Aberforth Smaller Companies

ASL’s value style has boosted performance, but valuations remain very low, and M&A could spark a further lift…

SHORE CAPITAL - Titon Holdings+ (TON, House Stock at 75p)

Aberforth Smaller Companies

ASL has outperformed since the vaccine rally, and its cheap portfolio valuations have historically led to strong returns…

Aberforth Smaller Companies

Aberforth Smaller Companies (ASL) is one of relatively few options for value investing in the UK small cap space. While value was out of favour for many years prior to the pandemic, since then it has staged a comeback and ASL has performed strongly as a result (see Performance). While ASL has outperformed its benchmark and sector in 2022 year to date, this has been in a falling market. Perhaps as a result of general risk aversion, the Discount has widened to 16%.

Finding value in a haystack

Non-income value strategies are becoming increasingly scarce, but the holdouts represent attractive near-term opportunities

Aberforth Smaller Companies - Overview

The reflationary rally since the announcement of successful vaccine trial results has been fantastic for value managers, and Aberforth Smaller Companies (ASL) has taken full advantage. As we discuss under Performance, the trust has generated strong returns over the past year, versus both the Numis Smaller Companies ex IT benchmark and against the UK small-cap sector. Consequently, the discount narrowed significantly in Q4 2020, the trust trading close to par in December and again in April 2021.

Aberforth Smaller Companies - Overview

Aberforth Smaller Companies (ASL) invests in UK small-caps. First listed in 1990, the trust utilises a team-based approach and places heavy emphasis on bottom-up stock selection using a disciplined value investment strategy. Whilst the composition of the team has changed since 1990, with all founding members having now departed, this process has remained consistent. As we discuss in performance, since launch ASL has outperformed the benchmark index by c. 2% p.a. The past five years have proven

Shoot to Thrill: ISA targets for long term growth

In times of crisis, the Romans would consult the Sibylline Prophecies. Contained therein was a prophecy that the 12 vultures seen by Romulus as he founded Rome (despite founding a start-up he still had time left for birdwatching, living before the modern-day culture of investors demanding updates) represented a signal that the primacy of Rome would last 12 saecula, a saeculum being a period taken as something between 85-100 years. With Rome and the Western Roman Empire falling to the Visigoths i

Eye of the Pfizer

It is often considered axiomatic in investment markets that smaller companies offer greater pricing inefficiencies, and thus greater opportunities to active managers to generate outperformance. In the UK Small Cap space, we have certainly seen suggestions over the long term that this is true, with the Morningstar UK Small Cap sector producing an average NAV return of c. 173.4% over the ten years to 05/02/2021, compared to a return of c. 115.2% from the Numis Small Cap including AIM excluding Inv

Cool Britannia?

There is no question the UK economy is in dire straits. A fall of 12% in GDP in Q2, followed by a 16% rise, led to an economy 7% smaller in September. The recent imposition of a second lockdown will lead to a further decline. The Bank of England forecasts the UK economy will end the year 11% smaller than when it started. The OBR estimates it will be smaller than it was entering the current crisis until late 2022. One lagging indicator which is lagging even more than normal is the unemployment ra

Aberforth Smaller Companies - Overview

Aberforth Smaller Companies Trust (ASL) invests in UK small-caps with a disciplined value investment style. While its portfolio has been under pressure in 2020, the announcement of good results from a candidate vaccine in late October saw its NAV rally and share price rally even harder than the market, which the managers believe indicates strong rebound potential. ASL has been managed to the same style since launch in 1990 and has outperformed the Numis Smaller Companies ex IT Index by over 1.5%

Five small cap trusts on very wide discounts

Trusts in the AIC UK Smaller Companies sector have de-rated significantly. Discounts have widened dramatically this year, having been pushed to a historic narrow point by the ‘Boris bounce’ at the end of last year. On an average discount of 12%, discounts in the sector are now wider than the 10 year weighted average discount of 11.5%. Within this average, there are some significant outliers. We look at the prospects for smaller company returns, as well as highlight those trusts exposed to them w

Aberforth Smaller Companies - Overview

Aberforth Smaller Companies Trust (ASL) owns a portfolio of cheap companies which the managers expect to outperform their more expensive peers. ASL has been team-managed since it was launched in 1990, and has outperformed the Numis Smaller Companies ex IT Index significantly since then. In more recent years the value style has been out of favour, and ASL has struggled relative to its growth-oriented peer group. As we discuss in the Performance section, the end of last year saw an outstanding qua

The fight in the dog

Smaller companies are usually a problematic area to invest in during significant downturns or recessions; and the sharp fall in 2020 hasn’t been an exception. In this article we assess the performance of smaller companies trusts throughout the pandemic, while identifying the factors that have differentiated the winners from the losers. This includes the impact that cash, market cap exposure, sector allocation, revenue exposure and growth or value biases have had, with some surprising results. We

First Quarter of 2020

We have knitted together the impact on the investment companies from what is now widely considered to be the most severe pandemic in a century. The collapse in asset prices over the latter part of March, brought the curtain down on an up-market that lasted more than ten years. In amongst this, there were pockets, such as the technology sector, that held up well. For many industries, the worst is still to come, as we brace ourselves for the sharpest contraction to global growth since the US great

Strong H1'23 results; forecasts upgraded

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Strategic progress drives robust growth

H1 interims are in line. Argentex has delivered strong growth (+28% yoy revenue) by driving growth initiatives. New technology-enabled products have been launched, including Alternative Transaction Banking, which are already delivering compelling growth ahead of expectations. Pressing into Europe via the Netherlands is also delivering strong growth. At the core, client KPIs remain strong. We leave our forecasts unchanged, with revenue momentum continuing into Q3. We believe the current 12.4x Dec

LIBERUM: Alpha Group International: A winning business at a cheap valuation

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Equals Group (EQLS LN) - Interims justify rise in forecasts

What’s new: Equals Group has delivered outstanding interims, which have exceeded even the positive commentary at the Capital Markets Day in May and the trading update on 5 July. With trading “ahead of expectations”, we raise our 2023E revenue forecast by 7% to £95m and adj EBITDA forecast by 11% to £20m, as well as nudging up our forecasts for 2024E and 2025E.

LIBERUM: Alpha Group International: Underlying strength

H1 23: focusing on capital generation

Promising results for M&G in H1 23. The new CEO, Andrea Rossi, continues to execute the company’s new strategy, and we have confidence that he is positioning M&G to surpass its financial targets for the 2022-24 plan. The H1 23 operating capital generation results significantly outperformed expectations, exceeding the consensus by more than 50%. This substantial capital accumulation is poised to deliver strong returns to shareholders, rewarding them for their patience during this transitional per

Gore Street Energy Storage + (GSF, House Stock, 84p) - Steady NAV growth

Robust interims; small reductions to FY24 forecasts

LIBERUM: Harworth: Valuation gains reflect management actions and operational progress

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Taking the Upper Brand: Brands Sector Overview

The earliest dated brand has long been contested; the majority point to Kongō Gumi, a family run construction company that specialised in Buddhist temples in Japan; its documented record of ownership goes back to 578 AD. Like Kongō Gumi, several different brands have withstood the test of time, albeit without then same degree of longevity. The term brand originates from the 1500s and means "to burn" in Ancient Norse and was initially used to mark cattle for ownership. This practice can be consid

Interim Results

FSFL, a UK centric solar electricity generator, delivered a solid H1’23 total return (-2.4%) in a difficult environment. During the period, the fund continued with its forward sales (locking in cashflows for the next 2.5 years), increased its discount rate by c50bps to 7.5% (UK), maintained its medium term inflation (2024-2030) assumption of 3.0% and announced plans to recycle 200MW of assets into higher returning projects. During 2023 the sector has de-rated as investors, grappling with valuati

Morning Note – 6 September 2023