Henderson Smaller Companies (HSL)

Henderson Smaller Companies Investment Trust (LON:HSL) invests in UK small- and mid-cap companies, seeking to generate total returns. Managed since 2002 by Neil Hermon of Janus Henderson Investors, HSL typically owns around 100 companies which the manager and his analyst team believe offer superior growth potential at a reasonable valuation.

Neil builds his portfolio primarily through bottom-up stock analysis, looking for companies which are attractive on his ‘4 Ms’: Model, Management, Money and Momentum (which we explain in the Portfolio section). This is balanced with valuation considerations (and we note Neil presently thinks the UK market looks attractively valued, with earnings set to be strong in the current financial year too).

Returns over the long term have been very strong, HSL significantly outperforming the benchmark index under the current manager’s tenure and over the past five years. As we discuss under Performance, this outperformance has been consistent, with HSL having outperformed on average in both positive and negative markets (though the trust did underperform in the market sell-off of Q1 2020).

Whilst the investment focus is on small- and mid-cap companies, which tend to yield less, HSL has an extensive track record of dividend growth. The current yield (as at 31/05/2021) of 1.9% on an historic basis is not particularly high but, as we discuss in the Dividend section, HSL has a track record of growing its dividend over the previous 18 financial years.