Frankly, 2022 will be long-remembered as an ‘annus horriblis’ for investors, especially those with a quality growth bias.
Domestic politics over the summer and autumn certainly didn’t help the UK market and subsequently UK focused funds were hardest hit with record outflows of over £8bn, with every month witnessing net selling.
However within the CHUK portfolio we have kept ourselves busy as numerous opportunities presented themselves. The portfolio was further concentrated and now has 38 holdings, down from 45 at the start of the year. We exited 11 positions and initiated in 4 new ones. Gone from the portfolio are Rio Tinto and Smith & Nephew (both after 21 years), as well as Melrose Industries, Hargreaves Lansdown, IntegraFin Holdings and smaller company holdings in TT Electronics, Kainos and RWS Holdings.
Welcomed to the portfolio were a quartet of businesses that we have had, long-term, on our watchlist: kitchen supplier Howden Joinery, US rental equipment provider Sunbelt Rentals owner Ashtead Group, video game services business Keyword Studios and our strategic decision to utilise the CH UK Smaller Cos fund in place of running the smaller company businesses in this portfolio for liquidity reasons. Out of the remaining 34 holdings, 32 were added to over the course of the year.
Looking forward to 2023, our underlying holdings are starting to make positive noises with indications that 2023 will be a better year. Just for example, Greggs are continuing to see sales soar, mitigating their rising input costs and post quarter end, JD Sports Fashion announced a bumper festive period with sales +20% on the previous year surprising even the most bullish of analysts. In November, Beazley raised a further £385m to support underwriting expansion in its successfully growing cyber and speciality offerings. In December, Ashtead Group announced that they fully expected their full-year results to be ‘ahead of our previous expectations’ with growing volumes across their rental markets, being driven by US construction strength.
Despite the travails of 2022, the UK is home to some incredibly successful and resilient international and domestic companies. Whilst it is impossible, and useless, to predict the direction of market trade winds for this coming year, we will continue to focus on investing in high quality UK listed businesses that operate in unique circumstances and that we believe can grow at steady rates 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.