For financial professionals in the UK

Lowland Investment Company Fund Manager Commentary – May 2022

Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

James Henderson

James Henderson

Portfolio Manager

13 Jun 2022
4 minute read

Laura Foll and James Henderson, Portfolio Managers of Lowland Investment Company, deliver an update on the Trust, highlighting the key drivers of performance over the month and recent portfolio activity.

Macro backdrop

We have always had a multi-cap approach to income investing, as this broadens the potential investment universe beyond a relatively select number of large UK company dividend payers. In recent months, this larger than benchmark position in smaller companies has been a headwind to the Trust’s relative performance. The Trust’s net asset value rose in May (0.7%), relative to a 0.7% rise in its FTSE All-Share Index benchmark and a -0.6% fall in its AIC UK Equity Income peer group.¹

Fund performance and activity

Among the largest contributors to performance was Morgan Advanced Materials, which is a top fifteen holding for the Trust and a company we have held for a number of years. It reported strong (11%) organic growth in the first quarter, surpassing its management’s organic growth guidance of 4-7% for the full year -in other words the management team is implicitly assuming a sharp slowdown into the latter half of the year.¹ This conservatism in guidance is a trend we are seeing in a number of our holdings, as management teams seek to ensure (as best they can) that market expectations are suitably conservative in the face of an uncertain economic backdrop.

The largest individual detractor during the month was solid state battery company Ilika. The company reported that end demand for its miniature batteries would be heavily weighted to the medical devices industry, which requires a long lead time because of the necessary trials and regulatory approvals, therefore pushing demand further into the future. On a relative basis, Shell was also among the largest detractors as despite it being the largest position in the Trust, it is now 7.5% of the FTSE All-Share Index and continued to perform well in May as oil prices rose.¹

During the month, we took the opportunity to add to several smaller companies on recent share price weakness, including textile rental company Johnson Services Group, food producer Finsbury Food, and Scottish housebuilder Springfield Properties. These additions were funded largely by the sale of the position in Relx, which was sold for valuation reasons following good performance.


It is undoubtedly a challenging backdrop for equity markets. Higher than expected inflation is causing cost of living pressures while the uncertainty of continued war in European and rising interest rates all mean that segments of the UK market have substantially de-rated this year and sentiment is broadly cautious. Despite this backdrop, we have kept the Trust’s modestly cyclical positioning (the two largest absolute sector positions are industrials and financials). This is because in our view, there is currently a high price for relative ‘certainty’, with some defensive sectors (such as utilities) having performed very well and re-rated to above long-term average valuation levels. From a medium to long-term perspective, sectors such as industrials present the opportunity to invest in what are often market leading engineers with structural growth drivers such as industrial automation.

Screenshot 2022-06-14 at 09.55.35

1 Source: Bloomberg as at 31 May 2022

Glossary Expand

Cyclical -Companies that sell discretionary consumer items, such as cars, or industries highly sensitive to changes in the economy, such as miners. The prices of equities and bonds issued by cyclical companies tend to be strongly affected by ups and downs in the overall economy, when compared to non-cyclical companies.

Income investing -Income investing means selecting investments designed to deliver a steady stream of income over a certain period. It’s a popular way to chase decent returns – and to potentially beat inflation. There are a number of ways to generate income.

Inflation -The rate at which the prices of goods and services are rising in an economy. The CPI and RPI are two common measures. The opposite of deflation.

Valuation metrics -Metrics used to gauge a company’s performance, financial health, and expectations for future earnings eg, price to earnings (P/E) ratio and return on equity (ROE).

Valuation metrics – Metrics used to gauge a company’s performance, financial health, and expectations for future earnings eg, price to earnings (P/E) ratio and return on equity (ROE).

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.


Marketing Communication.






Important information

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 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.