The fund was one of the first funds to be launched when the firm was established. Benchmarked against the MSCI UK Index, it is a portfolio of UK companies with strong structural growth opportunities and attractive cash flows.
The fund:
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Is overseen by a highly experienced team with complementary skillsets
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Focuses on companies with high and sustainable returns on capital with structural growth opportunities
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Is a concentrated portfolio with a long-term time horizon
November 2018 - Latest commentary
November saw equity markets consolidate around the lower levels prevailing post the October sell-off. A moderation in global growth has been discounted, but recessionary risks seem to be contained. UK equities initially warmed to the prospect of a Brexit deal at long last, only to be disappointed by the realisation that it was unlikely to be approved by parliament.
Sector returns have varied widely, albeit mainly for stock specific factors. For example, tobacco was the weakest sector as BAT fell sharply (-19.0%) following news that menthol cigarettes might be banned following an FDA review. In contrast, telecommunications outperformed as Vodafone rallied strongly (+17.5%) following in- line results accompanied by a commitment to pay the dividend. Elsewhere, a further fall in the oil price weighed on the oil & gas sector.
The fund underperformed the market in the month as stock selection detracted. The main holdings contributing negatively were the smaller technology stocks, namely Sophos, First Derivatives and IQE. The latter fell on news of Apple slowing orders from iPhone component suppliers, while Sophos fell on downgrades following results. However, the single largest negative impact came from not holding Vodafone (-40bp), with additional impact from the absence of international stocks such as Diageo and AstraZeneca.
Partially offsetting positive factors were rallies in Micro Focus, Sage, BT, Whitbread and Integrafin. The fund also received a relative benefit by virtue of being underweight in BAT and Royal Dutch Shell.
We introduced a new holding in housebuilder Taylor Wimpey this month to take advantage of recent price weakness inspired by Brexit uncertainty. This was funded by some partial profit taking in BT and by trimming Crest Nicholson. We also sold out of Shire, which will lose its London listing once the Takeda takeover goes through in the New Year. The proceeds were reinvested in GlaxoSmithKline and Unilever.
Brexit uncertainty remains the main obstacle to a sustainable rally in UK equities, which offer excellent value under any scenario barring a chaotic no deal Brexit.
Previous months’ commentaries are contained within the fund factsheets.