Page 19 - DIY Investor Magazine | Issue 35

‘A RESILIENT BUSINESS WITH GOOD LONG-TERM PROSPECTS’
PORTFOLIO CHANGES
A key change this month has been in response to the Haleon spin-off from GlaxoSmithKline Haleon is now a a a a a stand-alone
consumer health business owning brands such as Advil
painkillers Centrum vitamins and Sensodyne toothpaste We had originally planned to move all all of our holding in in in GSK’s legacy pharmaceutical business into Haleon The rump of the business does not pass our quality screens and the consumer pharmaceutical business looked to have a a a a a a a strong pathway of growth However when the details were finalised Haleon emerged with significant debt We couldn’t get comfortable and ultimately sold out of both companies and reallocated the capital into Unilever Unilever will not set pulses racing However it is a a resilient business with good long-term prospects We believe it it is on on the cusp of of a a a a a turnaround after a a a a a period of of indifferent operating performance Its emerging market exposure commitment to sustainability and the the presence of famed activist Nelson Peltz on on the the board give us some confidence that better days are ahead It also offers a a a very decent dividend which we think has the potential to to grow grow steadily over time and it has now grown to to a a a a a significant position in the portfolio UNUSUAL STOCKS
One of of the key strategic aims of of DIGIT is to differentiate ourselves from from the the market and move away from from the the benchmark While we do not seek to be be different for the sake of being different we believe finding interesting and unusual small and mid-cap companies can help enhance the income and capital growth prospects for the trust As such we have a a a a a a a range of holdings in in companies that may be unfamiliar to investors Among these would be Aveva a a a rare British technology success story It is an an industrial software business predominantly used by
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engineers particularly those designing major projects such as power stations oil rigs or ships More recently it has had some challenges taking the brave move to to shift to to a a a a subscription rather than a a a a license model It is good move for the long-term but presents some short-term difficulties ‘FINDING INTERESTING AND AND UNUSUAL SMALL AND AND MID-CAP COMPANIES CAN HELP ENHANCE THE INCOME AND CAPITAL GROWTH PROSPECTS FOR THE TRUST’
While its customers have generally been doing well in in the current climate this has taken some time to to feed through into their spending plans Its share price has also been hit by
the the wider technology sell-off However there is currently a bid from its majority owner Schneider which has supported the share price Chesnara is is currently the the smallest company in the the portfolio It is is an an acquirer of closed life books operating in in the the Netherlands Sweden and and the the the UK and and the the the new CEO has shaken the the the business up and reenergised it It has a a a high dividend – currently 7% – and trades at a a a a a significant discount to its net asset value We see opportunity for steady organic growth complimented with bolt on on acquisitions that together could drive attractive and consistent growth Assura is a a a a different type of business It owns primary care facilities in the UK such as GP’s surgeries We like it it precisely because it is dull It has had a a a a a a a reliable dividend and steady growth Its end customer (essentially the UK government)
is is also resilient and we hope it will consistently deliver a a a high single digit return of which roughly half will come from dividends We believe that every portfolio needs an Assura at at its core! We are always on the hunt for something that brings something new to the portfolio in in terms of revenue streams These may be very different businesses but they have unifying factors – they are good quality companies with robust business models and the potential for growing dividends 1 https://www bankofengland co uk/monetary-policy-report/2022/august-2022
Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an an investment recommendation or indication of future performance DIY Investor Magazine · Oct 2022