Over the same period the Church House UK Equity Growth fund fell 1%. Most of this failure in keeping apace with the market was down to not holding British American Tobacco, HSBC and BP. Not owning these three FTSE stalwarts has hurt the fund, and it is at times like these that we have to remind ourselves why are we not holding these types of company and is it detrimentally hurting us. 

The fund’s strategy objectives is to invest in UK quality growth businesses. These are companies which have tangible quality growth aspects, such as strong balance sheets and generate high, growing and organic cash flow. We like businesses that operate in asset light industries with high barriers to entry that deliver strong margins. Furthermore, we look to invest in companies with more intangible quality characteristics. Products with best-in-class brands and IP, with management teams that are aligned long-term with investors interests. It is hard to deliver a Quality angle on an oil and gas producer, a fading tobacco name (not to mention vaping) and a bank as big as HSBC. These three businesses operate in areas where there is strict regulation, government interference and are price takers (rather than companies that can set their own prices). Even though it has stung us in the short-term not holding these businesses, we believe (and have proven) that in the long term a portfolio of high quality growth stocks is the best way to invest. 

On this basis, the fund has a busy quarter with plenty of activity. In early August we initiated a position in Coca-Cola EuroPacific Partners. The company manufactures and bottles its eponymous products across western Europe, Australia, Indonesia and the Pacific. The company, like most soft drinks, has resilient and steady cashflow with a disciplined capital allocation. Despite slightly pared back guidance, the company delivered solid revenue and profit growth over H1 2025, coupled with a stable dividend and buyback program. The company has grown organically at just under 6% over the past ten years and 7.5% in EPS terms and we used the recent pull back to initiate in the stock. 

The position was funded by an exit in L’Oréal, who we have held since just before Covid. The stock has performed well for us, especially in the recently tough tariff-led environment. We felt that we wanted to increase our UK exposure in the defensive consumer staples sector and after a good run cashed in for a position in CCEP (Coca-Cola EuroPacific Partners).

In September, we also initiated a position in online property platform, Rightmove, a business we have watched for a long time after it came back into our valuation range. The company is very similar to Auto Trader, in where it operates on a subscription model to estate agents. From our own research we have found that it would be the most important outgoing for an estate agency in term of marketing spend and income generation. The proof is in the data, in 2024 it had 2.3 billion individual website hits and 980k properties listed. Shares fell back towards long-term average ratings and we took out a position in the stock.

In slightly smaller scale trading, we trimmed our top position in Diploma and in Alphabet who have both continued to outperform and reach all-time highs. We used the proceeds to top up London Stock Exchange Group, Relx and Sage, all have been hit in the past few months, but stand to benefit the most with their data heavy businesses in an ever-changing AI world. LSEG (London Stock Exchange Group) had good (and in-line) results but noted slower (but still good) growth in annual subscription value. They have a large and potentially powerful data set, so will be focussed on delivering the right AI tools to harness its growth. Sage was in a similar boat with good results but a slight slowdown in annual recurring revenue. Management however stated that the business should meet its full year guidance.
 

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.