By Adam Lewis LeggMason Enterprise has moved from holding more than 20% of its portfolio in A...
By Adam Lewis
LeggMason Enterprise has moved from holding more than 20% of its portfolio in Automony to just under 2%.
The share price of LeggMason Enterprise has slumped from 364p in January to 184p on 17 April, as a result of current market sentiment to technology stocks.
The trust, managed by John Johnston, runs an aggressive growth oriented small-cap mandate that looks out over three to four years to turn small-cap holdings into larger ones, leading the portfolio into holding a lot of technology companies.
Andy Gray, deputy fund manager on the portfolio, said that the trust has been hit hard by the de-rating of technology stocks and that in current market conditions, investors are looking more for earnings now rather than the prospect for future earnings.
Gray said that the trust has seen particularly poor performance because it has holdings in the stocks that have been hit hard by the de-ratings.
He added: "Autonomy was one stock that we got wrong. Last year we had more than 20% of the fund in it, this was reduced to 10% in August and since then prices have come down further as a result of a recent profit warning. The stock did not prove to be as resilient as we expected in the face of the technology crisis."
On 17 April, the trust only held 1.89% in Autonomy. Nick Greenwood, analyst at Christows, said Autonomy suffered because, while it was performing well, investors are now disheartened by technology. The company's shares are currently trading at a 20% discount.
Gray said a stock it believes it has called right, however, is Surfcontrol, a company that deals with internet access control, which it has 3.69% of its portfolio in.
He said: "So far it has performed well, had good results and has not seen any signs of a slowdown yet. However, because the market is currently worried about earnings, US exposure and IT spending, this stock has, in our view, been unjustly de-rated. However, we still believe in its business."
Over the past three months the net assets of the trust have fallen by 37%, compared to a fall of only 11% in the small-cap index. Over three months to 17 April, the trust has fallen by 49%.
Gray said that even though times for the trust are hard and painful mid-to-short-term the way it is run will not change.
He said: "It is a volatile fund but we maintain our aims for the longer-term horizon. When these businesses later mature, the value in them will be reflected."
Greenwood said the style Johnston uses has served him well in the past.
The trust's three year record, going back to when it was known as Murray Enterprise, has outperformed its peer group by 30%.
Gray said the trust is taking the opportunity with current market condition to add some holdings to its portfolio as there are some good values to be found at the moment.
"Transense Technologies now makes up 2.04% of the portfolio as we still feel this company as got a long way to go and at the moment has good newsflow," he said.
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