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Update from Temple Bar as it sells least cyclical holdings

The title of this article was changed on 26 March 2020 to correct an error spotted by one of our readers.

The UK equity income sector investment company, Temple Bar (TMPL), noted the following in its update to the market:

“Going into 2020 the TMPL portfolio was almost fully invested, including borrowings. The manager believed, supported by historical data, that value equities were very cheap relative to history and that UK equities were cheap relative to world equity markets.

Most cheap value equities offered some level of cyclicality which the manager accepted as those stocks had, in general, underperformed and were discounting only moderate economic growth.

The trust’s assets were particularly focused on stocks earning the majority of their revenues in the UK. The manager expected an expansionary budget and expected this to generate better than expected economic activity in 2020.

At the year end, approximately 6% of the portfolio was invested in precious metals (bullion and shares) as the manager believed we were approaching a new period of fiscal and monetary policy which would presage a period in which independent Central Banks were less focused on inflationary targeting than they had been for many years.

The covid-19 outbreak and the consequent extreme market volatility has proved an exceptionally difficult backdrop for the portfolio with many of the trust’s holdings falling significantly.

After lengthy discussion, the manager and board decided to increase significantly the liquidity on the portfolio thus immunizing the gearing on the trust. This was conducted through sales of the least cyclically exposed of the stocks on the portfolio. This maintained much of the sensitivity to a market, and in particular to a value recovery.”   

TMPL’s top ten holdings are as follows:

Travis Perkins 6.2%
Royal Dutch Shell Class B 4.6%
BP 4.4%
Royal Bank of Scotland Group 3.7%
Grafton Group 3.6%
Barclays 3.3%
Kingfisher 3.3%
TP ICAP 2.8%
Forterra 2.8%
Capita 2.6%

TMPL: Update from Temple Bar following sales to bring down cyclicality exposure

2 thoughts on “Update from Temple Bar as it sells least cyclical holdings”

  1. Title of the article not correct. They are increasing exposure to cyclicality. “This was conducted through sales of the least cyclically exposed of the stocks on the portfolio.”

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