With small-caps on the up, The Telegraph is backing North Atlantic Smaller Cos. manager, Christopher Mills, to keep outperforming, while MoneyWeek believes healthcare REITS, Assura and Primary Health Properties, could be beneficiaries of the new UK government.


With small-caps on the up, The Telegraph is backing North Atlantic Smaller Cos. manager, Christopher Mills, to keep outperforming, while MoneyWeek believes healthcare REITS, Assura and Primary Health Properties, could be beneficiaries of the new UK government.

By
Frank Buhagiar
28 Aug, 2024

Questor: This Fund Manager Has Returned 13pc a Year for 42 Years – Now is a Good Time to Buy


In 1982, Christopher Mills, founder of investment group Harwood Capital, became manager of the North Atlantic Smaller Companies Trust (NAS). 42 years on and the £555 million investment trust, which remains under Mills’ stewardship, has consistently outperformed the UK stock market, generating an annualised +13% return compared to the FTSE All-Share’s +8.9%. Over ten years, NAS’ total return of +147.5%, comfortably ahead of the Deutsche Numis Smaller Companies index’s +61.2%.

That successful track record, testament to the fund’s Anglo-American approach to investing in small-cap stocks, although currently only around 10% of the fund is invested in U.S. businesses while over 75% is in UK stocks. It’s also a nod to NAS’ activist strategy whereby the fund manager doesn’t just buy and hold sizeable stakes in companies, but also helps management teams transform/turnaround their businesses. And yet despite that track record, the shares currently trade at a 29% discount to net assets – a battle scar of the tough time small-cap funds in general have had these past three years or so, as the high inflation/interest rate environment put investors off the sector.

But things could well be looking up for both small caps and NAS itself. Small-cap indices are showing signs of life as interest rates come down; while NAS’ share price is up 10% over the past 12 months. All in all, Questor sees enough to slap a buy rating on NAS stock. And, it seems, The Telegraph tipster is not alone “we take comfort that Peter Spiller, the manager of Capital Gearing Trust, a longstanding Questor tip, is a big fan. Mr Spiller, who pips Mills to the post as the UK’s longest-serving fund manager, holds him in high regard and owns 6.8pc of North Atlantic. With small companies rallying on a strengthening UK economy, that’s a powerful endorsement.” Safety in numbers and all that.

MoneyWeek: Top Healthcare REITs for Your Portfolio
MoneyWeek has come up with two names in the Real Estate Investment Trust (REIT) space that stand to benefit from the change in government in the UK – Assura (AGR) and Primary Health Properties (PHP).

Fair to say the two trusts have quite a bit in common. Both are focused on building, managing and leasing healthcare facilities, such as GP practices and hospitals. Both primarily rent out their facilities to the NHS, meaning their tenant base is largely government-backed – currently 89% of PHP’s income is paid for by the UK and Irish governments. Both operate in a sector where underlying demand for the facilities they provide is being driven by an ageing population. And both stand to benefit from new Chancellor Rachel Reeves’ decision to scrap the previous plan to build 40 new hospitals across the UK – with NHS waiting lists at record levels “private providers are likely to have to step in to fill the gap.”

Of the two, MoneyWeek thinks that “Assura looks to be the better buy. The stock is trading at around 80% of book value and has an 8.2% forward dividend yield. PHP is around 10% more expensive on a book-value basis and only offers a forward dividend yield of 7.4%.” Nevertheless “both Assura and PHP look well placed to benefit from Labour’s drive to increase investment in the UK economy and improve access to healthcare. A portfolio of both would provide exposure to these themes while reducing company-specific risk.” And if that’s not enough “With interest rates heading lower, these companies may start to look much more attractive from an income perspective.”