Paul Newman: Mackay makes the most of Watford's home-grown talent

A funny thing happened at Fratton Park on Saturday: Watford lost a match. Malky Mackay's team had not lost away from Vicarage Road for six months until they went to Portsmouth, who recovered from 2-1 down to win 3-2 with two goals in the last 20 minutes.

While Mackay was disappointed to lose his unbeaten record – Queen's Park Rangers are now the only Championship team who have not lost on the road this season – he maintains pride in his young team's achievements. Watford were on the fringes of relegation last season until three wins in their last five matches lifted them to a 16th-place finish. They were favourites for the drop this time but are currently in fifth and have scored more goals (23) than anyone other than QPR and impressed with their enterprising brand of football.

Watford have not looked back since winning the season's curtain-raiser at Carrow Road, spoiling Norwich's celebrations on returning to the Championship. Mackay's men would be even higher up the table but for their wobbles at home where they have won only one of five matches – twice letting victory slip by conceding late goals.

Mackay took charge 16 months ago and has had to work on a tight budget. Loan players were crucial last season but Tom Cleverley (Manchester United), Henri Lansbury (Arsenal) and Heidar Helguson (QPR) have returned to their clubs, leaving the manager to concentrate on the traditional Watford way of developing home-grown talent.

"It's the only way forward at this club," Mackay said. "The fact that we were hours from administration last December meant that there were going to be big financial challenges ahead for us, as there still are. The core of the current group has to come from within.

"The club have invested time and effort in the Harefield Academy, so we have youths coming through there and through our own system. The fact that we are seen as a small community club means that we don't have the finances to go out and bring in experienced Championship players who can hit the ground running.

"If we have youngsters who are coveted by some of the bigger clubs you hope that their parents and advisers will think more about their long-term future, rather than the short-term glitz of having a Premier League tracksuit without playing at first-team level for a number of years. I have 18 and 19-year-olds in my team playing at a very good level of English football. If you do well here then you're going to get a chance at that age."

Ashley Young, who played nearly 100 games for Watford before his big-money move to Aston Villa, proves Mackay's point, while Marvin Sordell is the latest example of the club's emphasis on youth. The 19-year-old striker was given his debut last season but made only six appearances, scoring once, before going on loan to Tranmere. This year he has formed a fruitful partnership with Danny Graham, a shrewd recruit from Carlisle last summer, and has already scored six. With Graham the second top scorer in the division with eight goals, the pair are proving a handful for defences.

Mackay generally welcomes international breaks, despite losing on the resumption this time around. "Three games in a week takes its toll on players and the fact that we have a smallish squad means you appreciate the chance to recover from bumps and bruises," he said. "We need to wrap the players in cotton wool between games and make sure that the first group are fit and ready to play every week. Over last season and this we've planned our time off carefully and it seems to have worked well."

The manager does not read too much into his team's contrasting results at home and away. "We've had some smashing away victories this year but in terms of the actual performances there hasn't been a vast difference," he said. "We've performed pretty well at home as well. It's just that away from home teams have come out and come at us and we've managed to score goals."