Our UK Smaller Companies Fund has risen 7.8% in the first six months of the year and there appears to be every reason to hope for more of the same in the second half of 2024. First and foremost, global investors have woken up to the fact that UK assets are trading CHEAP. Without wanting to be that guy… we have been saying this for a while now (see previous Quarterlies).

We have seen a flurry of bids for London-listed businesses as predominantly international buyers have looked to pounce on bargains. Within this fund we have seen Swedish private equity investors EQT successfully bid for Keywords Studios (despite our protesting to the Board of Keywords that the price was too low) and housebuilder Redrow being taken over by their peer Barratt Homes. Elsewhere in the market (not owned in this fund) we have seen Britvic (owner of Robinson’s squashes) swallowed up by PepsiCo, Anglo American narrowly avoid being taken over by BHP Group and now it looks like Hiscox is in the crosshairs of a large Japanese suitor. We would much rather remain shareholders in businesses such as Keywords and Redrow rather than be forced sellers at these levels, but if UK markets will not see the value, then somebody else will and has.

Elsewhere within the Fund, Diploma once again deserves honourable mention for what looks like an excellent acquisition of Peerless Aerospace, a provider of specialty fasteners to the Aerospace and Defence markets in the US and Europe. We have also been heartened to see recovery in the share prices of names such as Fuller’s (London pubs) and Pets at Home (needs no introduction) – in both cases we felt that shares were unjustifiably beaten-up due to short-term worries about the UK economy and so we added to our positions at lower levels earlier in the year.

Otherwise, regular readers will be familiar with our top holdings that are largely consistent with the last quarter and, indeed, have been stable for a substantial period now reflecting our conviction in these businesses over the long-term.
 

The above article has been prepared for investment professionals. Any other readers should note this content does not constitute advice or a solicitation to buy, sell, or hold any investment. We strongly recommend speaking to an investment adviser before taking any action based on the information contained in this article.

Please also note the value of investments and the income you get from them may fall as well as rise, and there is no certainty that you will get back the amount of your original investment. You should also be aware that past performance may not be a reliable guide to future performance.