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Fund Profile

BlackRock Smaller Companies 12 June 2019


Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Smaller Companies. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

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BlackRock Smaller Companies aims to achieve long-term capital growth through investment mainly in listed UK smaller companies. For the past 17 years the trust has been led by Mike Prentis, however it recently announced that he will be stepping down at the June AGM and co-manager Roland Arnold will be taking over the reins. With this said, very little will change about the manner in which the portfolio is run, and the focus will continue to be on finding growth companies with potential to become much larger through a combination of top-down and bottom-up analysis.

The portfolio has become increasingly concentrated over the past year, as the managers have been selling a number of holdings where their conviction has weakened. Currently the portfolio is made up of c.120 stocks, and it is well diversified by sector and underlying revenues. The team continue to have a solid exposure to companies with an international presence, with over half of the portfolio’s revenues coming from abroad. At a sectoral level, the largest active overweights come from media (+7.4%), financial services (+7.3%) and industrial engineering (+5.2%). The company offers little exposure to travel & leisure companies, food producers and general retailers, many of which are UK focused. The company is also underweight software and computer services businesses as the team believe that ongoing political uncertainty could continue to impact business investment decisions, such as IT spend.

The company has a strong long-term track record of outperformance of not only its benchmark - the Numis Smaller Companies Plus AIM excluding Investment Companies - but also of its open and closed ended peers in the UK Smaller Companies sectors. Over the past five years the company’s net asset value per share has delivered returns of close to 80%, 30% ahead of the IA sector peer group and 25% ahead of the AIC peer group (all calculations on a total return basis). Perhaps more impressively, the company’s NAV has outperformed the benchmark by 48% over the same period. More recently, performance has been affected by political uncertainty surrounding the UK, which has impacted smaller companies share prices.

Kepler View

BlackRock Smaller Companies is a well-run company, with a long-term track record of strong performance. Mike Prentis’ retirement is something that investors will be disappointed to hear of, however we don’t doubt that Roland will be able to fill his shoes. We particularly like the manager’s decision to concentrate the portfolio a touch from what was a very diversified portfolio, but without comprising their aim to provide a “reduced risk” approach.

At this moment in time the portfolio seems well positioned for the rather more uncertain environment, and perhaps this is reflected in the narrowing of the discount. Currently trading on only a 2% discount to NAV, it hardly represents a bargain. However over the long term, the company has rewarded investors with excellent performance ahead of peers and the benchmark and we see no reason why Roland will not be able to continue this track record.

Strong long-term track record
Highly experienced co-manager Mike Prentis is leaving the team
Well positioned for the current volatile conditions
The trust has narrowest discount in the sector
Relatively low OCF

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Fund History

16 Nov 2023 BlackRock Smaller Companies - Bull vs Bear
In this inaugural episode of Bull vs Bear, we look at BlackRock Smaller Companies (BRSC)...
31 Jul 2023 Fund Analysis
BRSC is a newly minted ‘dividend hero’…
14 Jun 2023 Let's go round again?
Discounts have ballooned across the investment trust world, but our analysis shows we've been here before...
16 May 2023 Results analysis: BlackRock Smaller Companies
BRSC’s historically wide discount may offer an attractive entry point for long term investors…
05 May 2023 Don’t ignore smaller companies for income
While the UK market is a good hunting ground for income-seekers, that income is often concentrated in a handful of stocks and sectors. “A small cap allocation can help to diversify this, and the investment trust structure has unique features that makes it attractive to income seekers” says Roland Arnold on the BlackRock Smaller Companies Trust...
18 Jan 2023 Fortune favours the brave
Our research suggests a recession has already been priced into small cap trusts, but risks abound...
24 Nov 2022 Fund Analysis
BRSC’s wide discount and lower portfolio valuations may offer an attractive entry opportunity for long-term investors...
24 Nov 2022 Slides and Audio: BlackRock Smaller Companies
Download the presentation and listen to the audio from our webinar from 15 November...
02 Sep 2022 The small cap advantage
Smaller companies have shown their mettle through the pandemic. This is no accident, says Roland Arnold, portfolio manager of the BlackRock Smaller Companies Trust plc, these are dynamic and nimble businesses, that use capital effectively to drive innovation and deliver sustainable long-term growth...
10 Aug 2022 Get ‘em while they’re hot
Wide discounts in the UK Smaller Companies sector may present long term investors with good entry opportunities…
11 May 2022 Results analysis: BlackRock Smaller Companies
BRSC’s wide discount may provide an attractive entry point for investors…
05 Apr 2022 Fund Analysis
BRSC’s wide discount could prove a lucrative long-term entry point…
30 Dec 2021 Great expectations
As the last of the mince pies wilts in the fridge, topped with a generous helping of stilton, the Kepler Trust Intelligence team stick a finger in the air and point toward their top picks for the year ahead…
01 Dec 2021 Smaller companies: finding the best
Roland Arnold, Portfolio Manager of the BlackRock Smaller Companies Trust plc, explains how he uncovers companies that could grow their earnings for the long term.
29 Sep 2021 Fund Analysis
BRSC has a strong track record of consistent outperformance...
18 May 2021 Results analysis: BlackRock Smaller Companies
BRSC continues to forge a solid long-term track record despite a challenging year…
10 Feb 2021 Fund Analysis
BRSC has a strong track record of consistent outperformance...
10 Feb 2021 Eye of the Pfizer
Mining shares have rallied in recent months. With further potential, what impact could this have on the relative returns of active UK Small cap strategies...
17 Sep 2020 Blood in the streets
The UK Smaller Companies Sector faces plenty of challenges, but bombed out valuations among trusts in the sector look interesting...
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
22 May 2020 Fund Analysis
BRSC has one of the strongest track records in the UK Smaller Companies universe, consistently outperforming the benchmark in rising and falling markets…
06 May 2020 The fight in the dog
We look at the characteristics which have separated the winners from the losers among small-cap trusts in the current crisis, with some surprising results...
27 Dec 2019 Fund Analysis
BRSC is well positioned for uncertain conditions with strong diversification across sectors and geographies…
05 Dec 2019 Small wonders: income from the UK's most exciting companies
Smaller companies have typically been employed to add a little spice to a portfolio, to generate some growth alongside their stodgier blue-chip cousins. But they can play plenty of other roles, including as a solution for income.
12 Jun 2019 Fund Analysis
BlackRock Smaller Companies is a well-run company, with a long-term track record of strong performance...
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