The Sceptre UK Fund was up by 4.4% in February which compares to a rise of 0.9% for the FT All Share index.

In a month when there were many bid rumours, 2 of our stocks were subject to such rumours and both increased by about 10% during February. We took advantage of these moves which took the share prices to at (or very close to) our calculation of “fair value” and closed the positions. Another stock which we have been gradually selling since it started a strong rally in early December continued to strengthen ahead of its results and we were left with only a very small holding when it announced the 2005 results. We felt that the results and outlook left us feeling that the expected growth remains uncertain and we took the decision to close this position also. All 3 stocks are FTSE100 names and have given us annualised net returns of 10%, 32% and 40% since their purchase.

We also reduced the position size of our retail stock as the share price bounced back as we feel there is greater uncertainty surrounding the stock following the (potential) loss of its large wholesaling contract.

We added 1 new stock from the FTSE100 and added to 4 existing positions on stock price weakness. The new holding is very cash generative, growing rapidly (>15% pa) and occupies a very strong market position. Whilst it is trading at about 15x our current cashflow estimates, we believe the growth will continue and, due to its strong market position, we think it has significant pricing power.

One disappointment in the month was an agreed bid for our newly acquired software technology stock – whilst it is always good that the industry spots the same “bargains” as we do, it is very frustrating when we have only just started building a position and it represents only a small part of the portfolio. All we can say is – at least we had a small position rather than no position!

If there is anything here that you would like to have further detail on please let us know,

Best regards,

Chris Broadhurst
CEO