July Commentary - Lowland investment Company



​During July, Lowland’s net asset value increased 0.8% on a total return basis (using debt at fair value), underperforming its benchmark which rose 1.3%. 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 increased 0.7%. The increase in the Trust’s exposure to larger companies over the year has marginally increased the overseas earnings of the portfolio. However, we remain heavily exposed to UK domestic earnings, which have been subject to a derating by investors.

The best performer during the month was technical plastics company, Carclo. Consort Medical made an indicative offer to acquire Carclo at a 44% premium to the pre bid share price. The board rejected the approach, viewing it as undervaluing the company’s long term value. The shares reacted positively to the news. We continue to hold the shares because we see real opportunity for value creation once management have addressed the current issues within the company, focusing the business on technical plastics and LED technologies. In addition, the management team has recently been strengthened with hires for the positions of Chairman, Finance Director and a new Non-Executive Director. Takeover activity is marginally helping value oriented investors at a time growth is substantially outperforming.

The worst performer during the month was pharmaceutical company, 4D Pharma. The shares had performed strongly during the month of June after a clinical collaboration with Merck was announced. In the absence of negative news flow, the decline in share price during July appeared to be profit taking by some investors. Babcock, a support services contractor, also underperformed during the period after the company released a disappointing set of results. Going forwards, the bid pipeline appears to be stronger and revenue visibility has improved. We see this as supportive for future growth in the company and continue to hold our position.

We are marginal net buyers on weak days of companies where we believe the challenges are well aired and discounted in the share prices. During the month, we participated in capital raises for Phoenix Group, DS Smith and Ilika, believing the funds will be used to create long term shareholder value. DS Smith, a paper company, is acquiring Europac in a deal that will increase DS Smith’s European footprint and provide cost efficiencies. Phoenix Group, an insurer, is acquiring the Standard Life Aberdeen’s UK and European Life assets at a low valuation. Ilika, a solid state battery company, raised funds to invest into large capacity batteries which have wide applications, including usage in electric vehicles. We sold our holding in Pearson, a publishing company. After a share price move upwards, the current valuation appears to be pricing in a turnaround ahead of any real progress.


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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