
low.
And
the
challenge
that
I
found
with
those
brands
is
you
need
to
keep
getting
the
younger
audience.
You
don’t
want
your
brand
to
age
with
your
customers.
That
is
to
a
degree
what
happened
with
things
like
ASOS
where
–
I
was
one
of
the
original
young
ASOS
customers
back
in
the
day
and
it
did
slightly
age
with
us,
but
you’ve
got
to
keep
winning
the
next
generation
that’s
now
on
TikTok
or
whatever.
And
that
can
be
quite
a
challenge
to
keep
doing
that
over
and
over.
And
that
demographic
does
get
older,
so
you’ve
got
to
keep
getting
the
young
people.
It
can
be
a
challenge
over
a
long
period
of
time.
CJ:
My
final,
final
question
to
you
is
about
Rolls-Royce.
I
mean,
it’s
one
of
the
stocks
that
has
really
pushed
up
the
FTSE
100.
I
wanted
to
get
your
view
on
what’s
going
on.
Why
is
Rolls-Royce
doing
so
well?
LF:
So,
Rolls
and
M&S
are
actually
similar
in
a
way.
Obviously,
they’re
not
similar
companies.
They’re
completely
different.
But
they’re
similar
in
terms
of
their
turnaround
in
that
I
think
they’re
both
driven
by
management
change
and
both
of
them
have
had
that
potential
for
a
long
time.
So,
Rolls
has
had
a
big
market
share
in
its
wide
body
jets
for
a
very
long
time.
But
the
problem
that
it’s
had
is
historically
it
didn’t
make
much
cash.
So,
people
were
always
saying,
well,
your
earnings
are
this,
but
it’s
not
coming
through
into
cash.
And
part
of
that
is
that
they
weren’t
appropriately
charging.
They
weren’t
particularly
good
at
saying
to
a
customer,
well,
you
know,
the
contractor
says
this,
so
can
you
give
me
this
please?
They
were
slightly
relaxed
on
that.
So,
they’ve
got
better
at
pushing
up
pricing.
And
let’s
be
honest,
there’s
also
an
end
market
tailwind
that
we’re
back
flying
post
COVID.
So,
with
these
turnaround
stories,
it
always
helps
if
you’ve
not
got
the
wind
in
your
face.
If
people
are
out
there
and
they’re
flying
again,
the
flying
hours
go
up.
Rolls
charge
by
flying
hour.
So
that’s
helpful
as
well.
So,
you’ve
got
the
self-help
element
and
then
you’ve
got
the
end
market
element
as
well.
And
it’s
one
of
these
companies
in
the
UK
where
it
is
genuinely
unique
in
what
it’s
doing.
It’s
one
of
the
global
market
leaders
in
engines.
And
unfortunately,
we
don’t
have
that
many
companies
in
the
UK
where
we
can
firmly
say,
this
is
a
global
market
leader.
It’s
got
50%
market
share
globally
in
what
it’s
doing.
So,
I
think
once
people
see
that
the
turnaround
is
happening
and
real,
that
that’s
quite
powerful
because
it’s
got
global
end
markets
that
it’s
serving.
CJ:
This
is
Christopher
Johnson
for
Morningstar
UK.
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