Liontrust UK Growth Fund

February 2019 review

The Liontrust UK Growth Fund returned 1.7%* in February, compared with the 2.3% return from the FTSE All-Share Index.

 

The UK stockmarket continued its rebound in February. Investors were enthused by the US Federal Reserve’s dovish turn in January and this month were helped by positive developments in geopolitical tensions between the US and China. As the two countries were nearing the end of the 90 day truce against new tariffs, Donald Trump tweeted that tariffs on US$200bn worth of goods will be postponed as the pair engaged in trade negotiations.

 

The Brexit process edged closer to the March 29 deadline without a clear outcome in sight. Prime Minster Theresa May announced a series of UK parliamentary votes on the exit process, including one on a no deal and a separate one on delaying Brexit. The market took this as an indicator that a no deal Brexit has become less likely and resulted in a sharp rise in the pound.

 

For the Fund, most of the focus was on fourth quarter and 2018 earnings reports. This was behind the share price rises of AstraZeneca (+13.6%) and Weir Group (+9.0%), which both published strong full-year results. Drug giant AstraZeneca’s fourth quarter revenue rose 11%, with a particularly strong showing from its Oncology division. In addition, the company pleased the market with its forecast of high single-digit growth in product sales in 2019 and noted its lung cancer drug Tagrisso is set to be its biggest selling treatment as the group transitions its focus towards cancer treatment.  

 

Weir Group’s 2018 results trumped the market’s expectations, with adjusted operating profit rising 18% from 2017 to £348m, compared to the consensus forecast of £339m. Cost synergies from the support services engineer’s acquisition of ESCO in July were running ahead of the company’s expectations and helped boost operating margins.

 

Petrofac (-20.0%) was one of the disappointments in February. The oilfield services company said one of its former executives pleaded guilty to bribery charges related to the group’s contract awards in Saudi Arabia and Iraq worth US$4.2bn. The Serious Fraud Office’s investigation into the company is ongoing and the market remains concerned about further related charges.

 

Defence company BAE Systems’ (-9.0%) shares came under pressure as geopolitical tensions between the West and Saudi Arabia rose. Germany banned arms exports to the Middle Eastern Kingdom in response to the murder of Jamal Khashoggi, which may disrupt supply lines for BAE’s service of Saudi’s Eurofighter jets.

 

Movement in a number of holdings’ share prices were the result of late January statements. Next Fifteen Communications (+20.6) noted in the previous month that full-year results are set to be in line with expectations, and organic growth was indicated to be above the sector average. Renishaw (-9.2%), meanwhile, gave back the gains made after its January trading update. The metrology specialist reported a rise in interim revenue, with growth in all regions except the Far East. Domino’s Pizza Group (-11.8%) reported ongoing growth in UK and Ireland, though its international operations suffered ‘growing pains’.

 

Positive contributors included:

Next Fifteen Communications (+20.6%), AstraZeneca (+13.6%), Halma (+11.0%), Sage Group (+7.4%) and WH Smith (+7.4%).

 

Negative contributors included:

Petrofac (-22.2%), Domino’s Pizza Group (-11.8%), Renishaw (-9.2%), BAE Systems (-9.0%) and Pearson (-6.6%).

 

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

 

 

Dec-18

Dec-17

Dec-16

Dec-15

Dec-14

Liontrust UK Growth I Inc

-6.1

14.2

18.1

9.6

1.8

FTSE All Share Index

-9.5

13.1

16.8

1.0

1.2

IA UK All Companies

-11.2

14.0

10.8

4.9

0.6

Quartile

1

2

1

2

2

 

*Source: Financial Express, as at 28.02.2019, 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 31.12.2018, 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.

Friday, March 15, 2019, 10:36 AM