Fund Manager November 2021 Commentary – The City of London Investment Trust plc
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During November, the UK equity market produced a negative total return of 2.2%, as measured by the FTSE All Share Index1. The rise in Covid-19 cases in Europe and the emergence of the Omicron variant in South Africa weighed on market sentiment. With travel restrictions in prospect, the travel and leisure sector were notably weak. Defensive sectors outperformed, led by telecommunications services and utilities.
A complete sale was made from City of London’s portfolio of Daily Mail and General Trust, which is subject to a takeover bid from the Rothermere family. One-third of the value of the bid is in shares in Cazoo, an online used car dealer, which appeared to us to be vastly overvalued on conventional metrics. An addition was made to City of London’s shareholding in Ibstock, the leading UK brick manufacturer, which should benefit from the robust outlook for housebuilding.
UK GDP growth for 2021 is expected to be above 6%, which would be a record year in the post second world war era. It follows the sharp fall in GDP in 2020 when the pandemic and lockdowns started. While the emergence of a new Covid-19 variant is disappointing, it would appear that society is better able to adapt to the new conditions, especially with the roll out of the vaccination programme. Monetary policy, with rock bottom interest rates, remains stimulatory which should be supportive of dividend paying equities.
1 FTSE All-Share Index, as at 16/12/2021
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