Wednesday, 31 January 2018

Aberforth SC Trust - Final Results

The objective of Aberforth Smaller Companies Trust plc (ASCoT) 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 around 85 individual companies.

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.

Results

They have recently published final results for the full year to 31st December 2017(link via Investegate).
It has been another good year with share price total return of 22.6% compared to its benchmark index, Numis Smaller Companies index - Total Return of 19.5%. The return for the FTSE All Share in 2017 was 13% by way of comparison.

I was pleased to note that management charges have fallen as a percentage of net assets this year and ongoing charges which includes transaction charges are now 0.72%.

The trust has been the best performing IT in my portfolio over recent years. Over the past 5 yrs average annualised return for this smaller companies specialist is 16.2% p.a.

5 Yr Comparison v Vanguard Global Small Cap
(click to enlarge)

Income

The board are proposing a final dividend of 19.75p making a full year increase of 5.3% to 28.80p per share. In addition, as last year a special dividend of 6.7p is proposed as the trust has received special dividends from several portfolio holdings. Revenue reserves have increased by a further 14.7% to £79.92m (2016 £69.64m).

At the current price of around £13.50, the trust has a yield of 2.2% (but 2.6% including the special dividend).

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.

Last year I took the opportunity to trim back my holding as it had become overweight compared to when I first acquired it and I wanted to take out some of the capital appreciation for 'income'. However I am happy to continue with Aberforth for the longer term for delivery of growth and steadily rising income.

As ever, slow & steady steps…..

6 comments:

  1. Great performance, but rather a rocky road compared to the Vanguard Index?

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    1. Agreed...I think this will be down to the Vanguard fund having over 4,000 holdings which must help with volatility compared to the 85 holdings in ASL.

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  2. Many thanks for the post, interesting reading as always. One point you made prompts a question - why the reluctance to hold more than 5%-10% in small caps? What's the logic behind this? Looking at the MSCI world small cap index, small caps are stated to represent circa 14% of global equity markets.

    On a related note, have you had a look at FCS.L?

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    1. Good question...every investor can decide on their personal choice of portfolio mix but my suggestion was aimed more towards those who may not have considered smaller companies as a possibility but they also involve extra volatility and hence my caution.

      I will have looked several SC possibilities when I added this to my portfolio but cannot recall FCS. Is this one that you hold/recommend?

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  3. Thanks very much for the write up. I bought a little ASL for exposure to the UK smaller caps sector toward the end of last year, my introduction to it was via your blog a year or two ago! The low fee and slight discount to NAV made it attractive compared to Australian funds, where management fees can range to 1-2% p.a.. Hopefully management continue to do well.

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    1. Good to hear from you WfT and hope the Aberforth fund will do well for your portfolio over time.

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