By Annabel Brodie-Smith
I hope you are having a better start to the month than me. My husband and I both have Covid along with apparently one in thirteen people in the UK. We think we caught it at a family ‘super spreader’ party which infected my in-laws too, but of course we’ll never know.
However, we are on the road to recovery which is just as well as we are heading to Venice for our first holiday abroad since October 2019 next week. Fingers crossed it happens – I see they are cancelling flights left, right and centre at the moment… This month, we are exploring the investment lessons learned from long and sometimes bitter experience. What better way to start than with Peter Spiller, manager of Capital Gearing, who has been successfully managing this company for an amazing 40 years. It’s interesting to read Peter’s reflections on how things have changed since 1982, “how much is different and how much is the same". Peter adds, "Equity and bond valuations were extraordinarily attractive in 1982 and the opposite is true today.”
However, he remains optimistic about the outlook for investment companies, otherwise known as investment trusts: “We have always found great opportunity in investment trusts. They have outperformed and developed over the 40 years. Then exchange controls had disappeared shortly before and discounts were large. Essentially all the underlying investments were equities. Now a wide range of asset classes is available and discounts have been voluntary for over 20 years as a result of the ability to buy back shares.” In these uncertain times with inflation rising, it’s reassuring to see that 45% of investment company managers have been in place for at least ten years. And 27 managers have guided their investment company for over 20 years. Do read about our long-serving managers’ lessons learned, their most challenging moments and, in particular, the advice they’d give to their younger self in the role. There are some real gems here. Julian Cane, who’s managed BMO Capital and Income for 25 years explains: “Don’t be afraid to ask dumb questions – be worried if you get a dumb answer... Once you’ve done the necessary research, back your judgement. Your successes will outweigh the mistakes.” Georgina Brittain, who’s managed JPMorgan UK Smaller Companies for 24 years, says that her experience in the financial crisis stood her in good stead during the pandemic. She explains: “Most important was that by the time markets are falling, it is far too late to panic; such market declines offer an opportunity to buy more of the long-held, long-term winners in the trust, and this is what I did. Difficult to do at the time, but definitely beneficial to performance over the longer term.”
James Henderson, manager of Lowland for 32 years, gave his younger self this advice which many of us can relate to: “Keep enjoying it. Observing good managements and seeing how it all plays out is fascinating and fun. It is a privilege to be paid for doing it. But don’t tell the management at JHI that!” Also this month, Ian Cowie shares his three lessons from investing during the coronavirus crisis - essential reading for all investors. To give you a flavour here’s Ian’s view on his second lesson: never forget the importance of income. “Dreams of capital growth may disappear in a puff of smoke - or some unexpected bad news about a virus or a war - but the discipline of dividends keeps valuations rooted in reality.” Ian also mentions the benefits of the 17 dividend hero investment companies that have increased their dividends for over 20 years, and the magnificent seven who have increased their dividends for more than 50 years. See an updated list of the dividend heroes and read comments from Alliance Trust, BMO Smaller Companies Investment Trust and The Brunner Investment Trust on why being a dividend hero matters. There’s also a list of the next generation of dividend heroes which have increased their dividends for over ten years but less than 20 years. With the war in Ukraine sadly still continuing, Jennifer Hill takes a look at some of the defensive sectors and companies that are currently doing well. These include the commodities sector, capital preservation-focused investment companies, healthcare, infrastructure and property. Finally, I am speaking alongside Richard Stone, our Chief Executive, at the Investors Chronicle Future of Private Investing digital event on 15th June. There’s another whole day of presentations on 16th June and it’s free to register for the online event. To see the agenda and to register, please click here.
I’m on a panel titled ‘Investing for income: the secret to steady revenue streams and sustained returns’ and Richard is discussing, ‘Are investment trusts the best way to capitalise on mega trends’. It would be great if some of you could attend our sessions.
Fingers crossed I am Covid-free and can fly to Venice next week!
Wishing you all a Happy Easter.
Annabel Brodie-Smith Communications Director, AIC
