August Commentary - Lowland Investment Company

10/09/2018

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​During August, Lowland’s net asset value declined 1.48% on a total return basis (using debt at fair value), outperforming its benchmark which declined 2.76%. Within this, a decrease in bond yields meant that Lowland’s private placement note was fair valued upwards. Keeping debt at par, Lowland’s net asset value declined 1.45%.

The best performer during the month was insurer, Hiscox. The shares continued to trend upwards after releasing a strong set of results at the tail end of July. The company is very well run and has been disciplined in growing its reinsurance book at solid margins. There remain good opportunities to grow in specialty insurance, such as flood, cyber and general liability. We continue to see this as a long term holding for the Trust on this basis.
 
The worst performer during the month was Hill & Smith, a manufacturer of products for the infrastructure, galvanizing and construction industries. The company reported disappointing financial results due to bad weather and commodity pricing pressure. The long term outlook for the business remains strong and we continue to hold the position, seeing the share price reaction as overdone versus the earnings downgrades.
 
During the month we took profits in several positions that have performed well and the valuations were beginning to look a bit stretched. The positions we reduced on this basis were Avon Rubber (specialised rubber products), Chesnara (life insurer), Croda (specialty chemicals), DS Smith (paper producer), Numis (diversified financial) and Randall & Quilter (insurance). In addition, we exited our position in Topps Tiles due to concerns about deteriorating fundamentals and an unsupportive economic environment.
This should help make room for us to be net buyers on weak days of companies where we believe the challenges are well aired and discounted in the share prices. 
 
Glossary
Par value - par value is the face value of a bond. Face value is the nominal value (stated value of an issued security, as opposed to its market value) of a security stated by the issuer.

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 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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