DIY Investor Magazine
/
March 2017
33
AN INNOVATIVE INVESTMENT APPROACH
We believe investment returns are driven by a change in a company’s prospects and an accompanying change in
market perceptions. Often good companies are overly admired and consequently become overvalued. A company
that has been badly run or is down on its luck may offer much more potential for improvement and, eventually, for
outstanding returns. As contrarian investors, we see three distinct investment categories. We categorise the first
as
ugly ducklings
– unloved companies that most investors shun. These firms face fundamental challenges, and
the market has become extremely pessimistic about their prospects. But we see their out-of-favour status as an
opportunity.
The second category is where
change is afoot
. These companies have made significant changes to their
prospects, but the improvements are not yet recognised by the market. So, while other managers continue to steer
clear, we see the potential for profit.
In the third category are companies that
more to come
. Unlike the first two categories, these companies are
generally recognised as good businesses but we see an opportunity as the market does not appreciate the scope
for further improvement.
A PAINSTAKING PROCESS
To identify the right opportunities, we use a qualitative and quantitative analytic framework to research companies’
fundamental prospects. We carefully assess any management change and restructuring actions, and consider the
likely extent of any earnings recovery. Companies in our portfolio can move along an axis from “ugly ducklings” to
“change is afoot” and then “more to come”. When ugly ducklings become fully fledged swans, we’re looking to sell.
Until then, we keep portfolio turnover to a minimum.
For more information visit
Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a
result of market and currency fluctuations. You may not get back the amount you invest.
The Scottish Investment Trust PLC has a long-term policy of borrowing money to invest in equities in the expectation that this will improve returns for shareholders. However, should
markets fall these borrowings would magnify any losses on these investments. This may mean you get back nothing at all.
Investment trusts are listed on the London Stock Exchange and are not authorised or regulated by the Financial Conduct Authority.
Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this promotion should be considered to be or relied upon as constituting
investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.
This promotion is issued and approved by SIT Savings Ltd, registered in Scotland No: SC91859, registered office: 6 Albyn Place, Edinburgh, EH2 4NL.
Authorised and regulated by the Financial Conduct Authority.
Telephone: 0131 225 7781
Email
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