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View the video online at http://citywire.co.uk/money/video/a637542

‘Exceptional’ year for smaller companies, says Hermon of Henderson

Neil Hermon, manager of the Henderson Smaller Companies investment trust, says smaller companies have led the way in 2012 and are still poised to do well next year.

‘Exceptional’ year for smaller companies, says Hermon of Henderson

Smaller companies have had an exceptional year, outperforming larger companies with faster earnings growth, says Neil Hermon, manager of the Henderson Smaller Companies trust.  

The numbers speak for themselves as in the past year the Numis Smaller Companies 1000 (+Investment Trusts) index has generated total returns of 15%, bounding ahead of the FTSE 100 8.5% total return.

However, the tough economic conditions mean questions are being raised about the sustainability of company earnings forecasts. Hermon agrees but remains positive about the outlook for the smaller companies in which he invests.

The trust's shares currently trade at 347p, a 19% discount to the net asset value (NAV) per share of 427p. Shareholders have enjoyed total returns of 45% over the past year and 57% over the past five years to outperform the Numis Smaller Companies (excluding Investment Trusts) index total returns of 29% and 38% in the same time periods.  

One of the strongest performers in the trust is manufacturing equipment maker Spectris (SXS.L). It is Hermon's largest holding having risen 44% in value so far this year. Hermon is still positive on the stock and thinks it has good growth prospects and potential for margin expansion.

House-builders are also a focus in the portfolio with holdings in Taylor Wimpey (TW.L) and Bellway (BWY.L). Hermon says the government is doing a lot to help the  sector, in terms of lending and providing finance for first-time buyers, and he expects good growth and profitability ahead as the businesses buy new high-margin land at cheaper prices.

He also expects house-builders to improve their capital discipline and return more cash to shareholders, as opposed to looking to expand though rights issues in 2013.

Hermon has also recently added conveyor belt-maker Fenner Group (FENR.L) to the portfolio, which despite its challenges in the US, he believes is positioned for further growth.

7 comments so far. Why not have your say?

Dennis .

Nov 28, 2012 at 00:40

A good example of how a non investigative journalist allows someone to sell his fund without any sort of challenge

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Caelainn Barr (Citywire)

Nov 28, 2012 at 09:35

@ Dennis What questions would you like to put to this trust manager, with an investigative angle, for an investment trust profile video?

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Dennis .

Nov 28, 2012 at 10:26

His answers are all predictable. I have been on "how to handle the media" courses and this guy is doing all of the things we were taught to do ie keep talking, have a prepared script, answer your own questions and above all be in control and get your message over without being interrupted. I would prefer a Jeremy Paxman style where the guy is stopped in his tracks by simple unscripted questions like "but surely smaller companies are more likely to be affected by Banks' borrowing problems". "What is your take on the effect of a Euro crisis on small companies in your portfolio", find out some good and bad decisions taken by the guy over the past year and ask why he took those decisions etc.

I appreciate that if interviews get too combative then you wouldn't get these people to come for interview but I read Citywire (and the FT) for investment information and not to listen to adverts from Fund manager/salesmen.

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Caelainn Barr (Citywire)

Nov 28, 2012 at 10:40

@ Dennis Thanks, good to have your feedback

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smoking gun

Nov 28, 2012 at 15:20

C'mon Dennis. How can you say that you want Paxman style interviews. I learned to turn him off years ago because the guy does exactly what you complain about - asks a question and as soon as the guest opens his mouth Paxton butts in and tries to take him down a peg answering his own question probably from a pre-rehearsed script. Give me Andrew Neil or Andrew Marr. At least they give the guest an opportunity to make his case before being questioned more deeply. I can't (or maybe it's just won't) comment on the above article because don't know enough about it.

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Dennis .

Nov 28, 2012 at 16:19

OK perhaps Paxman is a bit extreme but the acid test is that having seen the interview would you invest some money in his fund? I have just, this afternoon, invested money somewhere else. These interviews are all very similar, remember interviews with Antony Bolton who thought that China was just like Europe in the 80's so it was a good investment? No one had the nerve to say "what's that got to do with it?" similarly with recent stories about investing in Africa.

We need to be much more interrogative of people running these funds and not let them give us sales talk.

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John Bowers

Dec 03, 2012 at 12:36

I was already invested in this fund and was happy to hear his comments though I agree that these interviews are just a mouthpiece for the fund manager. However, if you look at this small co. trust performance over recent years, the fact that you can still buy it at 19% discount is remarkable if not difficalt to understand. Coincidentally I too have recently invested in Fenner, which has been widely tipped recently following its good results.

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  • Henderson UK Smaller Companies A Net Acc
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  • Spectris PLC (SXS.L)
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  • Fenner PLC (FENR.L)
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  • Taylor Wimpey PLC (TW.L)
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  • Bellway PLC (BWY.L)
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  • Neil Hermon
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