Coronavirus – an update from Blankstone Sington AIM Inheritance Tax ISA
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
From Blankstone Sington
Stephen English, manager of the Blankstone Sington IHT AIM ISA gives a view and an update on the impact of the coronavirus crisis on the AIM market and the Blankstone Sington portfolio (March 2020). Below we reproduce his views, with the permission of Blankstone Sington.
Severe share price reactions within the AIM market
Newsflow is fast-moving and policymakers were initially slow to react but are now ramping up measures to try and mitigate both the human and financial fallout from the virus. The sell-off has been violent, with many examples of investors selling irrespective of price. In this phase there is very little ‘signal’ and a lot of ‘noise’, with wild intraday volatility in share prices. For example, core holding Tristel, whose high-level disinfectant is driving bumper demand currently, saw its shares close at 443p on 16 March before falling to a low of 280p on 19 March only to rally today to 450p (23 March). When panic and fear are driving markets often the best course of action is to do nothing; ‘don’t just do something, stand there’.
We hold a collection of companies with, on average, very strong balance sheets and exceptional management teams. Dividends/buybacks are being passed this year by most companies, with sheer survivability the predominant consideration of management. That is fine.
We held a deliberately balanced portfolio going into this crisis, with stocks such as Begbies Traynor and FRP Advisory, both insolvency practitioners, set to actively benefit from a recession. We have minimal retail exposure beyond Shoe Zone, whose management team has been through recessions before; it’s no accident it favours a strong net cash balance sheet. We never knew toilet roll would literally be fought over but Accrol, the leading supplier of own name toilet roll to both discounters and supermarkets, was already on a strong recovery path and will only benefit further from the extreme hoarding. The bulk of the portfolio is in business-to-business companies rather than business-to-consumer, which should add a further leg of resilience. In 3-5 years, the prices on offer today will be looked on as bargains. To sell now is to bet against human ingenuity; that has been an expensive mistake to make through millennia.
An equity is, at least in more rational times, nothing more than the value of the next 20-30 years of cashflow. An overly myopic focus on the next 6-12 months has created opportunities that one seldom sees. Fundraisings of good companies with bad balance sheets will be required and we will look at opportunities to selectively participate in the second half of this year. You will see portfolio activity levels rise this year as we look to rebalance from stocks that held up well into select recovery names, but there will also be a chance to buy into long-term structural growth companies that we have long admired but were just too expensive to own previously.
See five-year performance of shares mentioned above
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