Fleming Mercantile investment trust is looking for opportunities within value stocks but remains p...
Fleming Mercantile investment trust is looking for opportunities within value stocks but remains positive on the long-term technology story.
The closed-end fund is looking to increase its gearing to 16%, having fallen back to 4%.
The trust has seen an 11.8% rise in its NAV for the six months to 31 July, outstripping the 9.5% rise in the benchmark FTSE All-Share Index (excluding FTSE 100 and IC's) during what has been a volatile six-month period.
Fleming Mercantile saw its stocks in companies such as BATM Advanced Communications, Baltimore Technologies, and Psion rise sharply during the rush for technology stocks in the initial months of the year.
Martin Hudson, fund manager of Fleming Mercantile, said: "We've always been keen to invest in technology stocks so we had a large weighting in some individual stock before the rush began, we weren't overweight as such but the value of our technology stock rose pretty dramatically with rises of up to 30 times.
"Our initial investment into BATM was £3m. We took out £66m and we still have a remainder of about £30m in the company."
Ahead of the technology, media and telecoms correction in the early part of the year, all Fleming Mercantile stocks which were to be promoted to the FTSE 100 index were sold immediately to minimise the risk to the non-index portfolio, taking out a total of £300m.
The technology weighting in Fleming Mercantile has returned to a neutral level relative to the 17% benchmark weighting.
Recent cash injections following Chase Manhattan's acquisition of Robert Fleming and the takeovers of portfolio holdings MEPC, Arjo Wiggins Appleton, Racal Electronics and Courtaulds Textiles saw gearing being lowered to 4%.
Gearing has returned to 8%, with particular emphasis on value stocks, including recent acquisitions in chemicals and financials, with the emphasis there on small fund managers.
Hudson said: "We are looking at value stocks that we feel have been neglected during the excitement over the technology market.
"A lot of people have turned their backs completely on old-fashioned value stocks, with a lot being sold to provide capital to invest in technology, meaning their discounts are absurdly wide.
"We are looking to snap these up as we feel that their residual qualities, such as well-established market share, will ensure they keep their value.
"This does not mean we are not still looking for technology stocks, we have always been focused in this direction. However, as always we are taking it carefully and only buying into technology with a good, long-term plan.
"Eventually, we would like to get gearing up to its full potential of 16%, but we will be taking our time to ensure that the money is spent wisely."
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation