Fund Profile

BlackRock Throgmorton Trust 23 December 2020

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by BlackRock Throgmorton Trust. 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.

Overview
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Overview

BlackRock Throgmorton Trust (THRG) aims for long-term capital growth and an attractive total return through investment in UK small- and mid-cap companies. The manager, Dan Whitestone, allocates to both long and short positions, with the short book a key differentiator from its peers.

As we discuss under Performance, THRG’s returns have been exceptionally strong in both the short term and over the past five years, in fact the strongest in the peer group over five years. Perhaps as a result of these returns, THRG trades close to a premium (as discussed under Discount). The board has been active in issuing shares to help to manage this, recently placing 2.68m shares with institutional investors.

Dan believes the broader factors that have driven outperformance of many of his holdings are not only durable, but in fact accelerating, as we discuss under Portfolio. Following the COVID-19 pandemic and related policy responses, he anticipates significant ‘corporate Darwinism’. In this context, companies with robust balance sheets and market leading products can often look to consolidate and extend their intra-industry leads. Yet other areas are more prone than ever, in his view, to disruption from technology heavy, capital-light businesses with significant operational flexibility.

Long holdings are initiated with a typical timeframe of between 3-5 years, with Dan looking to identify companies which fall within one (or both) of two buckets. These are companies with quality differentiators, and industry disruptors. At present Dan believes there are significant opportunities for companies falling within both buckets.

Although the investment strategy is focussed on capital growth, the board has increased dividends every year for the past ten financial years.

Analyst's View

Following the spread of the COVID-19 pandemic, and the policy responses that followed, UK equity markets largely followed their global peers in bifurcating sharply between assumed beneficiaries and victims of the ‘new’ environment. This played well to the existing strategy within THRG, with its emphasis on identifying both disruptors and the disrupted, and an emphasis on financial and operational robustness. The manager is clearly excited by the opportunities that have already arisen from this environment, and his belief that we are only at the start of sustained shifts in behaviours which will drive the companies held within THRG is compelling in its logic.

A perception of ‘normalisation’ back to pre-COVID models (and intra-market rotations to ‘value’), may have been expected to pose a short-term headwind to THRG, yet precisely such an environment has not impeded the relative return profile in recent weeks. In the longer-term, the focus on an alliance of balance sheet strength and disruptive, innovative business models seems likely to us to yield significant opportunities more or less irrespective of wider market conditions, but should the manager’s envisaged environment come to pass it would very likely prove a further tailwind to the strategy. Clearly insolvency risks remain elevated across global markets, yet little risk seems to be implied in many instances. This should, in our view, continue to offer complimentary opportunities on both the short and long book for THRG.

BULL BEAR
Very strong track record of absolute and relative performance
Some underlying holdings could be vulnerable to profit-taking in a market rotation
Highly exposed to long-term industry change and secular trends accelerating as a result of COVID-19
Net market exposure tends to be structurally in excess of 100%, exacerbating downside as well as amplifying upside
Focus on balance sheet strength provides exposure to accelerated ‘corporate Darwinism’
Currently trading on a premium to NAV
Continue to Portfolio

Fund History

31 May 2024 Always look on the bright side of life
We argue that optimism is more likely to serve investors better than pessimism…
21 May 2024 Fund Analysis
THRG has performed well over the past year, with outperformance accelerating in recent months…
21 Feb 2024 Pitch doctoring
Our analyst argues the upcoming budget should see radical action to boost the UK market…
13 Feb 2024 Results analysis: BlackRock Throgmorton
Easing macroeconomic conditions may provide a catalyst for THRG’s operationally resilient companies to re-rate…
10 Jan 2024 Definitely maybe
Fund flows and discounts may shed some light on a once-in-a-generation opportunity…
07 Aug 2023 Fund Analysis
THRG: falling portfolio valuations mask strong and resilient operational growth trends…
13 Feb 2023 Results analysis: BlackRock Throgmorton
Performance improved for THRG in the second half of the 2022 financial year…
18 Jan 2023 Fortune favours the brave
Our research suggests a recession has already been priced into small cap trusts, but risks abound...
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
04 Nov 2022 Fund Analysis
THRG’s manager argues macro is driving short-term volatility, but fundamentals should prevail in the long term…
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…
16 Feb 2022 Perfectly formed
Our research suggests that investment trusts really are a better way to gain exposure to smaller companies…
09 Feb 2022 Results analysis: BlackRock Throgmorton
THRG continues to build on its impressive track record by investing in disruptive and innovative UK smaller companies…
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…
08 Dec 2021 Fund Analysis
A dynamic and growth orientated approach to UK smaller companies…
11 Aug 2021 In at the deep end
Does seeking out wider-than-usual discounts help investors systematically outperform in the UK trust space?
28 Jul 2021 Fund Analysis
THRG’s high net exposure reflects the manager’s bullishness about the opportunity set in UK small caps…
08 Jul 2021 London Calling
UK equities represent a ‘once in a generation’ opportunity for investors according to the managers who joined us to discuss the outlook at our event last week…
07 Jul 2021 Slides and Audio: BlackRock Throgmorton
Download the presentation and listen to the audio from our 'Cool Britannia' Summer conference on 01 July...
07 Jul 2021 Slides and Audio: Roundtable - Small is beautiful
Download the presentation and listen to the audio from our second roundtable discussion with Dan Whitestone, Georgina Brittain and Judith MacKenzie...
23 Jun 2021 Time to back Britain?
After a challenging period for the United Kingdom, we wonder if it could be the most exciting market on a five-year view…
09 Jun 2021 Cool Britannia?
Join the team at Kepler Trust Intelligence and six leading UK fund managers as we examine the prospects for UK equities with COVID in retreat and Brexit uncertainty finally behind us…
18 Feb 2021 Results analysis: BlackRock Throgmorton
After another set of strong results, we look at why, in our opinion, THRG continues to be one of the standout trusts in the UK…
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...
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
23 Dec 2020 Fund Analysis
BlackRock Throgmorton (THRG) seeks to use both long and short positions to generate alpha...
10 Dec 2020 Lots of uncertainty, but an abundance of investment opportunities
Dan Whitestone rationalises the financial performance of individual companies during the pandemic and how this has affected BlackRock Throgmorton Trust plc...
25 Nov 2020 Britannia Redux?
UK equities have been despised for almost five years and could offer extreme rebound potential…
17 Jun 2020 Fund Analysis
One of the most reliable trusts in the UK smaller-companies sector, THRG uses both a long and a short book to generate alpha, regardless of the wider market conditions…
20 Nov 2019 Making the grade: Kepler's rated trusts report strong performance in 2019
Earlier this year, we launched our new ratings for income and growth. Since then, the 40 trusts to have been awarded the elite Kepler Trust Intelligence ratings have performed strongly…
20 Nov 2019 Fund Analysis
One of the most reliable trusts in the UK, THRG has shown the ability to perform strongly in both rising and falling markets at low levels of volatility…
16 Oct 2019 Thinking big on small companies
10 Apr 2019 Because they're worth it
With the rise of the passives putting more pressure on fees than ever before, we argue that performance fees could be the key to encouraging truly active investment trust managers...
03 Apr 2019 Fund Analysis
Dan Whitestone offers a growth-orientated portfolio of UK small and mid caps, using both long and short positions...
24 Oct 2017 Fund Analysis
A growth-orientated UK small-cap trust that is differentiated from its peers thanks to its ability to take both long and short positions...
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