September Commentary - Lowland Investment Company



​September was a good month for the Trust; the net asset value rose 0.6% on a total return basis (with debt at fair value). This compares to the FTSE All-Share which fell 0.4%. The upward movement in bond yields was a positive for returns as it meant our £30mn private placement was revalued downwards.

The largest (active) positive contributor to returns was textile rental company Johnson Service Group. The management team here have done an excellent job of integrating small acquisitions while continuing to grow margins and achieve a good level of organic growth.

The largest detractor from performance was Carclo, which makes LED lighting for premium cars as well as specialist plastic components for medical devices. This reported weak first half results from its plastics business as a result of some deferred orders from customers. While this is disappointing we have maintained the holding as we think Carclo has good potential to grow earnings over the long term, which is not fully reflected in its valuation.
During the month we continued to gently reduce gearing, which currently stands at approximately 6% net assets. We are finding that valuations in the UK market are becoming increasingly polarised. Good quality companies with strong management teams and earnings upgrades are trading on what are historically high earnings multiples, while those companies that look optically more attractively valued are tending to be of lower quality and often have little potential to grow earnings. We do not want to lower the average quality of the portfolio. Therefore where we are reducing holdings (such as Hill & Smith and Conviviality) we are tending not to rotate into new holdings but rather choosing to reduce gearing. 

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 is not a guide to future performance. 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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Lowland Investment Company plc

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.

Past performance is not a guide to future performance. 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.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which investment products and services are provided by Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), 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 Henderson Management S.A. (reg no. B22848 at 2 Rue de Bitbourg, L-1273, Luxembourg and regulated by the Commission de Surveillance du Secteur Financier). We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Specific risks

  • Active management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • This trust 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 trust.
  • The trust could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the trust.
  • If a trust's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio diversified across more countries.
  • The return on your investment is directly related to the prevailing market price of the trust’s shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the trust. As a result losses (or gains) may be higher or lower than those of the trust’s assets.
  • 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 trust may use gearing as part of its investment strategy. If the trust utilises its ability to gear, the profits and losses incured by the trust can be greater than those of a trust that does not use gearing.
  • 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.

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