Market sentiment continues to be dominated by the determination of the Fed to bring US inflation under control and the likely length of the upward interest rate cycle. In the UK, public finance data actually looked better than expected, due to lower energy support scheme requirement and a higher tax take than projected. The 2022 year end company reporting season has commenced with most companies coming in line with market estimates. Analysts, given the macro backdrop, are reducing forecast expectations for this year, but share prices are generally holding up well and often rising, with forecast reductions already priced in by the market.
It was a relatively uneventful month for the Fund, with a modest negative return lagging the wider market, as small and mid-caps’ performance generally lagged large caps. The main detractors to the Fund’s performance were Foresight Group, which gave up some of its recent gains, and Future, which pointed out weakening audience numbers and digital advertising and affiliate ecommerce spend for its consumer technology segment in its AGM statement. On the positive side, both Stelrad and Eco Animal Health rallied from quite heavy sell-offs.
During the month we supported fund raisings by both SigmaRoc and Diversified Energy to finance accretive acquisitions. We also added to the Fund’s holding in LendInvest, the technology enabled asset light mortgage lender, to average down at what we regarded as an attractive valuation after a material decline in its share price. We also added to Advanced Medical Solutions and Big Technologies on recent share price weakness. On the sell-side we used recent bid stocks, namely Amryt Pharma and Curtis Banks, as a source of liquidity. We continued to sell down Wandisco on valuation grounds taking advantage of its very strong recent share price run. We reduced the Fund’s holding in Alliance Pharma after a strong bounce back from the recent profit warning-related sell-off and finally we exited IOG having lost confidence in the business after a series of reserve write-downs on its gas assets.