Aberforth Smaller - 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 trust's portfolio is diversified and will normally consist of investments in around 80 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 2018 (link via Investegate)

In contrast to the gains of recent years, 2018 has not been such a good year with share price total return of -11.8% compared to its benchmark index, Numis Smaller Companies index Total Return of -15.3%. The return for the FTSE All Share in 2018 was down -9.5% by way of comparison.

It appears that Brexit concerns have disproportionately affected UK smaller companies this past year, however I also note the portfolio is overweight in oil & gas producers compared to the index. With climate change taking center stage, this is a concern for me and I have written to the management suggesting they may wish to review their holding in this sector and consider renewable energy alternatives for the portfolio. I will be interested to hear their response!

5 Years v FTSE All Share
(click to enlarge)

Dividend

The board are proposing a final dividend of 20.75p payable in March, making a full year increase of 5.0% to 30.25p per share. In addition, as last year, a special dividend of 7.75p is proposed as the trust has received special dividends from several portfolio holdings. Revenue reserves have increased by a further 10% to £88m (2017 £79.9m).

At the current price of around £12.10, the trust has a natural yield of 2.5% (and 3.0% 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.

Over the past year or so I have disposed of quite a few of my investment trusts however, depending on the response from management, I am happy to continue with Aberforth for the longer term. My current holding is around 2% of my total portfolio so either way it's not going to make a huge difference.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

One Million Pageviews for the Blog!

Well, here we are...1 million people have visited the blog over the past 6 years...whodathoughtit! If I had £1 for each visit I would be doing well...ha ha.

During this period I have posted a total of 447 articles which attracted over 1,000 comments.

Evolving Strategy

Looking back, it is striking just how much my investing journey has moved around. Partly this has been influenced by reflecting on the input of readers, partly from changing circumstances such as the recent transition to State pension and also a fair share of poor decisions resulting from good old irrational thinking.

In the early days, my investing strategy was all about generating natural income from a mix of high-yielding UK shares and a basket of mainly UK-focussed investment trusts. My target income was 4% of my combined SIPP and ISA investments with the intention to reinvest any surplus.

This had worked just fine since I decided to move to early retirement in 2008 at age 55 yrs. At some point in 2014/15 I was beginning to take a closer look at this strategy and came to the conclusion that the focus on high income shares and trusts was limiting my investing horizon. For example, I had ignored the option of low cost global index funds such as Vanguard Lifestrategy because the yield was only 1.4%.

By this time I realised that maintaining a portfolio of 20+ individual shares was probably more trouble than it was worth and so began the process of off-loading them gradually in favour of my global index funds. As I said in this review of strategy post -  

"Individual shares have been interesting but they are volatile and I have not noticed any greater return to my portfolio for the additional risk so I will wind down the rest of my shares portfolio in the coming months and move the proceeds into collectives".

Today, I am looking to preserve what I have accumulated with my core of multi-asset global index funds and also look to the future with some of my technology and 'green' investments.

Books

Of course, the blog has been a useful platform to showcase my books. The first was "DIY Introduction to Personal Finance" self published in February 2012, a year before I started this blog. It was followed by "DIY Pensions" which is by far the most purchased title with just over 60% of sales (ebook & paperback combined), then "DIY Income" in 2014 and finally my second most popular seller "DIY Simple Investing" published in 2015 which accounts for 20% of the total.

I hope I can shed a little light on the mysteries of the self-directed investing process and help readers to take more responsibility for their future financial well-being.

Popular Articles

The main purpose of starting the blog was to keep a journal of my investing journey. Some of the articles are obviously more interesting to readers than others. The ones that have attracted most attention are usually when they are mentioned in a link by Monevator!

Here are some of the more popular - in no particular order :

In April 2015, I had been thinking about a more globally diverse strategy and wrote "VanguardLifestrategy - A One-Stop Solution". This subsequently morphed into the concept of "DIY Simple Investing" and for which I wrote this guest post on Monevator.

The annual updates on progress with my self-managed drawdown SIPP are popular but the nuts and bolts of how to work out the amount required for a decent retirement in early 2017 has proved the most popular of all the pension-related articles.(link here)

Asset allocation is an important aspect of the investing process. The better returns will most likely come from holding investments over many years so it's important for the DIY investor to find a strategy which will enable him/her to stay in the game for the long term, particularly during periods of volatility as we have experienced in recent months. This revised article on the subject was written in May 2016.

Just a few of the most read articles over the years - more are listed under the 'popular posts' tab above.

So, I am about to enter my 7th year with the blog. I'm not sure if I will manage to get to two million pageviews but will carry on a while longer. When I started out there were not too many investing bloggers around - Monevator and Retirement Investing Today spring to mind from the UK. Today there are lots more which is good to see.

Many thanks to all the people out there who dip in from time to time to share the journey and especially for many of the comment which have given me much food for thought as well as an opportunity to reflect on many of the mistakes I have made along the way.

Finally, an apology to those who really do not care to read about Brexit or Climate Change. Hopefully, the former can be put to bed before very much longer (?) but I have five grandchildren so the latter is likely to increasingly influence my thinking and also my investing decisions.

It's therefore appropriate to finish with a quote from Antonio Guterres, UN Secretary General, Sept 2018

"Nothing less than our future and the fate of humankind depends on how we rise to the climate challenge"