David Horner and Dave Taylor, who run the trust for Chelverton Asset Management, posted in their half-yearly report, a 32% increase in total net assets, with the fund now sitting at more than £29.7m.
Horner and Taylor said a period of sustained earnings upgrades was needed to move the market beyond its current trading range.
The discount on the investment trust has widened from 7.52% to 11.22% for the six months to 31 October. Including dividends distributed, the total return on net assets was 34.72%, compared with 13.6% for the previous six months.
The portfolio took profits on Victoria, Close Brothers and Arbuthnot and used these to fund a purchase of GLI Finance, a company that offers funding to SMEs.
Strong longer-term income prospects
“Whilst short-term valuations will continue to be driven by changes in earnings expectations our focus remains firmly on the longer-term prospects for dividend growth and the underlying yield of our investment universe,” the report said.
They aimed to take advantage of the short-term noise created by a disappointing few months of earnings, saying it laid a solid foundation for medium-term investment opportunities to generate income.
As GDP growth continued to accelerate, they noted industry debate had shifted from talking about whether or not the economy is improving, to a discussion about the strength of the recovery.
“This is positive for our portfolio as the small companies that we invest in tend to be relatively highly exposed to the fortunes of the domestic economy. Despite the strong rise in share prices, as interest rates are forecast to remain low for the foreseeable future, the dividend yield on the stocks that we invest in and ultimately on the fund itself will help to underpin valuations,” they said.
