manager of f&C us smaller companies trust focuses on insurers, seeing banks as overpriced
The F&C US Smaller Companies Investment trust is to continue with a discount narrowing policy that has seen it buy in some 25% of its shares since December 2002.
Chairman Gordon Grender underlined the board's commitment to the process, which has a stated policy of trying to keep its long-term discount to NAV at about 10%. It now has a market cap of £58m with total assets of £63m.
The policy appears to be working with shares trading at a discount to NAV of 8.3% as of 8 September compared with a weighted average for the US smaller companies sector of 16.2%, according to research by HSBC.
Grender, best known as a US fund manager at GAM, made the comments as the trust issued its unaudited preliminary statement for the year ended 30 June 2003.
During this period, NAV per share fell 8.4% compared to a decline of 10.5% in the benchmark sterling-adjusted Russell 2000 Index.
One element helping performance in a difficult market is fact the trust has no gearing. The sector as a whole has a weighted average gearing level of 108% with North Atlantic Smaller Companies leading the way at 119%.
Nick Greenwood, head of investment trusts at Iimia, said the trust's commitment to buybacks is what marks it out from its peers while its overall portfolio performance tends to reflect that of the market.
The trust launched in 1993 and was run by James Findlay until 1999. It is now managed by Robert Siddles, who was previously at Gartmore.
Siddles characterises himself as a stockpicker who is not keen to call themes or the direction of markets. Even so, he is confident that everything possible has been done by the US authorities to engineer an economic recovery and the re-election of president George Bush.
As such, he is preparing the portfolio for an environment characterised by stronger growth and higher interest rates.
One example of this is his overweight position in the consumer discretionary sector, which Siddles sees as a good source of recovery stocks.
Even so within this sector he has reduced his holdings in media and invested in financials. Within financials he is underweight banks as he believes they are overpriced and has focused on specialised lenders and insurers instead.
During the past year, Siddles has maintained a cautious stance towards technology.
He added: 'I have also re-organised our educational holdings. Education is presently big business in the US and over the year I sold off some holdings and bought cheaper ones.'
All the trust's warrants were cancelled in December 2002 and the annual general meeting takes place on 14 November at Foreign & Colonial's offices in London. Future shareholder votes on the continuation of the company take place every three years, starting from the AGM in 2005.
Describing his investment style, Siddles said: 'I look for strong franchises with a sustainable competitive edge and free cashflow.
'Managers should have significant stakes in their company and the shares must be out of favour.'
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till