There is no hiding from what was a difficult first quarter for our UK Smaller Companies Fund. After a strong 2021, markets for smaller companies took a hit against the backdrop of Putin’s aggression and rising interest rates.
Small companies tend to be hardest hit in nervous times and investing in this area can require thick skin. With this fund, we have set out to invest in a focused list of high-quality businesses that we think will grow at high rates for many years. Fevertree Drinks is an example that readers will be familiar with – Charles Rolls and Tim Warrillow created a unique brand and in doing so, started a whole new category of premium mixers. Fevertree have doubled their sales in the all-important US market over the last two years and, in our opinion, have only scratched the surface of this enormous spirits market.
Over the last three months Fevertree shares have fallen by a third, offering us the chance to add to our position, whilst others worried about Russia and inflation. This is just one example of what has been going on across the market. With this fund we have the advantage of being stock pickers, spending the majority of our time looking at the individual businesses and focusing on the long-term. On that basis, we have added to a number of positions we have been following for years, and feel have been oversold by the market – businesses such as industrials Judges Scientific and Diploma, insurer Beazley and pub company Young’s, to name just a few.
Brewin Dolphin also deserves mention, as shares in the wealth manager shot up on the back of a takeover offer from RBC. We were as surprised as anyone with the high multiple that was paid, but more than happy to accept the takeover at that price.
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.