Register Log-in Investor Type

Monks mild outperformance driven by a diverse range of stocks

Monks Investment Trust has announced its interim results for the six months ended 31 October 2015. Over the period, the company’s NAV lost 3.5% in total return terms, modestly outperforming the FTSE World Index which lost 4.3% (all in sterling terms). Reflecting a modest widening of the discount during the period, the share price total return was minus 6.9%. The company says that it normally regards short term results to be random and market volatility during the period this period supports this view.

The company says that a diverse range of stocks has contributed to returns during the period with particularly helpful performance from a number of US stocks including Royal Caribbean Cruises, Amazon.com and Alphabet (the search engine formerly known as Google). The company says that equity turnover for the six months was 6% and that the portfolio focussed on companies which they believe should grow at an above average rate over the long term.

In its final results in June the company said that it expected earnings per share to fall in the current financial year as a result of the portfolio restructuring, following the change of management team, towards stocks with higher growth prospects and typically lower dividends. The company says that the change in emphasis reflects a preference for growth stocks that reinvest more of their cashflows back into their businesses to drive future growth, rather than paying it out as dividends. Earnings per share for Monks for the period of 0.89p are therefore lower than the 2.26p for the corresponding period a year ago. Reflecting this, the Board has decided to pay an interim dividend of 0.50p per share, which will be paid in January 2016.

In terms of portfolio activity, the company says that, following the major portfolio reorganisation in late March and April, activity over the period was limited. Within this, there were five new purchases and one stock was sold completely. The new purchases included three stocks operating in ’emerging markets’: Autohome (a Chinese on-line car retailer), MTN (an African mobile phone network) and Sands China (casinos in Macao). The company says that all three have exciting long term growth prospects, in their view, but also face a range of more proximate operational and macro economic risks which have contributed to share price weakness and created a buying opportunity. All have entered the portfolio as what the company describes as incubator sized positions. They say that this approach appears to have been a sensible precaution in the case of MTN, which at the end of the period announced it was facing a significant regulatory fine in Nigeria. The company has also added to China’s leading e-commerce operator Alibaba, following share price weakness caused by macro concerns. The one complete sale was of China Resource Enterprise after its parent company bought control of its retail assets. The company says that the residual rump business holds less appeal following a rerating.

In terms of outlook, the company says that, in their view, over the long term equity markets are likely to rise and as such shareholders should benefit from positive gearing. As such, they are actively seeking opportunities to apply the fund’s borrowings and would expect, under normal conditions, to be approximately 10% geared to equity investments. They had begun to buy equities in early September but the market’s subsequent rally has led to a pause for the time being, whilst a better opportunity is awaited. The company’s US Treasury bond position has been and, since the end of the period, the proceeds have been used to reduce outstanding borrowings.

Monks mild outperformance driven by a diverse range of stocks : MNKS

Leave a Reply

Your email address will not be published. Required fields are marked *

Please review our cookie, privacy & data protection and terms and conditions policies and, if you accept, please select your place of residence and whether you are a private or professional investor.

You live in…

You are a…