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Liontrust Special Situations Fund

November 2022 review
Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

The Liontrust Special Situations Fund returned 7.6%* in November. The FTSE All-Share Index comparator benchmark returned 7.1% and the average return in the IA UK All Companies sector, also a comparator benchmark, was 7.6%.


Global equities recovered further in November, helped along by hopes that the pace of monetary policy tightening may be set to slow. The US Federal Reserve and Bank of England both implemented 75 basis point hikes in November, while the European Central Bank had lifted rates by the same amount at the end of October.


More important than the scale of this month’s moves were the comments regarding the future direction of policy. Minutes from the Federal Reserve’s rate-setting meeting and comments from its Chair, Jay Powell, noted that rates may need to peak higher than previously anticipated, but also suggested that future rate hikes may be smaller and slower, as the Fed waits to observe the cumulative impact of the policy measures already taken.


As investors weighed up whether this should be interpreted as a hawkish or dovish message, weaker-than-expected consumer price inflation tipped them towards the latter and added fuel to the recovery in risk asset prices. Inflation for October came in at 7.7% year-on-year, the lowest since January, down from June’s peak of 9.1%, and below forecasts of 7.9%.


With a number of companies updating on trading on the period to 30 September, it was a busy month for portfolio newsflow, the majority of it fairly constructive.


Dotdigital Group (+28%) continued to recover from its heavy fall in March, which came after it warned of a post-lockdown unwinding of customer buying behaviour as well as tight labour market conditions in the US. In July, the omnichannel marketing automation specialist announced that revenues for the year to 30 June would exceed re-based expectations, and the release of full-year results in November triggered another leg up for the shares. The company commented that positive trading momentum has carried over into the new financial year, with the prior challenges now waning and market conditions improving overall. It is on track to meet expectations for revenue growth next year, while profitability is marginally ahead of forecasts.


Kainos Group (+30%) is an outsourced provider of IT design and support services primarily to the public sector and healthcare industry. Long-term customer relationships and ongoing demand from the NHS have meant that its business has proven resilient to a challenging economic backdrop. In November, it reported 26% year-on-year revenue growth to £180m in the six months to 30 September, while bookings rose 18% to £222m, taking its contracted backlog to £308m. At 53%, growth was particularly strong in its international operations, lifting its share of the group total to one-third.


Domino’s Pizza Group’s (+27%) shares eased back earlier in the year on a weaker outlook for consumer spending and due to the impact of food cost inflation. Although margins came under pressure in the first half of the year, Domino’s has planned to pass costs on to franchisees in a lagged manner; investors will therefore be encouraged that November’s Q3 trading update maintains full-year profit guidance, suggesting its approach is working so far. Its recent sales performance has been good: like-for-like systems (excluding the impact of VAT changes) grew 2.4%, and has accelerated to 10.4% in the first six weeks of Q4.


The company has also continued to retreat its fledgling international operations by exercising a sell option on its German division, which it expects to generate a profit on disposal of £40m - £50m. As part a tighter capital allocation framework applied since March 2021, Domino’s also announced a new £20m share buyback.


Due to solid trading and strength in the US dollar, Keywords Studios (+22%) now expects both revenues and profits for 2022 to be ahead of its previous guidance. The support services provider to the video games industry also included upbeat 2023 outlook comments within a trading update, noting that organic growth may moderate but should remain well above its medium-term target of 15%. Keywords Studios anticipates a 2023 financial performance which is towards the upper end of the current analysts’ forecast range.


The Fund’s engineers also saw some strength in November, with Rotork (+17%) leading the way. Component supply chain issues contributed to slightly slower than expected sales growth earlier in the year for the provider of flow control solutions. However, a November trading update showed that attempts to address these issues have begun to pay off, with direct purchasing and forward buying of semiconductors yielding improvements. Together with robust customer demand and higher selling prices, this generated organic constant currency revenue growth of 19% in the four months to 30 October.


Weir Group (+16%) also noted that supply chain and logistics challenges are easing, while additionally commenting that gross margins have been maintained despite input cost inflation. With commodity prices remaining elevated, Weir Group experienced strong demand for its products in Q3, particularly for aftermarket spares which saw 21% order growth.


Among the portfolio detractors, Paypoint (-7.4%) shares gave up some ground on news of its agreed £76m deal to buy Appreciate Group, a gift card and reward scheme provider in the UK. The cash-and-shares offer equated to an offer price of 44p a share, a 69% premium to Appreciate’s share price – a level which some Paypoint investors may have viewed as too full judging by the share price reaction.


TI Fluid Systems (-8.5%), a provider of highly engineered automotive fluid storage, is benefiting from a recovery in global car production, although it has lagged the uplift slightly. Q3 constant currency revenue growth was 20% in constant currency terms, 760 basis points behind the global light vehicle market’s production increase. During this period, growth was constrained by low participation in the Chinese battery electrical vehicle market, which was dominated by domestic suppliers. Investors were also disappointed that TI Fluid Systems’ pass-through of input cost increases to customers has only been partial, with further adjustments needed to mitigate margin pressures.


Positive contributors included:

Kainos Group (+30%), Domino’s Pizza Group (+27%), Keywords Studios (+22%), Rotork (+17%) and Weir Group (+16%).


Negative contributors included:

Iomart Group (-16%), Midwich Group (-13%), Mortgage Advice Bureau (-13%), TI Fluid Systems (-8.5%) and Paypoint (-7.4%).


Discrete years’ performance** (%), to previous quarter-end:

Past performance does not predict future returns








Liontrust Special Situations I Inc






FTSE All Share






IA UK All Companies












*Source: Financial Express, as at 30.11.22, total return (net of fees and income reinvested), bid-to-bid, institutional class.

**Source: Financial Express, as at 30.09.22, total return (net of fees and income reinvested), bid-to-bid, primary class.

Understand common financial words and terms See our glossary

Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteedYou may get back less than you originally invested.

The issue of units/shares in Liontrust Funds may be subject to an initial charge, which will have an impact on the realisable value of the investment, particularly in the short term. Investments should always be considered as long term.

Some of the Funds managed by the Economic Advantage team invest primarily in smaller companies and companies traded on the Alternative Investment Market.  These stocks may be less liquid and the price swings greater than those in, for example, larger companies.


This is a marketing communication. Before making an investment, you should read the relevant Prospectus and the Key Investor Information Document (KIID), which provide full product details including investment charges and risks. These documents can be obtained, free of charge, from www.liontrust.co.uk or direct from Liontrust. Always research your own investments. If you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. 

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