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.
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.