The view among global asset allocators seems to be that the UK and its companies are floundering and that, buffeted by elevated inflation, higher interest rates and economic uncertainty, smaller companies in particular are struggling.
However, this is at odds with what we are hearing first hand in our meetings with the management teams of the majority of companies we hold in the fund and those we are talking to with a view to possible future investment. In many cases, they are reporting robust trading and continuing growth.
We take the view that nobody understands these companies better than the people managing them on a day-to-day basis. If they believe their shares look undervalued and are buying them back on behalf of the company then we view this as a strong vote of confidence.
Share buybacks also serve to remind us that not all smaller companies have high levels of debt on the balance sheet. The reality is many are producing excess cash, a fact which we see as further reinforcing the investment case for UK smaller companies.
We see a strong long-term opportunity in UK equities and particularly in smaller companies. The increasing number of share buybacks underlines the value that those who understand these companies the best – the management teams running them – see in their businesses. In our view this is a very positive signal for investors.
Mark Niznik, co-manager of the Artemis UK Smaller Companies Fund
1 This list does not include investment trusts, some of which have discount control policies which force them to buy back shares when discounts widen. Source, Bloomberg
2 Sources, Liberum and Datastream
FOR PROFESSIONAL INVESTORS AND/OR QUALIFIED INVESTORS AND/OR FINANCIAL INTERMEDIARIES ONLY. NOT FOR USE WITH OR BY PRIVATE INVESTORS. This is a marketing communication. Refer to the fund prospectus, available in English, and KIID/KID, available in English and in your local language depending on local country registration, from www.artemisfunds.com or www.fundinfo.com, before making any final investment decisions. CAPITAL AT RISK. All financial investments involve taking risk which means investors may not get back the amount initially invested.
Investment in a fund concerns the acquisition of units/shares in the fund and not in the underlying assets of the fund.
Reference to specific shares or companies should not be taken as advice or a recommendation to invest in them.
For information on sustainability-related aspects of a fund, visit www.artemisfunds.com.
The fund is an authorised unit trust scheme. For further information, visit www.artemisfunds.com/unittrusts.
Third parties (including FTSE and Morningstar) whose data may be included in this document do not accept any liability for errors or omissions. For information, visit www.artemisfunds.com/third-party-data.
