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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.
During the month we nearly completed the exit from the bond portfolio which we have been winding down in an orderly fashion. Less than 1% of the Net Asset Value remains and this will redeem in due course.
We have had a resolute earnings season to date which is as much about those we own as those we don’t. The market is in no mood for companies missing their numbers and the sell-off resulting from any disappointment being significantly more extreme than the actual profit downgrades. This should serve as a reminder of the valuation risk that is out there and that a derating (in the share price) can be swift when growth slows.
We exited a further two positions in October. We sold Barclays early in the month prior to another weak set of results. I lacked conviction in the investment case after further analysis and felt the turnaround strategy wasn’t playing out as expected. This decision was all the easier given the lack of yield, despite the view that you’re going to get dividend growth in the future. In my mind that was only ever going to happen in tandem with other improvements in the business – and to date, we are yet to see any real evidence of progress being made.
The second sale was Vodafone which has always flattered to deceive, in my opinion. Over the last decade this has delivered a negative capital return which is testament to the lack of delivery despite all the changes and promises. Granted, it has outperformed the index on a total-return basis over that period with the attractive yield enhancing returns. I’m sure many will disagree with me but the capital return on offer doesn’t strike me as a quality business and I feel if anything the moat (competitive advantage) is deteriorating not improving, despite the capital investment.
We used the proceeds of these sales to add to a number of positions on weakness including Pennon and Greencore Group. Having exited Barclays we put some of that money back into Prudential as we wanted to build the size of that position.
As at 31 October 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)
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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.
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