RCS - Lowland Inv. Co. - Edison issues update on Lowland Investment Company

Lowland InvestmentAnnouncement

09/01/2023 10:30

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RNS Number : 0921M  Lowland Investment Co PLC  09 January 2023

London, UK, 9 January 2023

 

Edison issues update on Lowland Investment Company (LWI)

The last 12 months have been difficult for Lowland Investment Company (LWI).
Combined, the weakness in UK mid and small caps' performance, UK corporate
earnings and value investing have been a notably powerful headwind for this
multi-cap income portfolio. However, the managers, James Henderson and Laura
Foll, are resolute in maintaining their mildly contrarian approach to
investing in under-researched small- and mid-sized UK companies for growth in
capital and income while selectively blending with larger, less volatile,
above-average dividend paying companies. Thus, it is reassuring to see the
very strong recovery in portfolio revenue through FY22 (+43% y-o-y) from the
depths of the pandemic, which gives some indication as to the resilience and
positive outlook for the portfolio at the company level. In addition, LWI's
portfolio is currently trading on a historical P/E ratio of 8.7x versus its
long-term average of 12.7x and the broad UK market's valuation of 9.6x. As a
result, we believe LWI offers investors an attractive way to access the whole
breadth of the UK market for both capital and income returns.

 

Taking a longer-term look at LWI's performance it is perhaps informative to
see that often when performance has been weaker (ie in 2002), investors have
benefited from some exceptional returns in subsequent years (2003-06). This
trend was repeated in 2008 when the portfolio had a very poor year, but with
the exception of 2011, in the years 2009-13 LWI materially outperformed the
broad market and peers. More recently, after a weak 2020, 2021 was a very
strong year for returns. Clearly, there is no guarantee of history repeating
itself but given the consistency of the approach under longstanding fund
managers James Henderson (appointed in 1990) and Laura Foll (2013), it is
possible that once investor sentiment returns to UK mid- and smaller-size
companies in particular, LWI may once again return to this pattern of
outperformance. In the meantime, investors are being paid a covered yield of
5.1% to wait (6 January 2023).

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