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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.
Having suffered a tough November with disappointing trading updates from three of our holdings we delivered a strong performance in December. In terms of the fund we saw some strong returns from Intermediate Capital, Asos, Cairn Homes and BBA Aviation. There was no recurrent theme with returns driven largely by positive news flow leading into earnings season. Cairn Homes has already updated on 2017 sales figures which came in around expectations with 418 units sold at an average selling price (ASP) of €314k. In terms of the investment proposition the forward sales were also very strong and they enter 2018 with 348 units sold versus the 850 expected in 2018. This provides a strong base visibility for us to anchor to as we await sales updates. In terms of profitability, this came in marginally behind expectations as they have increased the central costs slightly over the last year. Having spoken with management these costs are reflective of the ramp-up at their apartment blocks which need a much higher level of oversight to deliver. From my perspective I’m happier to trade 0.5-1% of margin to make sure these projects are managed appropriately.
From a trading perspective there was no activity in the month after a number of changes through November. In terms of the bigger picture I still feel the portfolio needs more concentration and that a number of the positions remain below the 1.5% active (relative to the benchmark) weight I would normally like to hold. Reshaping a portfolio is evolution rather than revolution and this isn’t a process you can force as it takes time to get the right names and then to build weightings to the appropriate level. Managing this against a volatile backdrop, as I noted last month, is why I believe it is better to wait for value to appear rather than trying to chase businesses that have already rerated.
As at 31 December 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.
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Past performance is not a guide to future results. The value of investments can go down as well as up.
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