Odyssean beats Index since IPO

Odyssean beats Index since IPO

Odyssean beats Index since IPO- Odyssean Investment Trust plc (OIT) has had a good year so far since its IPO on 1 May 2018. The trust raised £87.46 million at its IPO and it has beaten the benchmark since IPO. The benchmark, which is the Numis Smaller Companies ex-Investment Trust plus AIM, has had a NAV total return of -0.4%. Meanwhile Odyssean has had its NAV total return rise to 1.4% over the same period. This still while only having 23% of its capital deployed which leads to cash drag, and transactional costs of investing in new companies. There will be no interim dividends as dividend income was too low. Odyssean currently has a net cash balance of 55% and averaged 77% from December 2017 to September 2018, this net cash balance the company says is right in line with expectations since launch.

Odyssean is currently invested in nine holdings, which the company believes is good progress towards its goal of 20-25 holdings with minimal portfolio turnover. The nine holdings are operating in the Technology, Media, and Telecoms, Business Services, Consumer and Healthcare sectors. Their major positions are in SDL (9.3%), Equiniti (8.8%), and Chemring (8.0%). Their four mid-sized holdings are Devro (4.2%), Wilmington (4.2%), Volution Group (4.1%), and Benchmark Holdings (3.9%). They have two smaller investments that only account for 2.8% of net assets.

The portfolio manager had the following to say about the outlook of the company: “Volatility has dominated the period since the end of September 2018. Highly valued companies have appeared to be first in line to bear the brunt of the sell-off. We anticipate that this volatility will continue to create opportunities for the Company. For the first time in four years, there is obvious value in UK markets, which appear to be shunned by international investors. Anecdotal evidence suggests that MiFID II is leading to less communication between buy-side and sell-side market participants. We believe that this could be contributing to what we perceive to be increased share price volatility and polarised valuations. However, value is not ubiquitous, and despite a de-rating of expensive, higher growth AIM momentum stocks, many still appear to trade on considerable premia to takeout multiples. Buying shares in these companies seems to us to offer a limited margin of safety. Where we are finding pockets of value, the key judgement call is whether companies’ earnings projections are realistic. To help mitigate this, we remain focused on finding companies which are generating margins below their peak and potential, but where we believe there is limited downside. These companies should be able to grow profits through management actions, even in circumstances where sales growth may prove challenging. Liquidity remains patchy, bid offer spreads remain wide and individual share price volatility remains high. There is no evidence to date of material outflows from open-ended funds. As a result, we will need to be patient in building positions and performance of individual stocks and the portfolio in the very short term may be unrepresentative. Our investment horizon remains three to five years for each investment. We continue to target situations where we think there is a good prospect of attractive annualised returns in normal markets, without too much risk being assumed, and where management actions rather than re-rating alone can deliver good returns.”
OIT- Odyssean beats Index since IPO

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