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The value of your investments can go down as well as up, and you may not get back what you originally invested.
Over the month, the Company’s net asset value total return rose 0.5% which was marginally behind the 0.7% rise in the FTSE All-Share 5% Capped Index.
There has been plenty for us to discuss through the earnings season. Firstly, Astrazeneca announced that their cancer drug Mystic had failed to deliver any meaningful benefits versus the current therapy, causing the share price to fall 15%. We felt that we had no informational advantage on the outcome of this trial and therefore held a neutral position into the announcement which mitigated the risks in both directions. We currently have the stock under review and will work through the cash-flow and valuation before making a decision to hold on or exit the position. The second big announcement came from the U.S. Food and Drug Administration (FDA) who are reviewing allowable nicotine levels in cigarettes. This saw double digit falls across the whole sector before the market digested the fact that the FDA would need evidence to back their claims which would take years. We therefore felt the market reaction to this announcement was overdone so added to our position in British American Tobacco and Imperial Brands.
In terms of activity we exited a couple of names, WPP and BAE Systems. We have done a significant amount of work on WPP, and their peers, over the last few months as we could see there was a structural shift in the industry taking place. There are clear threats emerging from both the consultants and the likes of Google and Facebook as the industry transitions to the digital era. During our analysis we found a level of opacity that made it difficult to pinpoint exactly where their competitive advantage was being eroded. What was clear though was that it’s happening and while this may take time we didn’t feel the risk reward trade-off was attractive. The exit of BAE was more about their recent delivery, strong share price performance and a yield that is less attractive today. We used some of this capital to initiate on GVC Holdings post a good meeting with management. They are a pure-play online gambling business and having acquired Bwin, who were underperforming, are delivering on their turnaround strategy.
We also added Spanish housebuilder Neinor to the portfolio. This is a business I have followed closely since it came to the market and one I feel has significant potential over the coming years. Neinor has first-mover advantage in a market that is still recovering from the excesses of the last cycle. They have an attractive land bank of 11 thousand homes which they will look to deliver over the next three to four years as the ramp-up towards their target run-rate of 3.5-4k homes per annum. It is early days but they already have most of 2018 sales covered and with house price inflation starting to come through they are well placed to deliver on their target of a 20% margin.
As at 31 July 2017
The Company is an investment trust and therefore its shares are not subject to the Financial Conduct Authority's rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes which came into effect on 1 January 2014. The Company conducts its affairs so that its shares can be recommended by Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority's rules relating to non-mainstream investment products and intends to continue to do so.
Share price (Ordinary Shares)
26 September 2017
Share price (B Shares)
Share price (Units)
Past performance is not a guide to future results. The value of investments can go down as well as up.
The shares of the Company are listed on the London Stock Exchange.
Information in this section of the website concerning the Company is
directed solely at persons who are located in the UK. Nothing on this
website is, or is intended to be, an offer, advice, or an invitation, to
buy or sell any investments. Potential investors must read our full terms and conditions
before proceeding further with any investment product referred to on
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