BlackRock Throgmorton Trust Plc - Portfolio Update
London, October 21
The information contained in this release was correct as at 30 September 2021. Information on the Company's up to date net asset values can be found on the London Stock Exchange Website at:
BLACKROCK THROGMORTON TRUST PLC (LEI: 5493003B7ETS1JEDPF59)
All information is at 30 September 2021 and unaudited.
Performance at month end is calculated on a cum income basis
|Net asset value||-5.6||4.9||58.3||65.7||150.5|
Sources: BlackRock and Datastream
*With effect from 22 March 2018 the Numis Smaller Companies plus AIM (excluding Investment Companies) Index replaced the Numis Smaller Companies excluding AIM (excluding Investment Companies) Index as the Company's benchmark. The performance of the indices have been blended to reflect this.
|At month end|
|Net asset value capital only:||941.96p|
|Net asset value incl. income:||949.15p|
|Discount to cum income NAV||0.4%|
|Total Gross assets2:||£947.4m|
|Net market exposure as a % of net asset value3:||120.9%|
|Ordinary shares in issue4:||99,816,263|
|2020 ongoing charges (excluding performance fees)5,6:||0.60%|
|2020 ongoing charges ratio (including performance|
1. Calculated using the 2021 interim dividend declared on 26 July 2021 and paid on 27 August 2021, together with the 2020 final dividend declared on 10 February 2021 and paid on 1 April 2021.
2. Includes current year revenue and excludes gross exposure through contracts for difference.
3. Long exposure less short exposure as a percentage of net asset value.
4. Excluding 0 shares held in treasury.
5. Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 November 2020.
6. With effect from 1 August 2017 the base management fee was reduced from 0.70% to 0.35% of gross assets per annum.
7. Effective 1st December 2017 the annual performance fee is calculated using performance data on an annualised rolling two year basis (previously, one year) and the maximum annual performance fee payable is effectively reduced to 0.90% of two year rolling average month end gross assets (from 1% of average annual gross assets over one year). Additionally, the Company now accrues this fee at a rate of 15% of outperformance (previously 10%). The maximum annual total management fees (comprising the base management fee of 0.35% and a potential performance fee of 0.90%) are therefore 1.25% of average month end gross assets on a two-year rolling basis (from 1.70% of average annual gross assets).
|Sector Weightings||% of Total Assets|
|Net current assets||0.4|
|Country Weightings||% of Total Assets|
|Market Exposure (Quarterly)|
|Ten Largest Investments|
|Company||% of Total Gross Assets|
|Watches of Switzerland||2.7|
|Impax Asset Management||2.5|
Commenting on the markets, Dan Whitestone, representing the Investment Manager noted:
The Company returned -5.6% in September, underperforming its benchmark, the Numis Smaller Companies +AIM ex Investment Companies Index, which returned -2.3%. During the month the long book detracted while the short book in aggregate made a positive contribution.
There were some sharp changes in stock market dynamics in the second half of the month, and these changes caused the negative performance of the portfolio in September. In aggregate the stock market fell but within this there were pronounced changes in sector and style leadership. This was a particularly sharp event but (sadly!) not uncommon. These rotations and sell offs do happen, and will keep happening, but importantly we see this as a transitory setback and do not think the fundamental outlook or investment cases have changed. There has been focus on higher inflation and supply shortages in several industries which is a potential profit headwind for many companies. Notably inflation is a real concern if you are a low margin business with no pricing power and no volume growth to offset your cost inflation. But these are the type of companies we avoid and/or short. On the other hand, inflation can be accommodated (much) more easily if you have high margins, volume growth and pricing power. These are exactly the companies we look to invest in, and while investors will inevitably worry about all companies for a while, we do expect our holdings to fare better in due course. To frame the question a different way - do we think the structural demand outlook for enterprise spending on digital transformation has deteriorated due to supply shortages in gas, or increases in wages for HGV drivers? No, we do not. And so, the outlook for, say, Gamma Communications is as compelling as ever and this pullback represents a mid-cycle opportunity not the start of a problem.
The largest contributor to performance during the month was Dunelm, which delivered a strong finish to its year end and the current strength of trading has given Management the confidence to raise their guidance for profits for FY22 by circa.10%. Dunelm's investment and its digital initiatives are clearly driving significant market share gains, adding to their active customer base and driving order frequency and value to great effect. It is worth noting we also delivered some strong successes in the short book, notably in a UK listed CFD trading business which profit warned on lower activity levels (as customer behaviour normalises post pandemic).
The top 10 detractors were primarily long postions, and all had one thing in common, regardless of their sector, size, or geography they had all been very strong performers that fell back on no stock specific news. This kind of wide sell off is unfortunately a relatively common feature of the stock market, and so our approach is to accept them as the reality of our industry, and we try to spot opportunities within them. Of the top 10 detractors this month, we do not think there is any deviation in their fundamental investment cases, and the recent pull back has enabled us to add to positions, in particular our top three detractors.Gamma Communications was the biggest detractor falling over 20% in the month on an "in-line" update. After 3x upgrades this year maybe the market wanted more? From our perspective, to buy more Gamma on 24x p/e (price to earnings ratio) with a 95% recurring revenue model and a long runway of growth in UCaaS (unified communications as a service) is an opportunity not to be missed. The second and third biggest detractors were Auction Technology Group and Baltic Classified Group, which both fell sharply on no news flow, and we have added to both.
In summary, a setback in September, but as painful as these rotations seem in the moment (similar to say October 2018, or November 2020) our confidence in the investments remains. We have added to holdings and we think this will help sow the next leg of performance over the coming months. It is important to clarify that this month's performance is not attributed to any significant negative developments in the businesses or the investment cases, it is simply a short-term stock market phenomena. In fact, company updates that matter to us have continued to be overwhelmingly positive and this underpins our continued belief in the holdings.
1Source: BlackRock as at 30 September 2021
22 October 2021
Latest information is available by typing www.blackrock.com/uk/thrg on the internet, "BLRKINDEX" on Reuters, "BLRK" on Bloomberg or "8800" on Topic 3 (ICV terminal). Neither the contents of the Manager's website nor the contents of any website accessible from hyperlinks on the Manager's website (or any other website) is incorporated into, or forms part of, this announcement.