Fund Manager commentary - Lowland Investment Company

22/05/2019

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In April Lowland’s net asset value rose 5.4% relative to a 2.7% rise in the FTSE All-Share. Following the extension of the ‘Brexit’ deadline to the end of October this removed an imminent source of uncertainty for domestic stocks. As a result small and medium sized companies outperformed the FTSE 100 and this positively contributed to Lowland’s performance. While there has been a short term move upwards, UK equities, and particularly domestically focussed companies, remain out of favour and this remains evident in UK equity flows and fund manager surveys. We continue to see value in UK equities and intend to continue to be net investors in the upcoming months.

The largest contributor to performance during the month was Anexo, which provides hire vehicles following an accident to people who would otherwise struggle to get access to a hire car (or bike). This reported an encouraging set of results in which they are successfully managing to grow sales and earnings. Following an encouraging meeting with the management team we intend to keep the current holding.

The largest (actively held) detractor from performance was K3 Capital, a UK corporate broker. A subset of their business is larger corporate finance deals for which they are appointed to find a buyer. They are currently struggling to get larger deals completed due (partly) to uncertainty surrounding Brexit, which is putting off potential private equity purchasers. Following the share price fall we added to the holding as this setback in larger deals completing should be temporary, while the remainder of the business dealing in smaller businesses continues to grow well.

The largest purchase during the month was a new position in Vitec Group, which makes equipment for the broadcasting industry such as autocues, audio equipment, lighting, tripods etc with leading market shares globally across the majority of their products. There is potential to materially grow sales and margins over time and in our view this is not factored into the current share price. Elsewhere we added to existing holdings including RBS, GlaxoSmithKline and Mondi, all of which look attractively valued with a good dividend yield.

Glossary
Dividend yield: The dividend yield is the ratio of a company's annual dividend compared to its share price. The dividend yield is represented as a percentage.

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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