Better than expected inflation data in the USA and the first monthly decline seen in the UK helped the UK equity market rally somewhat in July. However, so far each improved inflation print has caused share prices to spike before gradually subsiding again, suggesting that we need to see a sustained period of improving data for investors to believe that the interest rate cycle has peaked, before they start allocating money to equities again. Hopefully, this will happen as we progress through the second half of this year.
At the individual stock level, the main contributor to the Fund’s performance was Tyman, the US building materials group, which rallied from very oversold levels after reassuring results. Future’s share price also rebounded from a very depressed level, when the company announced a share buy-back, a phenomenon we are seeing more and more across the market and the Fund’s holdings. Foresight Group was another stand-out performer on the back of strong results. The main negative contributors to returns were Restore, after it warned on profits because of a slowdown in its IT hardware destruction business, LBG Media, which fell back after its interim results highlighted its forecast’s heavy second-half seasonal bias, and finally Access Intelligence, where despite an improving performance, investors lost patience with the speed of the group’s profit recovery post the problems experienced in its large Asian acquisition.
On the dealing front we raised money by trimming a number of the Fund’s better performing shares, such as Tyman and Foresight, and reducing holdings in CentralNic, Premier Foods, Man Group, Vesuvius and Brooks MacDonald, where share prices have been relatively resilient. On the buy side we topped up the Fund’s holdings in Ascential, Clarkson, Learning Technologies Group and GB Group on the back of recent weakness. We also started a holding in CAB Payments, a fast growing FX payments platform for government agencies and banks to transfer money into developing countries.