For financial professionals in the UK

Fund Manager December Commentary – Lowland Investment Company

Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

15 Jan 2021
2 minute read

December was a strong month for the UK equity market following the approval of the Pfizer Covid-19 vaccine and beginnings of the UK vaccination programme. This positive news on the vaccine offset a more difficult short-term backdrop with many UK businesses again forcibly closed in order to curtail the spread of the virus.

Within the portfolio the largest contributor to performance was Ilika, which designs and produces solid state batteries for a wide range of potential end markets including domestic appliances, medical and automotive. Ilika had no material news during the month, but there is heightened investor interest in alternative energy and the market capitalisation remains low relative to other solid state battery companies. Other strong performers included a number of the industrial holdings including Senior, Morgan Advanced Materials and Redde Northgate (none had material news, the shares continued to recover on the expectation of a cyclical earnings recovery in 2021 and beyond). Among the largest detractors was insurer Hiscox, as the return to UK ‘lockdown’ means that there could be a repeat of the business interruption claims seen in Spring (albeit on a lesser scale as each month ~8% of all policyholders get moved to new terms where losses from Covid-19 are no longer covered).

Transactions during the month were modest, but two new small cap positions were started in Vertu Motors (car dealerships) and Finsbury Food (a supplier baked goods such as cakes for supermarkets and coffee shops). In both cases the valuation is low on a recovered earnings basis compared to where they have historically traded, and they have experienced management teams.

The return to lockdown in the UK will mean the earnings recovery for domestic companies exposed to, for example, the hospitality industry is pushed back later into 2021 and onwards. The equity raises many companies undertook in Spring 2020 largely means that those most affected will not require further funding, therefore we are not anticipating widespread balance sheet pressure. The debate will be to what degree the equity market ‘looks through’ a further few months of businesses being in some cases forcibly closed. We are currently reviewing those most affected within the portfolio to determine whether there remains attractive upside despite a more prolonged period of suppressed earnings.


Cyclical earnings: earnings generated from a defensive stock; one that provides a consistent dividend and stable earnings regardless of the state of the overall stock market or economy

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


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Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
  • Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies.
  • This Company is suitable to be used as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incured by the Company can be greater than those of a Company that does not use gearing.