Montanaro UK Smaller Companies, managed by Anna Lunden (pictured), has announced it interim results for the six months ended 30 September 2015. During the period, the company provided NAV and share price total returns of 12.5% and 14.7% respectively. These are both ahead of the performance of its Numis Smaller Companies Index benchmark, which returned 9.9%. Whilst the announcement does not comment on the contributions of individuals stocks, the managers do say that the outperformance of the company’s NAV relative to the benchmark was, “due to good stock selection and a favourable style tailwind”. The managers also say that increased corporate activity, with three stocks subject to takeover, was helpful to performance. During the period the share price rose by 8.4%, narrowing the discount to NAV from 16.5% to 12.2%.
In terms of outlook, the managers believe that there are reasons for cautious optimism for SmallCap investors. Firstly, they argue that the asset class is less exposed to energy and commodities, which are under pressure from investors as global overcapacity is yet to be reduced. Secondly, they make the case that UK small caps are more domestically focused and has therefore been less buffeted by conditions abroad. As a result they believe that investors are favouring the asset class because of the UK’s better economic performance, while they are also rewarding those companies that are able to translate a more dynamic economic environment into earnings growth. They therefore believe that the outperformance of SmallCap can continue into the New Year, if not beyond.
Montanaro UK Smaller Companies benefits from good stock selection and a favourable style tailwind : MTU