Shares Magazine - August 22, 2019

INVESTMENT TRUSTS

22 August 2019 | SHARES | 

CHAMPIONING GROWTH
COMPANIES
,ĞƌŵŽŶŝƐǁŝůůŝŶŐƚŽŚĞůƉĨƵŶĚ
ƚŚĞŐƌŽǁƚŚƉƌŽƐƉĞĐƚƐŽĨƐĞůĞĐƟǀĞ
ƐƚŽĐŬŵĂƌŬĞƚŶĞǁĐŽŵĞƌƐ͕ǁŝƚŚ
ƚŚĞƚƌƵƐƚŚĂǀŝŶŐƉĂƌƟĐŝƉĂƚĞĚŝŶĂ
ŶƵŵďĞƌŽĨ/WKƐ͘
ZĞĐĞŶƚƉŽƐŝƟŽŶƐŽƉĞŶĞĚŝŶ
more established market names
include property agent Savills
(SVS), oil and gas play Serica
Energy (SQZ:AIM) and Vitec
(VTC), a leading manufacturer
of specialist camera/video
ĂĐĐĞƐƐŽƌŝĞƐ͕ůŝŐŚƟŶŐĂŶĚ
sound equipment.
‘Savills is a real estate services
ĐŽŵƉĂŶLJŽīĞƌŝŶŐƌĞƚĂŝůĂŶĚ
ĐŽƌƉŽƌĂƚĞƐĂůĞƐ͕ǀĂůƵĂƟŽŶ͕ĨƵŶĚ
ŵĂŶĂŐĞŵĞŶƚ͕ƉƌŽƉĞƌƚLJĨĂĐŝůŝƟĞƐ
ĂŶĚĐŽŶƐƵůƟŶŐĨŽƌĂďƌŽĂĚ
ƌĂŶŐĞŽĨĐůŝĞŶƚƐĂĐƌŽƐƐƵƌŽƉĞ͕
ŵĞƌŝĐĂ͕ƐŝĂĂŶĚƵƐƚƌĂůŝĂ͕͛
says Hermon.
The business has been
ƐŝŐŶŝĮĐĂŶƚůLJĚŝǀĞƌƐŝĮĞĚŽǀĞƌƚŚĞ
years, ‘reducing its exposure
ƚŽƚƌĂŶƐĂĐƟŽŶĂůƐĞƌǀŝĐĞƐ
ƚŽǁĂƌĚƐŵŽƌĞƉƌĞĚŝĐƚĂďůĞ
revenue streams.
͚KƵƌŝŶǀĞƐƚŵĞŶƚŝŶ^ĂǀŝůůƐ
ƉƌŽǀŝĚĞƐƵƐǁŝƚŚĂƋƵĂůŝƚLJ͕
ĚŝǀĞƌƐŝĮĞĚƌĞĂůĞƐƚĂƚĞďƵƐŝŶĞƐƐ
ǁŝƚŚĂƐƚƌŽŶŐŵĂŶĂŐĞŵĞŶƚƚĞĂŵ
ĂŶĚŽƉƉŽƌƚƵŶŝƟĞƐĨŽƌĞdžƉĂŶƐŝŽŶ
ƚŚƌŽƵŐŚƚĂĐƟĐĂůĂĐƋƵŝƐŝƟŽŶƐ͛͘
Vitec has ‘a high market share
in each of its product categories
ĂŶĚĐŽŶƟŶƵĞƐƚŽŽƵƚƉĞƌĨŽƌŵ
ŝƚƐƉĞĞƌƐƚŚƌŽƵŐŚŶĞǁƉƌŽĚƵĐƚ
ŝŶŶŽǀĂƟŽŶ͕͛ĂĐĐŽƌĚŝŶŐƚŽƚŚĞ
small caps guru.
‘Whilst the consumer camera
ŵĂƌŬĞƚŚĂƐƐŚŝŌĞĚƚŽƚŚĞƵƐĞ
ŽĨŵŽďŝůĞƉŚŽŶĞƐ͕ƚŚĞƌĞƐƟůů
ƌĞŵĂŝŶƐĂŶĂĐƟǀĞƉƌŽĨĞƐƐŝŽŶĂů
and amateur photographer
market that buys high quality
equipment.
͚KƵƌŝŶǀĞƐƚŵĞŶƚŝŶsŝƚĞĐ

provides exposure to a company

ǁŝƚŚĂŶŝŵƉƌŽǀŝŶŐĚĞŵĂŶĚĐLJĐůĞ͕

increasing margins through

ĞĸĐŝĞŶƚŵĂŶƵĨĂĐƚƵƌŝŶŐĂŶĚƚŚĞ

ƉŽƚĞŶƟĂůĨŽƌƐŵĂůůĂĐƋƵŝƐŝƟŽŶƐŽĨ

ŽƚŚĞƌŶŝĐŚĞďƌĂŶĚƐ͛͘

Hermon has sold companies

ǁŚŝĐŚŚĞĨĞůƚǁĞƌĞƐĞƚĨŽƌƉŽŽƌ

price performance, including

ůĞŵĞŶƟƐ;>DͿ, ‘a speciality

ĐŚĞŵŝĐĂůƐŐƌŽƵƉǁŚĞƌĞƚŚĞ

company made a poorly judged

ĂŶĚĞdžƉĞŶƐŝǀĞĂĐƋƵŝƐŝƟŽŶŽĨ

Mondo Chemicals, an industrial

talc company. This boosted

ůĞǀĞƌĂŐĞƚŽůĞǀĞůƐǁĞǁĞƌĞ

ƵŶĐŽŵĨŽƌƚĂďůĞǁŝƚŚ͛͘

M&A SUPPORT

Turning to the outlook, Hermon

points out the UK economy

ŝƐƐŚŽǁŝŶŐĂŶĂĞŵŝĐŐƌŽǁƚŚ͘

͚ƌĞdžŝƚĚĞůŝďĞƌĂƟŽŶƐƐƚƵŵďůĞŽŶ

and there is clearly a range of

ŽƵƚĐŽŵĞƐďƵƚǁŚĂƚĚĞĂů͕ŝĨĂŶLJ͕

ƚŚĞh<ǁŝůůĞŶĚƵƉǁŝƚŚŝƐ͕ĂƚƚŚŝƐ

point, unclear.

͚džƚƌĂĐŽŵƉůŝĐĂƟŽŶŝƐĂĚĚĞĚ

ďLJƚŚĞƉŽůŝƟĐĂůƵŶĐĞƌƚĂŝŶƚLJŝŶ

ƚŚĞh<ƚŚĂƚŝƐůŝŬĞůLJƚŽǁĞŝŐŚ

on consumer and business

ĐŽŶĮĚĞŶĐĞ͕ĂŶĚĚĞůĂLJĂŶĚ

postpone investment and

purchasing decisions, further

ĚĂŵƉĞŶŝŶŐĞĐŽŶŽŵŝĐŐƌŽǁƚŚ͛͘

KƵƚƐŝĚĞƚŚĞh<͕,ĞƌŵŽŶ

ŶŽƚĞƐƚŚĂƚ͚ƵƌŽƉĞŝŶƉĂƌƟĐƵůĂƌ

ŝƐƐŚŽǁŝŶŐƐŝŐŶƐŽĨĞĐŽŶŽŵŝĐ

ƐůŽǁĚŽǁŶĂŶĚĞƐĐĂůĂƟŶŐƚƌĂĚĞ

ƚĞŶƐŝŽŶƐďĞƚǁĞĞŶƚŚĞh^ĂŶĚ

ŚŝŶĂĂƌĞƉƌŽǀŝĚŝŶŐĂĚĚŝƟŽŶĂů

ŶĞŐĂƟǀĞĐŽŵŵĞŶƚĂƌLJ͛͘

zĞƚ,ĞƌŵŽŶƐƚƌĞƐƐĞƐƚŚĂƚ

͚ĐŽŶĚŝƟŽŶƐŝŶƚŚĞĐŽƌƉŽƌĂƚĞ

sector are intrinsically stronger

ƚŚĂŶƚŚĞLJǁĞƌĞĚƵƌŝŶŐƚŚĞ

ĮŶĂŶĐŝĂůĐƌŝƐŝƐŽĨϮϬϬΘͲε͘ĂůĂŶĐĞ

sheets are more robust and

ĚŝǀŝĚĞŶĚƐĂƌĞŐƌŽǁŝŶŐ͛͘

/ŶĂĚĚŝƟŽŶ͕͚ĂůĂƌŐĞƉƌŽƉŽƌƟŽŶ

of UK corporate earnings come

from overseas, even among

smaller companies, and should

ďĞƐƚĞĚďLJƚŚĞƌĞůĂƟǀĞ

ǁĞĂŬŶĞƐƐŽĨƐƚĞƌůŝŶŐ͘tŝƚŚ

ƌĞŐĂƌĚƐƚŽǀĂůƵĂƟŽŶƐ͕ƚŚĞĞƋƵŝƚLJ

ŵĂƌŬĞƚŝƐŶŽǁƚƌĂĚŝŶŐďĞůŽǁ

long-term averages and M&A

ƌĞŵĂŝŶƐĂƐƵƉƉŽƌƟǀĞĨĞĂƚƵƌĞĨŽr

smaller companies.

By James Crux

&ƵŶĚƐĂŶĚ/ŶǀĞƐƚŵĞŶƚ

dƌƵƐƚƐĚŝƚŽƌ

TOP TEN HOLDINGS

(As at 30 June 2019)

Company WŽƌƞŽůŝŽ

weight (%)

Intermediate

Capital

3.40%

Bellway 2.90%

Clinigen 2.60%

John Laing 2.30%

Cineworld 2.20%

Renishaw 2.10%

RWS 2.10%

Paragon Banking 2.00%

AVEVA 1.90%

Dechra

WŚĂƌŵĂĐĞƵƟĐĂůƐ 1.90%

Source: Janus Henderson Investors

Bellway Homes features in their top ten holdings