Liontrust UK Growth Fund

November 2018 review

The Liontrust UK Growth Fund returned -1.3%* 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’s overweight allocation to oil and gas stocks was a headwind due to the ongoing weakness in 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 group Aggreko (-13.1%). The company supplies power generation equipment to oil services companies.

 

Defensive sectors of the market were again among the top performers: telecoms returning 13.3%, healthcare +3.6% and utilities -0.4%. The Fund’s pharma holdings GlaxoSmithKline (+8.6%) and AstraZeneca (+2.1%) benefited from the shift to healthcare stocks. This was, however, offset to some extent by the latest twist in Indivior’s (-45.9%) legal battle with Dr Reddy’s Laboratories, which saw a temporary injunction on a generic version of Indivior’s Suboxone Film drug lifted. British American Tobacco (-19.0%), also fell after reports suggesting the US Food & Drug Administration wants to crack down on menthol cigarettes. This hit the entire tobacco sector in the UK and US.

 

There was positive news from measuring devices maker Spectris (+11.7%) which released 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. 

 

PayPoint (+11.3%) 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. 

 

Actuator manufacturer and flow control company Rotork’s (-12.5%) trading update was less well received. It 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.

 

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:

Indivior (-45.9%), British American Tobacco (-19.0%), Aggreko (-13.1%), Rotork (-12.5%) and John Wood Group (-11.1%).

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

 

 

Sep-18

Sep-17

Sep-16

Sep-15

Sep-14

Liontrust UK Growth I Inc

9.4

11.5

25.7

1.6

7.7

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

3

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, 4:58 PM