What I Bought Last the shares trade at a discount . In comparison , the annualised returns from the FTSE All Share index , and the trust ’ s benchmark , the Numis Smaller Companies ( ex ITs ) index , stand at 10.1 % and 8.3 % respectively . So , not only did the smaller companies effect work , but the trust also beat its benchmark . The latter observation is interesting because the trust ’ s investment style is all about value , a style that has been out of favour since the financial crisis . Until recently , growth investors dominated the short- and mediumterm performance tables . But with surging inflation , rising interest rates and an uncertain economic outlook , growth stocks have de-rated significantly so far this year while value has outperformed – albeit only in relative terms . But as the trust ’ s managers recently noted , in a difficult environment to navigate , “ value is a useful compass ”.
The investment case So here ’ s the investment case . Valuations of UK equities decoupled from the rest of the world following the Brexit vote and continue to trade at a significant discount to their international peers . UK smaller companies trade at a discount to UK large companies , and M & A activity is growing in this area ( the trust has recently seen bids for holdings Brewin Dolphin , McKay Securities and Stagecoach ). The trust ’ s P / E ratio is at a 25 % discount to that of the average smaller company . And its shares trade at a 15 % discount to NAV . For that you are getting exposure to a selection of well-managed and resilient UK businesses with strong balance sheets in an unloved and under-appreciated corner of the market .
Peter Walls is the manager of the Unicorn Mastertrust
Issue 86 - July 2022 / 69 /