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 appears that a change of direction by the ECB has prevented this and on a positive note the domestic economy continues to be resilient. At the time of writing we appear to be no nearer to getting clarity on the outcome of Brexit and this continues to weigh on the valuations of UK centric equities and small and mid-caps generally. The raft of corporate results has in aggregate, we believe, been supportive of current valuations but for a sustained improvement in ratings we need to see a sensible outcome with respect to Brexit or corporate earnings upgrades. The former should help to deliver the latter.
In terms of performance last month, the most significant contributor was Dairy Crest which was subject to an agreed cash offer from Canadian dairy company Saputo and we have since sold part of our holding. Other strong performers included Go Ahead, RPS and Devro and we added to our investments in the latter two after solid sets of results. On the downside, Convatec and Redde reacted poorly to numbers and Restaurant Group and XPS Pensions continued to suffer selling pressure. We took some profit in Bellway after a strong run and added to our holdings in Crest Nicholson and Galliford Try after figures which maintained our housing exposure whilst giving us a substantial yield pick up. We also took some profit in Hilton Foods and DiscoverIE on yield grounds and we supported the fund raising in Low and Bonar. For our portfolio, corporate results so far have generally been in line with expectations although it is noticeable that where they have come up short valuations still tend to overreact on the downside. Pleasingly dividend payments remain robust.