monthly manager commentary
The Fund recorded a modest negative return in February, albeit outperforming its IA UK All Companies benchmark, as markets responded adversely to uncertainty over the scale of the anticipated Fed tightening and then latterly over fears of increased US protectionism. There were no stand-out underperformers in the Fund, which saw gentle price attrition over a wide number of holdings over the month. Our best performer was Maintel, the telephone service provider, which rebounded strongly when it indicated that it was starting to recover from the delay in customer orders that it had experienced in 2017.
We exited two holdings in February, selling out of Gamma Communications on valuation grounds after a strong run and exiting Gordon Dadds, a corporate legal practice, when it became evident to us that its working capital requirements were more onerous than we’d understood at the time of investment, to the extent that it wasn’t likely to meet our financial screening criteria. We bought back into Renew, the provider of multidisciplinary engineering services to the Energy, Environment and Infrastructure markets. Their focus on critical infrastructure with high levels of regulation is attractive to the fund as it creates good revenue visibility, with lower contract risk than a typical contractor. Renew’s share price had been weak due to general concern about contractors after the issues at Carillion, but Renew is well placed for increased spending on rail maintenance and nuclear decommissioning. We also took small positions in two biotechnology companies which both have quite binary market opportunities. Oxford BioDynamics’ proprietary EpiSwitch platform helps pharmaceutical companies identify which patients are most likely to respond to new therapies under development, reducing both money wasted on ineffective treatments and the risks of failure in drugs trials. Faron Pharmaceutical’s lead product Traumakine is an orphan drug in Phase 3 trials for the treatment of Acute Respiratory Distress Syndrome, which has greater than 400/- cases in Europe and USA per annum with a mortality rate of more than 30% and for which there is no approved medical treatment.
Markets started off the New Year strongly but this early enthusiasm petered out towards the end of the month as investors started to focus on the implications for strong global economic growth on inflation and interest rates to the extent that, at the time of writing, we have seen a sharp sell-off in the market followed by heightened levels of vola[…]
Equity markets ended 2017 on a positive note as sentiment shifted to resource stocks favouring the large caps segment over mid and small caps where the Fund invests. Notwithstanding this the Fund marginally outperformed its IA UK All Companies benchmark in December. Not for the first time in 2017 the main contributor to the Fund’s performance in th[…]
November was a busy month from a macro perspective, with the Chancellor delivering his budget and the first base rate rise since July 2007. Whilst the impact of these two events was limited (as they were largely priced in to market expectations), they contributed to what is a broadly supportive economic environment. Business sentiment is positive a[…]
The Fund enjoyed a satisfactory October, modestly outperforming its IA UK All Companies benchmark in a moderately rising market. Bottom-up corporate newsflow was generally supportive. Immupharma was our best performing stock, returning over 50%, as its critical Phase 3 Lupuzor trial continued to progress without incident. Dotdigital was very firm o[…]
As the headlines continue to be dominated by fears of a slowing economy and the uncertainty surrounding the Brexit negotiations, the reassuring news is that the companies that we invest in generally continue to meet, or beat, expectations. After the busy results season it appears that earnings upgrades continue to marginally outnumber downgrades an[…]
Up until this summer, we have seen a one way trade post BREXIT out of UK cyclicals into overseas earners. This was initially driven by Sterling’s devaluation and has been fuelled this year by commentary on a deteriorating UK macro outlook, when compared to a relatively strong US economy and a broadly based recovery in the Eurozone. This trade has n[…]
The Fund’s strong relative performance last month was helped by positive trading news from companies across a broad spread of sectors so, whilst the background economic commentary has become increasingly negative post BREXIT and management commentary is appropriately cautious, bottom-up numbers have for the most part been quite supportive of market[…]
A month on from the election and, despite the Tories and the DUP finally reaching some form of agreement, political uncertainty still persists and Brexit looks like becoming a ‘legislative battleground’. This all serves to undermine business optimism and consumer confidence in the short term and we have tangible evidence of this with the warning fr[…]
Regular and unexpected election results seem to be the new norm for the UK. This time the market seems to have taken the poor showing by the Conservative Party in its stride as investors have focused on the economic implications of a softer BREXIT, whatever that may entail, rather than worrying about the new found electability of a Labour Party tha[…]