After a positive first week, the market gave up its early gains as the rest of the month was dominated by the vaccine row with the EU and increased fears over mutant virus strains culminating in the adoption of a new UK quarantine regime. The relative success of the domestic vaccine roll-out continues to underpin recovery hopes for our UK centric stocks although the lack of a roadmap out of the current lockdown continues to cause uncertainty as to timing. As a result, analysts attention continues to focus on monthly cash burn for those stocks most affected by the lockdown such as pub groups and restaurants. The bulls are hopeful that there has been a shift by the government towards a policy of under promise and over deliver, something that we always encourage in the companies we invest in. Whilst the relaxation of restrictions remains a moveable feast, the market still appears to be happy to look through the short-term issues to a more normalised future. With the resolution of the trade deal with the EU and the relatively poor performance of the domestic equity market last year, UK analysts are increasingly highlighting the scope for corporate activity and it is interesting to note that towards month end we had an approach for our holding in Marston’s from private equity. We expect to see more of this as the year progresses.
Our top positive contributors to performance last month were spread across a wide range of industries but the common theme running through most was a recovery in trading. Devro and Headlam announced that figures would come in at the top end of expectations and Headlam also confirmed that they would resume dividend payments earlier than forecast. STV and Bloomsbury released trading statements guiding to numbers ahead of market estimates with Bloomsbury benefitting from the growth in reading of printed books through the pandemic. Sthree also performed relatively well as it resumed dividend payments along with the release of its final results. We believe that this combination of positive earnings momentum alongside reinstatement of dividends will be a powerful driver of performance for those companies that can achieve it. The negative contributors in the month were a bit of a mixed bag and included Provident Financial, Redde, Sabre and Polar Capital, over worries about the earnings exposure to its technology funds. On the trading front, we added to our positions in Paragon, Watkin Jones and Stock Spirits ahead of good dividend payments, and reduced our exposure to Wood Group, after a short-term price rise, on income grounds.