Fund Manager December commentary – Lowland Investment Company
2 minute read
It was a good month for the Trust following the general election result and continued recovery in Sterling. The strongest performance, predominantly, came from companies positively exposed to the domestic economy including Bolton-based corporate finance company K3 Capital, Severn Trent (no longer at risk of being nationalised), bowling operator Ten Entertainment and flooring distributor Headlam. Our trading activity following the election result was fairly muted, however where we did add to positions it tended to be in the smaller company area (such as Palace Capital and Shoe Zone), where shares remain on low valuations and did not react materially to the result.
As at the end of December the portfolio was on an average forward P/E of 12.5x. Therefore while 2019 was a good year for UK equities, in our view the portfolio valuation remains modest. In an environment that is scarce for income, the 4.4% average forward dividend yield of the portfolio also remains high (for example versus what you can receive in an average UK bank account!). We will therefore continue to deploy a moderate level of gearing.
Glossary
Gearing: A measure of a company’s leverage that shows how far its operations are funded by lenders versus shareholders.
Price to earnings (P/E) ratio: A popular ratio used to value a company’s shares. It is calculated by dividing the current share price by its earnings per share. In general, a high P/E ratio indicates that investors expect strong earnings growth in the future, although a (temporary) collapse in earnings can also lead to a high P/E ratio.
Yield: The level of income on a security, typically expressed as a percentage rate.
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. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.
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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Important information
Please read the following important information regarding funds related to this article.
- If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
- Some of the investments in this portfolio are in smaller company shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
- This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
- Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance 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 (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.