Speaking in an update video, he said the trust continues to be aroudn two-thirds exposed to mid-caps, while circa 25% is small-cap. Despite some investors saying mid-caps are overvalued, Hermon says the sector is performing a bit better in terms of fundamentals than small-caps, as their earnings have grown faster in the past few years. “We see value and opportunity in those areas,” he commented.
Asked if today’s increased M&A activity is a sign of better corporate confidence? Herman said yes.
“M&A happens on the top of the cycle when corporate confidence is better. It’s also about the fact that interest rates are low, debt is cheap and US companies can pick up assets in the UK. That will continue going forward,” he added.
One area in particular wherein he continues to see value is the building sector. Commenting on George Osbourne’s recent announcements regarding housebuilding policy, he said: “The government has been very supportive of the building sector for a number of years.” And the land market remains benign, according to Hermon. “It looks well set,” he said.
Bellway and Chris Nicholson are holdings in the trust, he added.
