Aberforth Smaller Companies

Last updated 03 December 2019

ASL’s portfolio is on a deep discount to the market, with signs of a turnaround in performance…

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Aberforth Smaller Companies. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Aberforth Smaller Companies

Aberforth Smaller Companies Trust (ASL) takes a disciplined value approach to investing in UK small-caps, which has generated market-beating returns since launch in 1990. Since the financial crisis, growth strategies have tended to outperform in the UK and globally, and ASL has not been spared.

However, in the past few months there has been a sharp rally in value stocks. This has seen ASL’s share price rise by almost 20% – with the NAV rising and the discount narrowing – illustrating the potential should the ‘elastic snap back’. The managers note that, in terms of the historical price-to-earnings (P/E) ratio, ASL’s portfolio is trading on the widest discount to the smaller companies index in its near 30-year history.

The trust is managed by a team of seven, five of whom are partners of Aberforth. The investment approach is long-term, and the managers are active shareholders behind the scenes. The partnership structure and the managers’ significant investments in their own funds mean that interests are strongly aligned with those of the shareholders, in our view.

Although ASL aims to generate total returns, dividends are viewed as an important part of that return and the value approach means that the portfolio often yields more than the market. The current historic yield is 2%, excluding special dividends. Revenue reserves are healthy, as discussed in the Dividend section.

As sentiment has shifted back towards value strategies since the summer, the discount has narrowed and ASL now trades on a 3.5% discount, compared to an AIC UK Smaller Companies sector average of 6.5%.

Thomas McMahon
Thomas is a senior investment trust analyst and joined Kepler in April 2018. Previously he was senior analyst at FE Invest, where he was responsible for fund selection for a range of model portfolios. He covered all asset classes over time, but has particular experience with emerging markets and fixed income as well as UK smaller companies funds. He has a degree in Philosophy from Warwick University and is a CFA charterholder.

Fund History

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Key facts

Investment objective

To achieve a total return greater than that of the NSCI (XIC) over the long term by investing in a diversified portfolio of small UK quoted companies

As at:

29/11/19

Trust Name

Aberforth Smaller Companies

Ticker

ASL

Management Company

Aberforth Partners

Manager Name

Peter Shaw; Richard Newbery; Alistair Whyte; Chris Watt; Keith Muir; Euan Macdonald;

Association of Investment Companies (AIC) Sector

UK Smaller Companies

12 Mo Yield

2%

Dividend Distribution Frequency

Semi-Annually

Latest Market Capitalisation

£1,258,834,908

Latest Net Gearing (Cum Fair)

1%

Latest Ongoing Charge Ex Perf Fee

0.79%

Turnover Ratio

26.2%

Shares Outstanding

89,533,066

(Discount)/ Premium (Cum Fair)

-3.5%

Daily Closing Price

1406p

Source: Morningstar, Aberforth Partners

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

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