Understandably, the uncertain global political environment and the continued escalation of trade war rhetoric has increased volatility in equity markets and, against this backdrop, we continue to review the portfolio to ensure sustained delivery of an appropriate level of income to our investors over the investment cycle. To this end, we have reduced our holdings in Numis and MacFarlane after strong long-term outperformance, and sold out of Huntsworth entirely as its yield fell below 2%. We have added to positions in McColl’s, Castings and Crest Nicholson, who are ‘out of favour’ in the short term but are all companies that we believe have sound long-term prospects.
In terms of contribution to performance over the month, Polar Capital and Severfield responded well to good results, Strix benefitted from a rerating and BCA announced that they had been the subject of a tentative bid approach, since withdrawn, alongside impressive results resulting in no reduction in the share price. Additionally, Diversified Gas and Oil performed well after announcing another transformational acquisition of gas and oil producing assets in the Appalachian Basin. On the downside, Connect issued a very poor trading update alongside a proposed dividend cut, whilst N Brown and McColls also performed poorly. There continues to be a relatively high number of earnings disappointments amongst companies with exposure to the UK consumer and unsurprisingly, the valuation gap between small and mid-cap domestic earners and the rest continues to widen.