Bath/Head Office & Unquoted Equity Team:
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Investor Information

monthly manager commentary

October 2019

Whilst global appetite for equities remains firmly focussed on trade wars, the UK market is driven by a more domestic issue. We have said for some time now that a wide range of companies that we invest in need a resolution to Brexit, one way or another, to be able to move forward and to start planning future capital spending programmes and to properly implement growth strategies. Some sort of certainty is desperately needed. Hopefully the general election next month will provide the catalyst for this, although this is by no means guaranteed to be the case, as the odds on another hung parliament currently suggest. We expect further downward pressure on macro estimates as the business of government grinds to a halt for six weeks and sentiment will not be relieved by corporate statements which we expect to be universally cautious with respect to domestic earnings. In the next month, we expect to be overwhelmed by commentators analysing what stocks will perform best or worst under differing election outcomes. We continue to take comfort in the fact that investors are generally underweight in UK equities and that overseas companies and private equity continue to see good value within our investable universe.

The strongest performer this month was Murgitroyd, which was subject to a recommended cash offer. GVC also performed well after a good Q3 trading update, as did Randall and Quilter. On the downside, poor or indifferent updates undermined the valuations of De La Rue and Devro. During the month, we added to our holdings in Close Brothers, Saga and T Clarke and started a new holding in Tyman, the international supplier of engineered components to the door and window industry. As a generalisation, investors are now anticipating earnings downgrades across a broad range of industrial cyclicals as the effects of the trade wars and global slowdown begin to bite. The consensus view at the moment seems to suggest that in the short term there is more downward pressure on earnings to come but that on a look through basis earnings could be set to be revised upwards in the first half of next year. This is currently a view that we subscribe to and should help to put a floor under valuations.


September 2019

The relative performance of our UK facing investments continues to be largely driven by an almost slavish adherence to Brexit sentiment and short term movements in Sterling. Hopefully, however, the current state of uncertainty will soon be addressed, at which point investors and the companies that we invest in can start to take a longer term view o[…]

August 2019

There was some good news on the domestic front as announcements of increases in public spending and a better than expected July GDP number, led by the services sector, dispelled fears of a UK recession. Brexit continued to dominate the news headlines however and all possible outcomes still appear to be open. This uncertainty continues to influence[…]

July 2019

The announcement that Boris Johnson was to become the next Prime Minister at the end of last month contributed to a sharp fall in Sterling and underperformance of our small and mid cap portfolio compared to large cap peers. Whilst this reflects a well-worn short-term knee jerk reaction that then tends to be gradually reversed, the belief that ther[…]

June 2019

The quarter started with reassuring newsflow from a range of our underlying holdings and performance remained relatively resilient as it was buoyed by a number of corporate bids. This was despite the fact that the real price momentum resided in growth stocks and the valuation gap between ‘growth’ and our ‘value’ orientation continued to widen in th[…]

May 2019

The age old stockmarket adage of ‘selling in May’ proved well founded as stocks drifted lower in the absence of the positive corporate news flow of the previous month. Despite the worries with regard to global trade tariffs intensifying, there was a welcome intervention from the Fed with a doveish pronouncement about US interest rates. Brexit was […]

April 2019

Against a daily diet of confusion over Brexit, worries over domestic politics and bearish rhetoric with respect to global trade, ‘bottom up’ corporate news has remained robust. It is generally accepted that UK plc has had the benefit of a short-term inventory build ahead of the original Brexit date and companies that we speak to are currently in th[…]

March 2019

The good news since the turn of the year is that the UK equity market has started to recover despite the outcome of Brexit still being unclear, although the balance of probability is now for a ‘softer’ outcome. The domestic economy has remained resilient as real wages rise and household spending holds up well, but it is fair to note that company i[…]

February 2019

More of the same last month as stock markets continued to be subject to short term swings in investor sentiment which were driven by ‘noise’ surrounding the two major macro issues of tariff wars on a global basis and Brexit on a domestic one. For a brief moment the threat of a Euro zone recession threatened to add to investors concerns but it appea[…]

January 2019

After a particularly difficult few months, we started the new year on a more positive note. In the US, the Fed appeared to adopt a more ‘dovish’ stance which helped market sentiment although at the same time there were increased fears with respect to a slowing Eurozone economy. At home, high employment levels and rising real wages underpinned a re[…]