James Carthew: Smithson and GSCT look sensible options
Smaller companies are out of favour as nervous investors prefer liquid mega caps (especially those with an AI angle, however tenuous). Nevertheless, in the global smaller companies sector, both Smithson (SSON) and Global Smaller Companies Trust (GSCT) have managed to make positive net asset value (NAV) progress over the past 12 months and are sensible options if you want exposure to this area.
Over that period, SSON has returned 13.6% or 14.1% in share price terms. It is clawing back some of the ground it lost over the first half of 2022, but at £13.82 per share it has a long way to go until it regains the £20-plus highs achieved in December 2021 – before interest rates started to climb.
SSON is a growth-focused fund, like stablemates Herald (HRI) and Edinburgh Worldwide (EWI), but its focus on companies with strong cash flows that can be reinvested to support business growth means that it is better suited to the current environment where equity fundraising is hard and debt finance is more expensive and more difficult to secure.
Nevertheless, 2022 was SSON’s worst year since its launch in 2018. Its holding in Fevertree Drinks (FEVR) proved particularly unhelpful (taking about 3.2% off the NAV), which is ironic as I wrote almost exactly the same thing when I last looked at the trust back in March 2020, although then the hit was 1.5%.
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