Liontrust Special Situations Fund

December 2017 review

The Liontrust Special Situations Fund returned 2.6%* in December, compared with the 4.8% return from the FTSE All-Share Index.

 

UK equities reached fresh all-time highs as this year’s ‘Santa Rally’ a phenomenon where stocks surge towards the end of December as volumes thin took hold. The gains were mainly driven by large caps with the FTSE 100 Index rising 5.0%, compared to the FTSE 250’s 4.4% rise and the FTSE Small Cap’s 2.7% increase. The Fund’s relatively lower exposure to large cap stocks compared to the FTSE All-Share was therefore a headwind this month.

 

Also a headwind was that much of the FTSE All-Share’s rise was powered by mining stocks, a sector which the Fund has no holdings in. The avoidance of miners is based on the view that their values are derived from tangible assets, not the intangible assets which the Economic Advantage investment process seeks out. However, the Fund was able to capture some of gains experienced by the oil & gas sector, which tracked oil prices higher in December. BP (+6.9%) and Royal Dutch Shell (+5.0%) both contributed to the Fund’s return.

 

Oil services engineer John Wood Group (-10.2%) missed out on the rally of oil related stocks. The decline in the company’s share price came despite it announcing that the integration of Amec Foster Wheeler – which it acquired on 9 October 2017 – was progressing ahead of schedule and that it expects pro-forma 2017 earnings before interest, tax and amortisation (EBITA) will be between US$590m to US$610m.

 

Company newsflow was light in December. Fund supermarket Hargreaves Lansdown (+12.5%) saw its share price increase towards the end of the month benefiting from the rise in wider equity markets.

 

Having already issued a profit warning last month due to the impact of contract delays, IDOX (-37.6%) caused more concern with the revelation that its review of end-year accounts (for the period to 31 October 2017) had uncovered certain revenue items which should not have been included in FY2017 forecasts. The resolution of this issue was not helped by its CEO taking sudden sick leave, with non-exec director and former-CEO Richard Kellett-Clarke stepping in as interim CEO. The earnings before interest, taxes, depreciation and amortisation (EBITDA) impact of the revision is estimated to be a £3m reduction to the £23m figure which was given in last month’s update.

 

Positive contributors included:

AA (+12.6%), Hargreaves Lansdown (+12.5%), Rightmove (+11.6%), Smart Metering Systems (+11.6%) and AstraZeneca (+7.2%).

 

Negative contributors included:

IDOX (-37.6%), John Wood Group (-10.2%), Aggreko (-5.9%), Statpro Group (-4.7%) and Spirax-Sarco Engineering (-2.5%).

 

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

 

 

Dec-17

Dec-16

Dec-15

Dec-14

Dec-13

Liontrust Special Situations I Inc

16.8

15.8

13.9

1.9

21.2

FTSE All Share Index

13.1

16.8

1.0

1.2

20.8

IA UK All Companies

14.0

10.8

4.9

0.6

26.2

Quartile

1

2

1

2

4

 

*Source: Financial Express, as at 31.12.2017, total return (net of fees and income reinvested), bid-to-bid, institutional class.

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. 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. 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

This content 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.  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, faxed, reproduced, divulged or distributed, in whole or in part, without the express written consent of Liontrust. 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.

Thursday, January 11, 2018, 3:36 PM