Artemis Alpha Trust (ATS) announced its annual results for the year end up to 30 April 2023. During year NAV per share rose by 1.3% and its share price fell 1.2% (on a total return basis). In comparison the benchmark FTSE All- Share Index rose by 6.0%. The second half of the year showed a stronger relative performance than the first half with NAV rising by 17.0%, compared to a 12.5% increase in the benchmark. Although the FTSE All-Share Index is the formal benchmark, the manager noted that a significant proportion of the companies in the portfolio are relatively small and form part of the FTSE 250 Index which declined by 3.3% over the year and the portfolio bears little relationship to the FTSE All-Share.
Discussing the performance for the year, chairman Duncan Bridge noted:
“During the year global markets were dominated by Russia’s invasion of Ukraine and the resulting sharp increase in energy prices, inflation and interest rates. The uncertainty caused by Brexit was exacerbated by the mishandling of the economy by the Truss government, resulting in weakened sentiment towards the UK market and, in particular, the consumer-orientated stocks which feature strongly in our portfolio.
“However, the manager remains confident in the prospects for individual stocks and convinced of the under-valuation of many UK companies. Although the portfolio remains dominated by exposure to UK companies such as retailers, banks and housebuilders, the manager has also initiated positions in some non-UK companies including out-of-favour digital companies such as Nintendo, Alphabet and Meta.”
Regarding the outlook, the investment manager added that;
“The current portfolio is characterised by exposures to capital cycle beneficiaries, structural growth opportunities, and discounted UK assets. Airlines (easyJet/Ryanair) and retailers (Frasers/Currys) stand to see higher returns from limited capacity / consolidation. Financials (Lloyds/Natwest, Plus500, Hargreaves Lansdown) should be beneficiaries of interest rates remaining higher than they have been in recent years whilst the UK housebuilders should benefit if interest rates ease from current levels. Out-of-favour digital winners (Nintendo, Delivery Hero, and Alphabet) continue to benefit from structural trends that should improve their business economics.
“Another reason we are confident in the prospective returns of the portfolio is the result of the diversification in the sources of excess return that we have identified. The portfolio also retains considerable liquidity, with over 80% of the company able to be sold within one day, which enables us to take advantage of movements in the market.
“We judge the greatest visible risks to our outlook to reside in energy markets and geopolitics. Energy markets are fundamentally tight due to underinvestment following the 2014/15 downturn and disruptions to European gas supply provoked by the war. Higher demand or an unforeseen reduction in supply would be damaging to economies with limited domestic supply. Both the UK and US will have elections next year and US-China relations remain strained.”
ATS : UK optimism for Artemis Alpha Trust after up and down year