The Sceptre UK Fund was down by 4.2% in June compared to a 1.0% decline in the FT All Share Index and a 4.8% decline in the FTSE 250 Index. The rolling 12 month net return for the fund (after all fees) is 17.2%.
The poor performance in June is a disappointment to us but, because we run a very concentrated portfolio of about 15 stocks, there are always going to be times when there is a divergence of performance from the market. During the month of June there has been a polarisation of performance with the large cap (FTSE100) stocks performing relatively well and the mid-cap/small cap stocks performing less well – as you can see from the fact that the FTSE 250 (mid-cap) index was down almost 5% in June.
The stocks in our portfolio range from about £100m to £11.2bn in terms of market capitalisation with the median being £388m and the weighted average being about £3.5bn and compares to the FTSE 250 on the following parameters:
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Sceptre Fund
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FTSE250
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Yield
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2.7%
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2.4%
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P/E ratio
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14.5x
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28.0x
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Price/Book
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2.0x
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9.8x
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Price/Sales
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1.3x
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6.1x
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Our portfolio is very different from the FTSE 250 index (and the other indexes) and, we believe, is very conservative, consists of “under valued” companies which have excellent market positions and are extremely well run.
In June six of our stocks declined in price by 8%+ and only three stocks were actually up in price, we also had our first large crystallised loss when we sold a UK engineering stock after 15 months, generating a total loss of about 4% on the fund. The reasons behind the initial investment and the sequence of events leading to our decision to sell are quite involved and cannot be easily summarised without losing important details. We have prepared a separate paper which we will be very happy to forward to investors if you would like to know more about the company involved. We feel that we were somewhat misled by the company in the meetings and conference calls with them. Whilst this is a very regrettable mistake and lessons have been learned, we believe that it is inevitable that the occasional ‘value trap’ will arise and our job is to make sure these occurrences in the fund extremely rare.
As always, if you have any questions on our approach or performance, please let us know.
Chris Broadhurst
CEO
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