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.