Second half rally drives strong year for Artemis Alpha Trust

Artemis Alpha Trust (ATS) announced its annual report for the year ended 30 April 2024. The company delivered a NAV total return of 15.1%, well ahead of the benchmark index return of 7.5%. Shares rose 12.3%. The discount was 11.7% at the time of publishing. The company noted that during the second half of the year the portfolio enjoyed a stronger absolute and relative performance after a difficult first half dominated by uncertainty and volatility. In the six months to the end of April 2024 the net asset value per share rose by 27.3% and the share price by 34.2% versus 14.2% for the benchmark.

Discussing the portfolio, the manager noted that it remains optimistic about the UK and the prospects for consumer spending in particular. It added that although the portfolio includes some international names (such as Alphabet, Nintendo and Universal Music), about half of its net assets are invested in companies which are primarily exposed to the UK economy. It says a combination of improving macro conditions and a more positive outlook for UK corporate earnings has drawn attention to the low valuations placed on many UK companies such as banks and housebuilders, as evidenced by the spate of takeovers in the latter sector.

Discussing the performance and the outlook, fund managers John Dodd and Kartik Kumar added:

“The year witnessed a rise in stock prices even as bond yields increased. Several factors contributed to this outcome. Inflation indicators moderated as pressures diminished, resulting in less uncertainty about the future path of interest rates. This happened without a significant deceleration in economic activity, which meant corporate earnings were stronger than expected. Also, continued hope for the benefits of artificial intelligence lifted stock performance, especially in the US market.

“We are optimistic about the portfolio’s potential returns, based on a combination of bottom-up and top-down factors that can be summarised as follows:”

• Macro headwinds to UK corporate earnings and confidence are set to ease.
• Low valuations in UK domestic assets (e.g. Housebuilding/ Banking) should lead to high future returns.
• “Wide moat” businesses (e.g. Technology/Media) continue to offer up attractive opportunities.
• Capital intensive industries (e.g. Retail/Aerospace) are benefitting from a capital cycle.

ATS : Second half rally drives strong year for Artemis Alpha Trust