Liontrust Special Situations Fund

November 2018 review

The Liontrust Special Situations Fund returned 0.3%* in November compared with the -1.6% return from the FTSE All-Share Index.

 

The initial bounce back in stock markets following ‘Red October’ lost momentum half way through November as further uncertainty over Brexit and tumbling oil prices weighed on investor sentiment. This was evident across the whole market cap spectrum in the UK, with the FTSE 100 returning -1.6%, the FTSE 250 -2.1% and FTSE Small Cap (ex IT) -1.9%.   

 

The Fund was largely able to avoid the slide in UK equities, with half its holdings ending the month higher. The defensive qualities of the healthcare sector meant that it was one of most resilient to the market downfall and the Fund’s stock picks in this sector benefited. ECO Animal Health Group (+17.0%) and GlaxoSmithKline (+8.6%) were the stand out performers.

 

ECO Animal Health’s share price jumped after it announced that its swine vaccine joint venture with US-based Pharmgate extended its scope to include Japan and Brazil. Glaxo also expanded its business in Japan after signing a strategic commercialisation deal with Japanese life sciences company Kyowa Hakko Kirin for the distribution of its anaemia drug Daprodustat.

 

Measuring devices maker Spectris (+11.7%) was another top performer after releasing a strong trading update for the four months to end October. Like-for-like (LFL) sales increased 8% year-on-year, with growth across all geographic regions and all four of the company’s divisions. Its Materials Analysis division stood out, with a LFL increase of 12% driven by growth in the semiconductor and pharmaceutical industries.  

 

Though the Fund outperformed the FTSE All-Share, it did feel the pinch from falling oil prices. Following a 22% decline in November, Brent oil hit its lowest level for over a year due to ongoing concerns about oversupply. This was compounded by two of the world’s largest producers – Russia and Saudi Arabia – being unable to agree on whether supply cuts are necessary and Donald Trump arguing against output cuts. John Wood Group (-11.1%), BP (-7.0%) and Royal Dutch Shell (-5.2%) were the Fund’s holdings that fell. The fall in oil prices may have also influenced the share price of temporary power generation equipment company Aggreko (-13.1%). The company supplies power generation equipment to oil services companies.

 

Actuator manufacturer and flow control company Rotork (-12.5%) reported a 4% decrease in order intake in the third quarter, with a particularly steep drop of 20% in its Fluid Systems division. Revenue, however, showed growth of 8.4%, which the company said was due to the variation of timing in project orders and deliveries.

 

There was more positive news for PayPoint (+11.3%) which recorded a 4% increase in pretax profit in the six months to 30 September. The roll out of PayPoint One, its electronic point of sale system, expanded to 11,246 sites, keeping it on track to meet its target of 12,400 sites by 31 March 2019. FTSE 100-listed catering company Compass Group (+9.0%) delivered solid full-year results, in which it saw revenue increase 5.5% on a constant currency basis and an operating profit rise of 7.1%. It also issued a positive outlook, expecting 4-6% organic growth in its current financial year.  

 

The only change to the portfolio this month was the sale of Shire ahead of the completion of its takeover by Japan’s Takeda Pharmaceutical.

 

Positive contributors included:

Spectris (+11.7%), PayPoint (+11.3%), Compass Group (+9.0%), GlaxoSmithKline (+8.6%) and TP ICAP (+7.2%).

 

Negative contributors included:

Accesso Technology Group (-25.6%), Aggreko (-13.1%), Rotork (-12.5%), John Wood Group (-11.1%) and Domino’s Pizza Group (-11.0%)

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

 

 

Sep-18

Sep-17

Sep-16

Sep-15

Sep-14

Liontrust Special Situations I Inc

13.8

13.7

23.0

6.0

6.9

FTSE All Share Index

5.9

11.9

16.8

-2.3

6.1

IA UK All Companies

5.5

13.6

11.7

1.9

6.0

Quartile

1

2

1

2

2

 

*Source: Financial Express, as at 30.11.2018, total return (net of fees and income reinvested), bid-to-bid, institutional class. Non fund-related return data sourced from Bloomberg.

 

**Source: Financial Express, as at 30.09.2018, total return (net of fees and income reinvested), bid-to-bid, primary class.

For a comprehensive list of common financial words and terms, see our glossary here.

 

Key Risks

 

Past performance is not a guide to future performance. Do remember that the value of an investment and the income generated from them can fall as well as rise and is not guaranteed, therefore, you may not get back the amount originally invested and potentially risk total loss of capital. 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. The performance of the  GF UK Growth Fund may differ from the performance of the  UK Growth Fund and will be lower than its corresponding Master Fund due to additional fees and expenses.

 

Disclaimer

 

The information and opinions provided 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.  Always research your own investments and (if you are not a professional or a financial adviser) consult suitability with a regulated financial adviser before investing.

Wednesday, December 12, 2018, 4:17 PM