Miton UK MicroCap Trust plc (LON:MINI) has announced its Factsheet for the month ended 29 February 2024.
Manager commentary
During the globalisation decades, the capital appreciation of companies focussed on growth has greatly outpaced the return generated by companies paying good and growing dividends.
This has been especially apparent in micro-caps listed on the UK stock exchange. As capital has been withdrawn from the large UK companies, their valuations have fallen although this has been moderated by international buyers. Where capital is withdrawn from UK micro-caps however, they are of little interest to international investors and hence their valuations can fall very considerably.
Over recent years, the compromises that come with globalisation have become more apparent. Global electorates have started to vote for nationalistic policies, which sometimes lead to additional geopolitical risk (the potential political, economic, military, and social risks that can emerge from a nation’s involvement in international affairs). During crises, we believe cash generative companies have all the advantages.
Whilst the very largest international companies known as mega-caps may have outperformed again during 2023, the mood change in electorates appears to be well established, so conditions that favour cash generative companies such as those of the UK may be set to become persistent. In time, we believe the valuation of the UK stock market will rise compared with others, even the US. We also anticipate the
new trend will favour UK-quoted micro-caps disproportionately.
So, whilst we believe the share prices of numerous micro-cap portfolio holdings are standing on very overlooked valuations at present, the important feature is that most continue to trade well. During
February for example, Beeks Financial Cloud Group plc, a business that makes it easy for the counterparties of financial exchanges to thrive, by operating in the cloud, announced a very large new
contract. Its share price had drifted down to 94p at the end of January, but with this announcement it
finished February at 166p.
Gervais Williams & Martin Turner
Miton UK MicroCap Trust (LON:MINI) intends to invest primarily in the smallest companies, measured by their market capitalisation and quoted or traded on an exchange in the United Kingdom.
