Mundy: Why I like stocks that are slashing dividends

Investec's Alastair Mundy has said investor irrationality is helping his investment process but has warned on corporate profitability.

Mundy, who manages Investec's £1.9bn Cautious Managed fund, said panic selling as a result of macro fears and the prospect of dividend cuts is helpful to his £450m Special Situations portfolio, which targets companies which have seen their value fall 50% relative to the market. "We like to invest in companies that are cutting or even omitting dividends. That generates another level of irrational investors, perhaps income investors who are forced to sell, for example", the manager said. "Short-term volatility is of no great consequence to returns. If anything it is a positive because i...