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HL Select Funds

HL Select UK Shares - 1 month in

HL SELECT UK GROWTH SHARES

HL Select UK Shares - 1 month in

Monthly roundup

Important information - The value of this fund can still fall so you could get back less than you invested, especially over the short term. The information shown is not personal advice and the information about individual companies represents our view as managers of the fund. It is not a personal recommendation to invest in a particular company. If you are at all unsure of the suitability of an investment for your circumstances please contact us for personal advice. The HL Select Funds are managed by our sister company HL Fund Managers Ltd.
Steve Clayton

Steve Clayton - Fund Manager

6 January 2017

The fund has had an exciting first month. The market was strong, as investors reacted to the prospect of a Trump-Pump to the USA, the world's largest economy. The new President-elect advocates a “USA First” approach to the economy. Whether it eventually turns out to be a Trump-Pump, or a Slump 'n Dump is another matter. Right now though, the bulls have their horns out.

A combination of new monies from investors, a dividend or two, plus performance mean that the fund has grown in value by almost £30m since launch and currently stands at just under £200m. Although please note past performance is not a guide to the future.

View the portfolio breakdown

Top performer has been Burford Capital, which is probably the most esoteric investment in the fund. We first bought stock at around 465p and then followed up with further purchases at around the 550p level, after the company announced a deal to acquire its largest rival.

Burford finances other parties' legal disputes, investing its capital to pay the solicitors' fees and other expenses, in return for a pre-agreed share of the proceeds, if the case succeeds. The business has been rapidly building its portfolio of cases and whilst the timings of commercial court cases are often hard to predict, there should be plenty of potential for positive news in the years ahead.

Already in 2017 Burford has announced that it has sold on part of its interest in a major case, at a level that suggests at least a tenfold return on its investment, if the case continues to proceed positively. That has seen the stock push through 600p on the first day's trading of the New Year.

The next largest gains have come from Compass Group, where we bought in on day one at just over 1325p. The stock has so far risen over 10%. Positive demand for US-centric businesses seems to have been the main driver; Compass's largest division serves the US catering markets.

That demand for US exposure has also led Intercontinental Hotels Group to register a double-digit gain.

We have another double-digit gainer in the portfolio, the name of which we have yet to reveal. We are currently deciding whether to stick with the quantity of stock we have bought so far, or continue to accumulate, despite the higher prices.

The largest loser is another stock where we are currently actively building the position and so have not revealed the position. The stock's loss is only 1.2%, the position is still very small and we are happily continuing to add here. But it is not the most liquid of stocks, so it may be a fair while before we get the full position we want and can reveal its identity.

At the moment, however busy the market, we would tend to regard it all as a bit of a phoney. Investors are trying to pre-empt the impact of political change, before they even truly know what the change will be, never mind the likely effects. What is missing is that which matters most; results from real companies and their managements' confidence, or otherwise, in the direction of their businesses.

Those will come over the next few months, as 2016 full year results are reported and the way the market responds to those results will be much more tangible than the current seasonal posturing.

View the portfolio breakdown

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Important - This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research for more information. Unless otherwise stated performance figures are from Bloomberg and estimates, including prospective yields, are a consensus of analyst forecasts from Bloomberg. They are not a reliable indicator of future performance. Yields are variable and not guaranteed.