After a torrid end to 2018, markets started the new year on a more positive note. The Fund itself enjoyed a good rebound, just slightly underperforming its IA UK All Companies benchmark. Its best performing stocks were Cloudcall, which recovered from a prolonged sell-off on the back of a positive trading update, and Angle, which rose on the back of news of a potential new oncology application for its blood biopsy technology. Some of the best contributors to the Fund’s performance were domestic earners with Polypipe, the plastics drainage products business, forging ahead, On The Beach, the online travel agent, rallying on the back of a reassuring trading update and Brooks MacDonald rebounding after announcing a cost cutting programme. On the negative tack, modest downgrades after trading updates by both Quixant and Restore caused their shares to sell-off sharply, whilst yet another warning from Gama Aviation, where the Fund now only has a modest holding, further undermined its share price.
During the month we topped up a large number of holdings across the Fund, which we felt looked oversold after the market correction at the end of 2018. We built up our holding in Euromoney, where the valuation in our view does not yet reflect the work management have undertaken to upgrade the quality of the group’s asset base. We also added to Quixant and Restore after their sell-offs, because we still like both businesses and we felt the share reactions were overblown. Finally, we participated in a fund raising by Altitude to finance the potentially transformational acquisition of a key US business partner. On the sell-side, we trimmed holdings in Ashmore, Oxford Metrics and Aquis Exchange on valuation grounds. We also exited Hollywood Bowl after a strong run in the share price.
For the immediate future, the high level of political uncertainty surrounding trade wars and BREXIT will continue to dominate the market. Hopefully, we might have more clarity on these matters by the end of the first quarter, but in the meantime, we will try to take advantage of the volatility by building up holdings in some of our favourite screened stocks at attractive valuations to lay the foundations for the Fund’s future capital growth.