June Commentary - Lowland Investment Company

23/07/2018

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​During June, Lowland’s net asset value declined 0.2% on a total return basis (using debt at fair value) and performed in line with the benchmark. Within this, an increase in bond yields meant that Lowland’s private placement note was fair valued downwards. Keeping debt at par, Lowland’s net asset value decreased 0.3%.


The best performer during the month was pharmaceutical company, 4D Pharma. The shares rose after the company announced a clinical collaboration with Merck to investigate the combination of Merck’s cancer drug with 4D’s live biotherapeutic candidate for patients with solid tumours. This partnership is encouraging because it gives credence to 4D’s treatments, given Merck is a large pharmaceutical company that allocates a high proportion of their research and development spend to cancer research. In addition, the company announced that its irritable bowel syndrome drug was shown to be safe and well-tolerated in a recent clinical study. We added to the position following the positive news flow.


The worst performer during the month was specialty chemicals company, Elementis. Investors responded negatively to the company’s intention to acquire Mondo Minerals, a high grade talc miner and producer, at a high valuation. The deal comes in close succession to the last highly valued acquisition by the new CEO and will require a capital raise for funding. The company was previously focussed on generating strong cash flows, thus we are evaluating how management’s acquisitive behaviour may impact our investment thesis.


We are marginal net buyers on weak days of companies where we believe the challenges are well aired and discounted in the share prices. We, therefore, added to our positions in Centrica and Greene King during the month on valuation grounds. In addition, we partook in the IPO of Anexo, a solicitor and non-fault motorist claims manager. Anexo lends customers vehicles while their insurance claims are being processed in exchange for a proportion of their final insurance pay outs. This is particularly useful for individuals that require a vehicle in order to perform their job and who are less likely to have sufficient funds to replace their vehicle without an insurance pay out, such as individuals in the delivery industry. The strong know-how in the business is difficult to replicate. We felt the company was coming to market at a large discount to its intrinsic value.

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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Please read the following important information regarding funds related to this article.

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 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 incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. 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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