By Annabel Brodie-Smith
January certainly felt like a long month. There was a series of boring domestic problems which ranged from the trivial – the dishwasher not working – to the alarming – waking up to a leak and no water which was remedied later but resulted in two holes in the ceiling! Everything is now back up and running or in the process of being mended. There were some lovely sunny days at the end of the month and clouds of snowdrops are out and about.
“It’s a timely month for Compass to get away from the mundane and go boldly on a voyage of discovery.”
But it’s a timely month for Compass to get away from the mundane and go boldly on a voyage of discovery. Firstly, we explore the exciting young high growth companies that venture capital trusts (VCTs) invest in. VCTs invest in small, ambitious companies which can grow into household names, such as Zoopla and Gousto. These small companies are high risk so the government offers attractive tax breaks including 30% up-front tax relief if you hold them for five years, tax-free dividends and exemption from capital gains tax.
This week I talked to VCT managers – Nic Pillow of Blackfinch Spring VCT, Andrew Bloxam of Foresight Technology VCT and Ian McLennan of Triple Point Venture VCT about their investments, the impact of the tough economic conditions, the benefits of these companies to the economy and whether Labour would have any impact on this industry. Read our release which also includes the view of Peter Dines who manages the Northern VCTs.
The managers’ investment strategies were an adventure in themselves… with Foresight investing in “deep tech”, which are early-stage businesses which use cutting-edge technology to tackle serious global problems. One example is a company developing a flood early-warning system. Triple Point invests in businesses providing services to other businesses, often with a data gathering element and Blackfinch focuses on tech enabled companies in areas such as fin-tech and HR software.
“This month Ian Cowie is sailing into space, comparing the opportunities in space technology to Christopher Columbus’s maiden trip to the new world in 1492.”
This month Ian Cowie is sailing into space, comparing the opportunities in space technology to Christopher Columbus’s maiden trip to the new world in 1492. Ian is particularly interested in Elon Musk’s SpaceX and his network of over 5,000 Starlink satellites which means this internet service provider can reach everywhere on earth.
Ian explains that several investment trusts offer exposure to space, including Seraphim Space Investment Trust which invests “in a diversified, international portfolio of predominantly early and growth stage unquoted SpaceTech businesses with the potential to dominate globally.” For exposure to SpaceX, Ian lists a number of Ballie Gifford trusts including Baillie Gifford US Growth (6.8%), Edinburgh Worldwide (9.6%), Monks (0.3%), Schiehallion (7%) and Scottish Mortgage (4%).
I have to admit I have a special interest in Starlink, as living in the wilds of Oxfordshire they provide my internet. And when living in the sticks, internet is vital otherwise there’s no phone calls, no Sky and no work. I have found them reliable and the only problems have been when my teenagers are on holiday and use up all the data, but that’s teenagers for you…
Finally, we explore China’s prospects where it’s been quite a week with property company China Evergrande entering liquidation. And this news follows a disappointing run of Chinese performance since the post-Covid rally in early 2021 came to an end. So, is it time for brave contrarian investors to consider China? Dale Nicholls, Portfolio Manager of Fidelity China Special Situations, said: “From our discussions with companies on the ground, we have the sense that the worst is behind us… Clearly, a lot of pessimism over the economy appears priced into valuations.”
Rebecca Jiang, Portfolio Manager of JPMorgan China Growth & Income is also optimistic, commenting: “We believe most of the widely discussed bad news has been priced in. At these relatively low levels, we see significant potential for the market to respond positively to incremental good news.”
Clearly, there are concerns and the recovery could take time. “At the start of 2024, we are still seeing weakness persist in mainland markets” said Pruksa lamthongthong, Manager of Asia Dragon Trust. “Encouragingly, though, fundamentals remain intact and we are expecting high single-digit earnings growth for the entire market. This, along with depressed valuations, lays the ground well for an eventual recovery, as the benefits of monetary and fiscal stimulus gain traction in 2024.”
Time will tell if the Year of the Dragon which starts on 10 February reignites China’s economy. The dragon symbolises strength, wisdom, luck and prosperity – bring on the dragons!
I hope you have a good February. The six nations starts tonight – very exciting – and not long until half-term and the long-awaited arrival of daffodils.
Kind regards
Annabel Brodie-SmithCommunications Director, AIC
