2 growth stocks owned by this Neil Woodford-beating fund

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Neil Woodford is considered to be one of the UK's best fund managers. However, while it is impossible to deny that Woodford's performance is certainly better than most, there are fund managers out there that have chalked up a better performance over the years.

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One such example is the MFM Slater Growth Fund, which has been managed by Mark Slater since March 2005. Over this period, the fund has produced a return of nearly 300% while over the same period funds managed by Woodford have produced a return of around 200%.

Unfortunately, with a minimum initial investment of £5m, the MFM Slater Growth Fund is out of the reach of most investors. But its top holdings are still public. Here are two of the top 10 positions.

In demand

First Derivatives(LSE: FDP) is not a company that features heavily on most investors' radars. The company provides IT services to the financial services industry, a boring but essential line of business. Since the financial crisis, the demand for such services has been growing as regulators clamp down on bad behaviour and companies are forced to find new ways to meet regulatory demands while at the same time keeping costs low.

First Derivatives' profits have surged over the past few years thanks to this trend. For the financial year ending 28 February 2013, the company reported revenue of £57m and a pre-tax profit of £6.2m. For the year ending 28 February 2017, analysts have pencilled-in a pre-tax profit of £18.1m on revenue of £144m, up 191% and 152% respectively over the five-year period. During this time, earnings per share have grown 86% and shareholders have been well rewarded as the shares are up 125% since the beginning of 2014.

City analysts are expecting this growth to continue for the next few years. Earnings per share growth of 10% has been pencilled-in for the fiscal year ending 28 February 2018 and further earnings growth of 8% is expected for the following financial year. Between fiscal year-end 2017 and 2019 pre-tax profit is expected to increase by 23%.

This kind of growth is worth paying for and the market has placed a high multiple on the company's shares as a result. Shares in First Derivatives currently trade at a forward P/E of 47.8 and only yield a paltry 0.7%, which may be too pricey for most investors. Still, if the company can repeat the growth seen in the past few years, over the long term this may be a price worth paying.

Cheap growth

Like First Derivatives, CVS Group(LSE: CVSG) is another company that has achieved outstanding growth over the past few years, which appears to be why MFM's managers like the company.

Between fiscal year-end 30 June 2012 and 30 June 2017, the company is expected to have grown earnings per share by an impressive 167%. Over the same period, pre-tax profit is up by a staggering 771%. Once again, such growth does not come cheap. Shares in CVS are currently trading at a forward P/E ratio of 29.6, falling to 27.2 for 2018.

Nonetheless, with earnings per share growth of 30% projected for the year ending 30 June 2017, the shares appear to be worth paying a premium for.

Small-cap bargain?

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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