Lowland (LWI) share price decline

[JuanDB]

Hi,

I've been progressively topping up my investment in Lowland Investment Trust over the last 6-9 months as the share price has declined from a year high of £15.4 down to £12.4 today. My yield on cost is about 3.95%. A purchase today would give a forward yield just under 5%, well above the long term average.

The share price decline is puzzling me. I know the managers held Carillion to the end which would have caused a hit to NAV last year however the SP has dropped nearly 10% just in the the last month or so with no apparent reason. I'm not seeing that drop reflected in other UK G+I ITs such as Shires.

I'm seeing this as a buying opportunity rather than something of concern. Any alternative views?

Cheers,

Juan.

[Dod101]

I have never held Lowland but it is a UK oriented income and growth trust. It has many of the usual high income suspects and thus, like say Edinburgh IT, another trust with similar objectives, the decline in its share price reflects what has happened in that area of the market. Depends what you are looking for but I am personally not interested but then I have an exposure to that are through similar directly held shares and through Edinburgh Investment Trust.

I agree that for an IT, the yield is attractive, but at the cost of capital so it falls into the category of what I call dearly bought income..

Dod

[Dod101]

Sorry for the muddle in my post. I did not edit very well, but I hope you get my message!

Dod

[JuanDB]

Thanks Dod.

Perhaps the more useful point I should have raised is the widening discount. A decline in share price correlated to NAV reflects a decline in the underlying asset values. In the case of lowland the discount is widening from 5.x% average to 8.x% which may reflect increased market concern around the overall health / performance of lowland itself.

I can't see any information in the public domain to support a more negative view on lowland specifically - are others seeing something I'm missing?

[Backache]

I think Lowland as well as being domestically orientated has a higher exposure to UK small and medium sized companies which investors have been particularly bearish about with Brexit looming.
If Brexit turns out better than expected you may bet a very good rebound if worse then the shares could suffer further.

[richfool]

I think Lowland as well as being domestically orientated has a higher exposure to UK small and medium sized companies which investors have been particularly bearish about with Brexit looming.
If Brexit turns out better than expected you may bet a very good rebound if worse then the shares could suffer further.

I agree. It also tends to have a higher proportion of industrials.

I used to hold LWI, in a galaxy long ago, - well, before 2008, - and I recollect in the falls around 2008 it fell further and recovered more slowly than other UK G&I trusts I held, so I later sold.

[Villa]

I own the other ugly sister - Law Debenture - and it seems like time to ditch it.
Maybe I’ll wait until after Brexit, in case the convenient excuse for underperforming was true.

You will be able to find (via google) a very recent advertorial in MoneyWeek in which the fund manager lays out her excuses. When she knows where she went wrong, but is still ‘sticking to her guns’, it’s time to fire her. I cannot see Lowland or Law Debenture recovering (if at all) for a very long time and so buying into the discount seems very risky.

[Silverstar64]

LWI up 2% yesterday and the chart looks positive over the last 2 weeks. The managers are holding firm to their strategy and I support that. Reading the editors comments in this week's Investors Chronicle the UK market is not only competitively cheap it is attracting overseas buyers and just, maybe, a reversal is due. I hold LWI among my UK trusts and will stick with it.

[Silverstar64]

I own the other ugly sister - Law Debenture - and it seems like time to ditch it.

LWDB is a conviction hold for me due to its additional income streams from the professional services business. My remarks above about the UK hold as the trust is 76.9% UK. It's performed better than LWI in my portfolio.

[StOmer]

I own the other ugly sister - Law Debenture - and it seems like time to ditch it.

LWDB is a conviction hold for me due to its additional income streams from the professional services business. My remarks above about the UK hold as the trust is 76.9% UK. It's performed better than LWI in my portfolio.

Law Debenture was one of three IT's our broker bought a long time ago but we no longer hold it. I am thinking it may be a useful addition once again although recall that MoneyWeek expressed some concern in 2018 about the fiduciary business. I have not seen anything else expressing concern about what is usually considered a plus point of LWDB.

Elliott is also a bit iffy on Law Debenture. He is happy with the value-orientated expertise of its managers James Henderson and Laura Foll, but concerned about its subsidiary business IFS (Independent Fiduciary Services), which makes up a significant part of the trust’s value and so is “an important part of the story”. The (relatively new) chief executive of the overall business, Michael Adams, has departed to be replaced by Tim Fullwood as interim CEO. Fullwood is a “safe pair of hands” given his long service as chief financial officer, says Elliott. But it is an unusual hint of instability in a generally stable and successful trust, and one “that we are monitoring carefully”.

[StOmer]

LWDB is a conviction hold for me due to its additional income streams from the professional services business. My remarks above about the UK hold as the trust is 76.9% UK. It's performed better than LWI in my portfolio.

Law Debenture was one of three IT's our broker bought a long time ago but we no longer hold it. I am thinking it may be a useful addition once again although recall that MoneyWeek expressed some concern in 2018 about the fiduciary business. I have not seen anything else expressing concern about what is usually considered a plus point of LWDB.

Elliott is also a bit iffy on Law Debenture. He is happy with the value-orientated expertise of its managers James Henderson and Laura Foll, but concerned about its subsidiary business IFS (Independent Fiduciary Services), which makes up a significant part of the trust’s value and so is “an important part of the story”. The (relatively new) chief executive of the overall business, Michael Adams, has departed to be replaced by Tim Fullwood as interim CEO. Fullwood is a “safe pair of hands” given his long service as chief financial officer, says Elliott. But it is an unusual hint of instability in a generally stable and successful trust, and one “that we are monitoring carefully”.

[BrummieDave]

LWI is my 6th largest holding in an 18 IT portfolio, down 10% since I bought it, and at the current price I'd be more tempted to buy than sell.

I don't hold LWDB.

[Silverstar64]

...I am thinking it may be a useful addition once again although recall that MoneyWeek expressed some concern in 2018 about the fiduciary business. I have not seen anything else expressing concern about what is usually considered a plus point of LWDB.

You are right it wasn't a stellar performance but the businesses performance has picked up: Total revenue up 6.9% in the half year to 30th June against the same period 2018. Over the same period, the IPS business increased its revenue return per share by 8.9%.

[Villa]

...I am thinking it may be a useful addition once again although recall that MoneyWeek expressed some concern in 2018 about the fiduciary business. I have not seen anything else expressing concern about what is usually considered a plus point of LWDB.

You are right it wasn't a stellar performance but the businesses performance has picked up: Total revenue up 6.9% in the half year to 30th June against the same period 2018. Over the same period, the IPS business increased its revenue return per share by 8.9%.

I had hoped the fiduciary business would help protect against some of the downside on the investments, but it seems to be a bit of a plodder and I can’t see them being able to grow it significantly. LWDB is still on my ditch list!

[monabri]

Lowland dividend history.



For an income seeker, the current yield of 4.15% is a little on the low side (*) but well above recent "historical" levels. Of more interest might be the rate at which the paid dividend has been increasing.

Here's the link to the AIC page on LWI.

https://www.theaic.co.uk/companydata/286

For new investments, this might be "of interest" but I'm not sure how they are managing to increase the dividend so much each year.

(* on reflection, compared to building society interest rates..not too shabby!).

[monabri]

Browsing the Investment Trust Handbook 2019, I noted that "FundCalibre" assigned LWI an " Elite Fund" rating (12 funds were awarded this rating).

(The Fund Calibre website is here https://www.fundcalibre.com/ )

In the IT handbook they state

"While many screening systems that analyse past performance exist, we think ours is unique because we attempt to calculate the probability of future performance as well. Our process is designed to produce an estimate of how likely a manager
is to continue to deliver superior returns over the next 12 months. Managers must have a track record of at least three years to be considered and a trust must pass this screen before we will proceed further with our research. The best trusts on our analysis are then eligible to be given an ‘Elite Rating’.

They add:

"The regulators rightly require us to say that past performance is not a reliable guide to future returns."

(Just as well).

I had a browse of their website to see if there was more details on the selection method..numbers and facts to back up their methodology.

On their website, one can find the section for LWI. Fundcalibre mention

"A full fund factsheet is not available, as the provider has chosen not to market this fund."

What? Does this mean that Janus Henderson are not paying FundCalibre to wave the flag for LWI?

I also noted in my browsing

"Elite Rated CF Woodford Equity Income beats all 72 peers since launch"

It sort of makes me question the usefulness of the IT Handbook....in depth research or marketing puff?

The Elite 12...in case you were wondering.
Baillie Gifford
Baillie Gifford Shin Nippon
F&C Global Smaller Companies
Fidelity China Special Situations
Fidelity Special Values
Jupiter European Opportunities
Lowland Investment Company
Murray International
Schroder Oriental Income
Scottish Mortgage
The City of London
TR Property

[BrummieDave]

It sort of makes me question the usefulness of the IT Handbook....in depth research or marketing puff?

You could equally make the same comment about any other 'best of' list, probably including the recently released Investor's Chronicle Top 100 Funds, which in case anyone's wondering, contains the following:

MI Twenty Four Dynamic Bond (GB00B57TXN82)
Jupiter Strategic Bond (GB00B544HM32)
Royal London Sterling Extra Yield Bond (IE00BJBQC361)
Royal London Ethical Bond (GB00BJ4KSY83)
MI TwentyFour Monument Bond (GB00B3XVTT21)
NEW ENTRANT: AXA Sterling Credit Short Duration Bond (GB00B5VL0B78)
Rathbone Ethical Bond (GB00B7FQJT36)
M&G Emerging Markets Bond (GB00B4TL2D89)
NEW ENTRANT: Baillie Gifford High Yield Bond (GB0030816713)
NEW ENTRANT: M&G Global Macro Bond (GB00B78PH601)
Henderson Diversified Income Trust (HDIV)
City Merchants High Yield Trust (CMHY)
Capital Gearing Trust (GCT)
Personal Assets Trust (PNL)
RIT Capital Partners (RCP)
Janus Henderson UK Absolute Return (GB00B5KKCX12)
Invesco Global Targeted Returns (GB00BJ04HL49)
BNY Mellon Real Return (GB00BSPPWT88)
NEW ENTRANT: SVS Church House Tenax Absolute Return Strategies (GB00BNBNRF27)
Troy Trojan Global Income (GB00BD82KQ40)
Artemis Global Income (GB00B5N99561)
Fidelity Global Dividend (GB00B7778087)
Murray International Trust (MYI)
Jupiter Asian Income (GB00BZ2YMT70)
Schroder Oriental Income Fund (SOI)
BlackRock Continental European Income (GB00B3Y7MQ71)
European Assets Trust (EAT)
JPMorgan Global Emerging Markets Income Trust (JEMI)
TB Evenlode Income (GB00BD0B7D55)
MI Chelverton UK Equity Income (GB00B1FD6467)
Rathbone Income (GB00BHCQNL68)
Finsbury Growth & Income Trust (FGT)
Diverse Income Trust (DIVI)
City of London Investment Trust (CTY)
Law Debenture Corporation (LWDB)
Edinburgh Investment Trust (EDIN)
Jupiter Global Value Equity (GB00BF5DRJ63)
Aberdeen Standard Investments Global Smaller Companies (GB00BBX46522)
BMO Global Smaller Companies (BGSC)
Scottish Mortgage Investment Trust (SMT)
Monks Investment Trust (MNKS)
Rathbone Global Opportunities (GB00BH0P2M97)
Lindsell Train Global Equity (IE00BJSPMJ28)
Fundsmith Equity (GB00B41YBW71)
Unicorn Mastertrust (GB0031218018)
NEW ENTRANT: JOHCM Global Opportunities (GB00BJ5JMC04)
Witan Investment Trust (WTAN)
Liontrust Special Situations (GB00BG0J2688)
MAN GLG Undervalued Assets Fund (GB00BFH3NC99)
CFP SDL UK Buffettology (GB00BF0LDZ31)
Merian UK Mid Cap (GB00B1XG9482)
Henderson Smaller Companies Investment Trust (HSL)
BlackRock Smaller Companies Trust (BRSC)
FP CRUX European Special Situations (GB00BTJRQ064)
Janus Henderson European Focus (GB00B54J0L85)
Schroder European Alpha Income (GB00B6S00Y77)
Barings Europe Select Trust (GB00B7NB1W76)
NEW ENTRANT: BlackRock European Dynamic (GB00BCZRNN30)
Artemis US Select (GB00BMMV5105)
JPMorgan US Smaller Companies Investment Trust (JUSC)
NEW ENTRANT: Hermes US SMID Equity (IE00B8JBCY79)
Baillie Gifford Japan Trust (BGFD)
Man GLG Japan CoreAlpha (GB00B0119B50)
LF Morant Wright Nippon Yield (GB00B42MKS95)
Legg Mason IF Japan Equity (GB00B8JYLC77)
Baillie Gifford Japanese Smaller Companies (GB0006014921)
Stewart Investors Asia Pacific Leaders (GB0033874768)
Invesco Asia Trust (IAT)
Schroder AsiaPacific Fund (SDP)
Fidelity China Special Situations (FCSS)
Aberdeen New India Investment Trust (ANII)
Jupiter India (GB00BD08NQ14)
JPMorgan Emerging Markets Investment Trust (JMG)
Hermes Global Emerging Markets (IE00B3DJ5K90)
BNY Mellon Global Emerging Markets (GB00BVRZK937)
Fidelity Emerging Markets (GB00B9SMK778)
Aberdeen Standard Investments Latin American Equity (GB00B4R0SD95)
BlackRock Frontiers Investment Trust (BRFI)
Worldwide Healthcare Trust (WWH)
NEW ENTRANT: International Biotechnology Trust (IBT)
Polar Capital Technology Trust (PCT)
Allianz Technology Trust (ATT)
Jupiter Financial Opportunities (GB00B5LG4657)
NEW ENTRANT: Polar Capital Global Insurance (IE00B61MW553)
BlackRock World Mining Trust (BRWM)
Impax Environmental Markets (IEM)
Stewart Investors Worldwide Sustainability (GB00B7W30613)
Aberdeen Standard Investments UK Ethical Equity (GB00B6Y80X40)
NEW ENTRANT: Troy Trojan Ethical Income (GB00BYMLFL45)
First State Global Listed Infrastructure (GB00B24HK556)
HICL Infrastructure (HICL)
Renewables Infrastructure Group (TRIG)
JLEN Environmental Assets Group (JLEN)
Standard Life Private Equity Trust (SLPE)
Pantheon International (PIN)
HarbourVest Global Private Equity (HVPE)
TR Property Investment Trust (TRY)
BMO Commercial Property Trust (BCPT)
Standard Life Investments Property Income Trust (SLI)
Tritax Big Box REIT (BBOX)

Apols in advance if this is breaching copyright or any such legal nicety, and I'm sure the mods will pull it if that's the case. I don't mean to be mischievous in any way.

Full details behind the 'choices', including the market segmentation, are available to subscribers of the website, or purchasers of the mag of course.

[jonesa1]

For anyone interested in Lowland, with time to spare at 12:30 today, the fund managers will present on the last year's performance and outlook:

https://www.janushenderson.com/en-gb/in ... usts-live/

[BrummieDave]

For anyone interested in Lowland, with time to spare at 12:30 today, the fund managers will present on the last year's performance and outlook:

https://www.janushenderson.com/en-gb/in ... usts-live/

Thanks for posting this, I watched with interest.

Performance has been poor relative to other equity income ITs as most will already know, so let's hope that with the market's potentially improved appetite for domestic, smaller cap stocks, this year will be better for LWI, still my fifth largest holding.

Laura Foll comes across as extremely competent with a firm grasp of what's going on within the portfolio and across the broader market. James Henderson looks increasingly past his sell-by, and the sooner he passes more of the workshare to Laura the better IMHO.

I'm also hoping this year will be good for emerging markets at last, and will boost one of my top three holdings, MYI.

Other than that, ignoring the perennial failure that is PLI, everything's pretty good.

[ADrunkenMarcus]

I'm also hoping this year will be good for emerging markets at last, and will boost one of my top three holdings, MYI.

Ditto.

Best wishes

Mark.