IN THE BACK
Aberforth Smaller Companies Trust
Unicorn ’ s Peter Walls says this trust is trading at a quadruple discount
There ’ s plenty of evidence to show smaller companies perform better than their larger counterparts over the long term . But there ’ s one big caveat : some years will be outstanding ( the average smaller company ’ s share price gained 56 % in 2009 ) while some will be dreadful ( there was an average fall of 43 % in 2008 ). Of course , these moves were during the financial crisis , but they were of far greater magnitude than equities in general . In the past , patient investors with a strong stomach have been handsomely rewarded by the “ smaller companies effect ”. There ’ s a lot of debate about the strength of this effect , and there have been protracted periods when it simply hasn ’ t been evident at all . But outperformance of just 1 or 2 percentage points per annum can be significant if it is compounded over many years . Moreover , if you believe investment performance is cyclical , then now may be a good time to consider buying into this area .
Put it into practice We have recently added to our holding in the
Aberforth Smaller Companies Trust , which was launched in December 1990 . Since then , the share price has delivered an annualised compound growth rate ( including reinvested dividends ) of 11.9 %. The net asset value ( NAV ) has fared even better , at 12.3 %, but
/ 68 / trustnet . com