Wednesday, 29 January 2014

Aberforth Smaller Companies - Final Results

The objective of Aberforth Smaller Companies Trust plc (ASL) is to achieve a net asset value total return (with dividends reinvested) greater than that of the Numis Smaller Companies Index (excluding Investment Companies) over the long term.

The trusts portfolio is diversified and will normally consist of investments in over 80 individual companies. They are currently overweight in Industrials which account for 35% of the portfolio, Consumer Services 21% and Technology 11.5%.

In seeking investments, the approach will be fundamental in nature involving regular contact with the management of prospective and existing investments in conjunction with rigorous financial analysis of these companies. The emphasis within the portfolio will reflect the desire to invest in companies whose shares represent relatively attractive value and a preference for holdings with low or no gearing.

The trusts was by far the best performing IT in my portfolio over the past year.

They have this week published final results for the full year to 31st December 2013.(link via Investegate)

Net Asset Value Total Return is up 52.4% compared to its benchmark index Total Return up 36.9%. The share price total return is up 62.0% as the discount has narrowed. This is following a 44% share price advance in 2012.


2 yr comparison -v- ftse all share
(click to enlarge)
These results represent the best one year returns since the trust was launched in 1990.

The board are proposing a final dividend increased of 5.9% to 16.15p per share and which will make a total of 23.5p for the full year. Revenue reserves have increased by a further 12% from 32.1p to 36.1p.

A few years back when I purchased this trust for my SIPP portfolio, it was yielding around 4% however, after the share price increases - currently around 1115p - the yield has fallen to just over 2%.

Last week I took the opportunity to top slice Aberforth, selling off around 25%, and reinvested the proceeds into Aberdeen Asian Income Trust to bring it up to a ‘full’ holding and on a yield of 4%.

I would not advocate a large holding of small caps in any portfolio, however a weighting of between 5% - 10% is likely to boost total returns for the long term investor.

I am happy to continue with Aberforth and would add to my holding should there be any significant pull-back in the share price over the coming year.

As ever, slow & steady steps…..

2 comments:

  1. Aberforth has been on a remarkable roll last year - I hold this too. I'm intrigued by your comment on

    > however a weighting of between 5% - 10% is likely to boost total returns for the long term investor.

    I hold it to lean against the rather heavy large cap bias of my HYP, but that was mainly to seek a bit of size diversification.

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    1. Hi Ermine,

      Thanks for stopping by and leaving a comment. I think historically over the longer periods, the better returns have come from the smaller companies sector so some exposure to this sector should increase the overall portfolio returns.

      Agreed they also provide some balance by way of diversification in size/market cap.

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