A traditionally quiet month but still a couple of compelling investment opportunities
In August , IFSL RC Brown UK Primary Opportunities (+0.5%) underperformed the UK equity market (+1.4%).
A quieter period for primary opportunities as is customary in August. We did however participate in the successful IPO of Strix and a primary placing in FairFX.
Markets ended the month higher though there were a few sharp risk off days mainly due to growing tensions between North Korea and its continued nuclear missile testing and an inflammatory President Trump. Strong Chinese demand buoyed commodities and Eurozone growth reached 5 year highs. On the other hand, UK growth remains modest not aided by EU negotiation uncertainty. Sterling hit 7 year lows against the Euro.
Markets continue to trade at historically high valuations which are justifiable given the earnings momentum and attractive dividend yield on offer, particularly from the UK market. However we are cognisant of not overpaying for assets and our primary market approach, which allows us to buy at discounts to the prevailing market price, aids our downside protection. We continue to emphasise buying into good quality companies at reasonable prices and anticipate a busy autumn ahead for primary opportunities.
Purchases
Strix
A global leader in kettle controls that is well placed to benefit from growing middle classes in emerging markets where ownership of kettles is rising rapidly. The valuation and dividend yield make it a compelling investment. The shares have already returned in excess of 30%.
FairFX
FairFX is a leading foreign currency payments provider. We purchased the company as part of a primary placing of £20m for the acquisition of CardOneBanking that transforms FairFX into a larger digital payments and banking services provider.
Sales
Gulf Marine Systems
Following a profit warning on delayed contracts we were concerned over debt covenant levels and whilst the shares fell sharply, we moved swiftly to exit our holding.
Fever-Tree
The shares have continued to soar since last month’s stunning set of results. Given the heighty valuation, we felt it prudent to pare back our holding. It remains one of our largest holdings.
Hastings
The shares were sold following a rise on the back of a solid set of results. The Company remains reasonable value but insurance is a notoriously competitive business and we felt our cash will be better deployed in upcoming primary opportunities.
OneSavingsBank
The shares were sold following results and a recent share price recovery. The Company remains heavily exposed to the UK economy and Brexit sentiment and whilst modestly rated, we felt inclined to exit a volatile stock at an opportune moment.
Discrete Annual Performance – August 2017
| Fund/Benchmark Name | 31/08/2012 to 31/08/2013 | 31/08/2013 to 31/08/2014 | 31/08/2014 to 31/08/2015 | 31/08/2015 to 31/08/2016 | 31/08/2016 to 31/08/2017 |
|---|---|---|---|---|---|
| IFSL RC Brown UK Primary Opportunities P Acc | 13.59 | 10.82 | -1.27 | 13.98 | 23.51 |
| IA UK All Companies | 23.55 | 9.67 | 1.52 | 8.85 | 13.77 |
| FTSE All Share | 18.90 | 10.33 | -2.34 | 11.73 | 14.33 |
Source: FE 2017
The past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested.
