Keystone (KIT) aims to generate long-term total returns through investment in primarily UK equities. Managed since April 2017 by James Goldstone, KIT typically invests on an all-cap basis. The manager seeks to identify companies where investor sentiment is unjustly negative and there exists a catalyst to a valuation re-rating.
KIT typically offers a greater yield than much of its peer group. Dividend generation is considered important by the manager because he views this as evidence of alignment of management and shareholder interests, as well as capital discipline. Presently KIT yields c. 4.7% on a historic dividend basis. The board moved in 2019 to introduce a quarterly dividend. The current environment may present challenges to maintaining this level of dividend, but revenue reserves remain in place to potentially help mitigate any shortfall in portfolio revenue.
Currently trading on a discount of c. 12.7% (as of 20/04/2020), KIT is trading at a wider discount to both its own historic average and the wider sector. The board has been supportive, with significant buybacks earlier in 2020 and capacity for further buybacks.
Presently the portfolio remains overweight UK domestic earners, but the manager has consciously adopted a bar-bell approach to relative risk positioning with regards to potential environments, with positions that should benefit in either inflationary or deflationary environments, including a significant allocation to gold mining companies. He believes he has identified stocks which are attractive on their own merits, but particularly so in a divergent range of economic results. On balance, however, the portfolio remains tilted slightly towards an inflationary environment, with the manager believing extraordinary policy stimulus measures will ultimately have this result.