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Shining a spotlight on the best performing value collectives since the market’s vaccine boost
Thursday 20 May 2021 Author: James Crux

After more than a decade of domination for growth stocks, global markets are finally seeing a shift into value.

This in turn has benefited funds pursuing a value investing style. Growth performed relatively well through the initial course of the pandemic with technology stocks leading the way, but the key catalyst for the long-awaited rotation into value was ‘Pfizer Monday’ on 9 November last year.

The arrival of effective vaccines allowed investors to begin forecasting an economic recovery and stronger global growth ahead and led them out of growth stocks and into value and cyclical sectors which typically do better during periods of economic recovery.

Over the past six-and-a-half months, funds, investment trusts and exchange-traded funds (ETFs) following a value style have had a powerful tailwind behind them. Shares has crunched data from FE Analytics covering the period from 1 November 2020 to 12 May 2021, thereby capturing the value rally, to reveal the leaders and laggards among collectives with a value bias.

Our research shows small cap value portfolios are enjoying their day in the sun, and also demonstrates that selective actively managed funds with a focus on value are managing to outperform competing low-cost ETFs.

In addition, several UK equity income funds have also enjoyed a rare glimpse of the top of the performance tables thanks partly to the cyclical make-up of the UK stock market, with investors reassessing the prospects for economically sensitive stocks following the arrival of coronavirus vaccines.


Investors seeking low-cost exposure to the value rotation could have made roughly 36.5% in six and a bit months by buying the two best-performing ETFs with a value bent. According to FE Analytics, these were Xtrackers MSCI Europe Value (0MVO) and iShares Edge MSCI Europe Value Factor (IEVL).

Yet investors who entrusted their hard-earned cash to stock picker Jonathan Winton would have seen a superior 55% return, as his Fidelity UK Smaller Companies (B7VNMB1) fund proved the best-performing open-ended vehicle with a value bent since 1 November 2020.

Winton invests in companies that have gone through a period of underperformance, but where there are ‘unrecognised growth options’; he believes the stock market is inefficient at pricing companies that have gone through a troubled period and are out-of-favour as a consequence.

This is particularly the case for smaller companies where a lack of research can often combine with market scepticism to leave many companies trading below the true value of their franchise, in Winton’s view.

Often, it is only when an improvement in a company’s trading is visible that the market moves to reprice future growth prospects. Winton places strong emphasis on understanding
the downside risk of each potential investment.

Holdings span the likes of car parts-to-bicycles seller Halfords (HFD), floor coverings distributor Headlam (HEAD), outsourcer Serco (SRP) and luxury interior furnishings firm Sanderson Design (SDG:AIM).

Also riding high is TM RWC UK Equity Income (BG34293), the Ian Lance and Nick Purves-managed fund ranked first quartile on a one year, six month and three month basis according to Trustnet.

The overwhelming bulk of the fund’s assets are invested in companies valued at larger companies (£2.5 billion plus), with strong recent performers ranging from Royal Mail (RMG) and mining giant Anglo American (AAL) to banking group NatWest (NWG).

Another high-flyer is UBS UK Equity Income (B4W5895), the quarterly dividend paying portfolio managed by Steven Magill, head of the European value team at UBS Asset Management.

Mainly preoccupied with opportunities among the large caps, the fund has returned an impressive 49.4% during the value rally, benefiting from share price surges from top ten holdings including Barclays (BARC), BP (BP.) and Glencore (GLEN).


Among the top performing investment trusts with a value investing style is Aberforth Smaller Companies (ASL), with a total return of 78.1% over our designated period.

Invested in companies ranging from supermarket salads-to-pizzas supplier Bakkavor (BAKK) to recruiter Robert Walters (RWA) and logistics firm Wincanton (WIN), Aberforth’s managers are value investors who buy shares in companies they calculate to be selling below their intrinsic value.

This is determined through detailed financial and industrial analysis, combined with ‘a valuation approach that focuses on both stock market and corporate worth’.

Other noteworthy performers with an emphasis on value include Chelverton UK Dividend Trust (SDV), up 101.4%, as well as Fidelity Special Values (FSV), managed by Alex Wright and the aforementioned Jonathan Winton with a contrarian style which has returned 67.7% during the value rotation.

Also enjoying a revival is Temple Bar (TMPL), managed by RWC Partners’ Ian Lance and Nick Purves (see above), which has delivered a robust 65.2% return during the rotation into value.

Indications of rising inflation have provided a tailwind for reopening names held in Chelverton UK Dividend’s portfolio, among them Restaurant Group (RTN), Revolution Bars (RBG:AIM)
and Saga (SAGA).


Two trusts that have delivered positive returns over the period in review, yet have lagged value peers, are Lowland (LWI) and The Scottish Investment Trust (SCIN). The relative underperformance more glaring in the latter’s case.

Trading on a 5.5% discount to net asset value (NAV), research house Edison says Lowland, managed by James Henderson and Laura Foll, offers ‘a differentiated approach from peers given its value-biased style, long stock list, high weighting in smaller companies, and willingness to hold some of the portfolio in non-yielders with significant growth potential’.

And with the world reopening from lockdowns, ‘the more cyclical and small-cap names favoured by Lowland Investment Trust’s managers have begun to outperform’.

Sitting at an 8.9% discount to net asset value (NAV), The Scottish Investment Trust is a global fund managed by contrarian investor Alasdair McKinnon.

McKinnon seeks undervalued, unfashionable companies that are ripe for improvement and recently revamped the portfolio to take advantage of the many opportunities among unloved areas of the market he believes will benefit from a multi-year economic rebound.

Current holdings including the likes of BT (BT.A), energy giant BP, US bank Wells Fargo, home improvement retailer Kingfisher (KGF) and restaurants operator Cheesecake Factory.

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