Markets responded adversely to uncertainty over the scale of the anticipated Fed tightening and then, latterly, over fears of the US becoming more protectionist as the rhetoric over trade wars was stepped up. At home, the results season gathered pace and generally underlined the resilience of corporate earnings, although it was noticeable that there was a bias in downgrades towards domestic consumer and retail stocks. The key to any potential upgrades here remains the prospect of growth in real wages as we move through the year. Ahead of the Italian election we ended the month with just over five percent cash which was slightly higher than usual but was only temporary and we are now back to normal levels i.e. sub three percent. The election itself had little impact largely as the result was within the predicted range of outcomes according to the polls. The recent increased level of market volatility continues to present us with new opportunities within the remit of our investment process.
At the stock level, our best performer was Fidessa who after releasing a good set of figures also revealed that they had agreed a cash offer for the company by Temenos, a Swiss software provider. RM was strong after an excellent set of numbers, Ultra Electronics responded well to reassuring results and STV recovered from an oversold position. On the downside, Galliford Try fell after announcing a capital raising which was needed as a result of a JV with Carillion. This was particularly unfortunate as their underlying housebuilding business performed very well. Northgate fell after an internal review recommended increasing their average fleet holding period which will have the effect of reducing short term profits but improving medium term returns. As we invest for long term income we are supportive and topped up our holding at the lower levels. We added to a number of our holdings including Essentra, Babcock, Marston’s, RM and National Express. Money was raised as we sold Computacenter into their tender offer and RWS, both on yield grounds, and Hogg Robinson after an agreed bid for the Company. We added one new stock to the portfolio during a placing, Diversified Gas and Oil, which owns low risk oil and gas producing assets in the US.