For individual investors in the UK

UK small cap valuations are too good to ignore

Neil Hermon, Portfolio Manager of The Henderson Smaller Companies Investment Trust, discusses the challenges small-and-medium sized businesses are facing, why they are more resilient than some might think, and why the small cap story remains compelling.

Catch up on previous episodes of Trust Radio

Not for onward distribution. 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. 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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. [We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.]

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Henderson Investors International Limited (reg no. 3594615), Janus Henderson Investors UK Limited (reg. no. 906355), Janus Henderson Fund Management UK Limited (reg. no. 2678531), Henderson Equity Partners Limited (reg. no.2606646), (each registered in England and Wales at 201 Bishopsgate, London EC2M 3AE and regulated by the Financial Conduct Authority) and Janus Henderson Investors Europe S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier).

Janus Henderson, Knowledge Shared and Knowledge Labs are trademarks of Janus Henderson Group plc or one of its subsidiaries. © Janus Henderson Group plc


14 Nov 2022

Key takeaways:

  • The perfect storm of the war in Ukraine, China’s zero-covid policy, higher interest rates, and elevated inflation amid a cost-of-living crisis has made it challenging for smaller and medium-sized businesses.
  • We think that corporate fundamentals are intrinsically stronger than they were during the Global Financial Crisis of 2008-2009. In particular, balance sheets are more robust, dividends have been recovering strongly, and we are seeing an increase in buybacks.
  • Valuations among UK smid-cap stocks are the cheapest they have been since the global financial crisis, and for long-term investors, this presents an attractive opportunity from a stock selection perspective.

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.

 

Marketing Communication.

 

Glossary

 

 

 

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 diversified across more countries.
  • Most 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.
  • Derivatives use exposes the Company to risks different from, and potentially greater than, the risks associated with investing directly in securities and may therefore result in additional loss, which could be significantly greater than the cost of the derivative.


14 Nov 2022

Key takeaways:

  • The perfect storm of the war in Ukraine, China’s zero-covid policy, higher interest rates, and elevated inflation amid a cost-of-living crisis has made it challenging for smaller and medium-sized businesses.
  • We think that corporate fundamentals are intrinsically stronger than they were during the Global Financial Crisis of 2008-2009. In particular, balance sheets are more robust, dividends have been recovering strongly, and we are seeing an increase in buybacks.
  • Valuations among UK smid-cap stocks are the cheapest they have been since the global financial crisis, and for long-term investors, this presents an attractive opportunity from a stock selection perspective.