Spring Logo
Home Icon Our Funds Events News & Views About Us
United Kingdom
Evenlode Logo

Evenlode

  • IFSL Evenlode Income Fund
  • IFSL Evenlode Global Income Fund
  • IFSL Evenlode Global Equity Fund
Chelverton Logo

Chelverton

  • MI Chelverton UK Equity Growth Fund
  • MI Chelverton UK Equity Income Fund
  • MI Chelverton European Select Fund
  • Chelverton Select Consumer Staples Fund
  • MI Chelverton UK Opportunities Fund
Zennor Logo

Zennor

  • IUP Zennor Japan Fund
  • WS Zennor Japan Equity Income Fund
Fulcrum Logo

Fulcrum

    Tata Logo

    Tata

    • Tata India Equity Fund
    cusana Logo

    Cusana

    • Cusana Emerging Markets Equities Fund
    Spring Logo
    • Our Funds
    • Events
    • News & Views
    • About Us
    United Kingdom
    Legal InformationContact Us

    Call us on

    +44 (0)20 3307 8086
    emailLinkedIntwitter
    Spring Capital Partners Limited is an appointed representative of the principal firm, Robert Quinn Advisory LLP (FRN: 548030). Spring Capital Partners GmbH and Spring Capital Partners AB are tied agents of ACOLIN Europe AG which is regulated by Bafin in Germany (BaFin-ID: 10135649). Read full disclaimer

    Site by HSL

    back arrow
    Related funds
      IFSL Evenlode Income Fundright arrow
    Investment ViewsDecember 2019

    The Opportunity Set Continues to Evolve

    Hugh YarrowEvenlode IncomeRead more from this author

    December is shaping up to be a positive month for the UK stock market. Two developments have improved investor sentiment towards the political and economic outlook: one local and one global.

    On the local front, the election of a Conservative majority government last week makes the future of Brexit significantly clearer. The withdrawal agreement negotiated with the EU this autumn will now pass through parliament, leaving the UK on track to exit the EU at the end of January 2020. Some longer-term UK political uncertainties will remain in the background, including the UK’s need to negotiate a reasonable trade deal with the EU by the end of next year, and the question of Scottish independence. However, investors have welcomed the clarity that is presented by a substantial majority for the UK government, a Brexit plan, the prospect of no further election in the UK for several years, and the potential relief that these factors should provide to the struggling UK economy.

    On the international front, news that the US and China have negotiated the outlines of a trade deal has also been welcomed. This means the tariff hikes that were planned to take place last weekend have been postponed.

    Helped by all of the above, the year-to-date return for both the market and the fund remains strong. Since the beginning of January, the FTSE All-Share has risen +18.7% and Evenlode Income +24.0%i.

    Performance

    Though relative performance has, overall, been positive year-to-date, Evenlode Income’s performance has lagged the UK market over the last four months. This is primarily for two reasons. Firstly, although the fund will always have at least 80% of the portfolio in the shares of UK-listed companies (currently c.86%) it has a relatively high exposure to British-listed multinational companies, which have underperformed as the pound has rallied strongly. Secondly, the bedrock of the fund is, as usual, invested in relatively repeat-purchase companies whose shares have a tendency to lag a market in which investors are seeking more risk and higher exposure to economically sensitive businesses.

    We acknowledge that our investment approach may seem a little unexciting and austere during periods like the last few weeks. But there is a good long-term reason for this. We are committed to ‘remaining at the investment crease’ over the years and through a wide range of conditions, and we think geographic diversification combined with resilient and steadily growing cash generation are important factors in delivering on this commitment. Though stock markets are moved by short-term news over the short-term, the share prices of individual companies are moved by the long-term fundamental development of these businesses over the long-term, and it is on these fundamentals that we continue to focus. Almost all the companies in the portfolio have updated the market since the beginning of October and we have been reassured by the aggregate progress they are making and the strategic investments they are making for the future. The portfolio’s free cash flow yield for 2019 is 4.9% and this is forecast to grow to 5.5% next year, which provides good cover for the fund’s 3.1% dividend yield.ii

    The Opportunity Set Continues to Evolve

    In general, we are happy with the current shape of the portfolio and have made relatively few changes in recent weeks. However, we remain open to making changes as share prices bounce around, as they often do! To give a couple of recent examples, we were trimming Cisco and Unilever over the summer for valuation reasons. However, since then their share prices have fallen (down -21% and -18%, approximately, since their respective summer peaks) with sentiment not helped by both companies reporting a slowdown in growth over recent months (including an update from Unilever this week that revenue growth for 2019 will be slightly below the company’s +3-4% guidance range for the year).

    The fall in both share prices has materially improved their relative valuations, in a stock market in which many shares have risen very strongly over the same period. We are, therefore, now adding to the fund’s positions in both Cisco and Unilever again. In our view, both companies are well placed to grow their free cash flow and dividends over coming years thanks to their cash-compounding business models, market-leading positions and attractive structural growth prospects. Here are their respective free cash flow yields and dividend yields.iii

    Evenlode Dec Investment View

    Onwards to a New Decade

    I look forward to updating you on Evenlode Income’s progress during 2020, the start of a new decade! In the meantime, I would like to thank all co-investors for your interest and support this year, and wish you an enjoyable, peaceful Christmas on behalf of all of us at Evenlode.

    Hugh and the Evenlode Team

    17th December 2019

    Please note, these views represent the opinions of Hugh Yarrow as at 17th December 2019 and do not constitute investment advice.

    Related funds
      IFSL Evenlode Income Fundright arrow

    i Source: Evenlode, Financial Express, total return, bid-to-bid, 31/12/2018 to 16/12/2019

    ii Source: Evenlode, Factset

    iii Source: Evenlode, Factset

    Where opinions are expressed they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice. This document is marketing material and is not intended as a recommendation to invest in any particular asset class, security or strategy. The information provided is for illustrative purposes only, it should not be relied upon as recommendations to buy or sell securities.

    For the most up to date information, please refer to the TB Evenlode Income Fund and share class-specific Key Investor Information Documents, the Supplementary Information Document, the Annual or Interim Reports and the Prospectus, which are available on the Literature tab.

    Past performance is not a guide to future returns. The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested. Performance figures for all share classes can be found in the relevant Key Investor Information Document. Fund performance figures are shown in Pound Sterling, inclusive of reinvested income and net of the ongoing charges and portfolio transaction costs to 17th December 2019 unless otherwise stated. The figures do not reflect the entry charge paid by individual investors. The standardised past performance information is updated on a quarterly basis. Source: Evenlode Investment Management Limited

    swoosh

    Call us on

    +44 (0)20 3307 8086
    emailLinkedIn
    Legal InformationContact Us

    Spring Capital Partners Limited is an appointed representative of the principal firm, Robert Quinn Advisory LLP (FRN: 548030). Spring Capital Partners GmbH and Spring Capital Partners AB are tied agents of Allington Investment Advisors GmbH which is regulated by Bafin in Germany (Bafin-ID: 10158575). Read full disclaimer

    Site by HSL

    Spring Logo
    Our Use of Cookies

    We use cookies - the analytical kind, sadly not edible - to help personalise content, track visits to our website, and optimise your experience.
    By continuing to browse the site you are agreeing to our cookie policy.