Why it’s good news if Assura accepts the offer from its peer rather than private equity
as
08 Kier shares hit new 52-week high on
08 A string of lost cases sends Litigation Capital Management shares to five-year low
How is Sainsbury’s faring in the battle of the supermarkets?
10 How Constellation Brands can shake off its heavy hangover
XPS Pensions can continue to grow faster than the market
Did you know that we publish daily news stories on our website as bonus content? These articles do not appear in the magazine so make sure you keep abreast of market activities by visiting our website on a regular basis.
Over the past week we’ve written a variety of news stories online that do not appear in this magazine, including:
The UK market could do without being further diluted by overseas takeovers
If you are of the mind, as I am, that the wave of M&A is a long-term negative for the UK market then there was a positive development on 23 June. GP practices landlord Assura (AGR) announced plans to merge with its peer Primary Health Properties (PHP) rather than be taken over by private equity group KKR.
Yes, the ranks of the UK market are still thinner as a result of this deal but, assuming it goes through, but at least investors will still have access to the underlying assets through the combined entity. This is a sector which is underpinned by strong demographic drivers, thanks to an ageing population, and one that offers a reliable stream of income.
Takeovers at a healthy premium may be welcomed by investors in the short term but, as we have discussed several times, in the long term it can involve missing out on even greater gains and it clearly has implications for the breadth and depth of the UK market.
Just consider Cambridge-based ARM (ARM:NASDAQ) – a company taken over in the wake of the Brexit vote, when UK stocks and, significantly, the pound were in the doldrums. Japan’s Softbank paid £24.3 billion for the business.
This represented a 40%-plus premium to the undisturbed price – so you might think it was a nobrainer for shareholders. In truth, they left a lot on the table by acquiescing to this deal.
Fast forward to today and ARM, which snubbed London to list in the US in 2023, is worth more than £100 billion. In an alternative universe where it remained listed domestically, it would be one of the largest companies on the FTSE 100.
Without being too parochial, it is better if UK assets remain in the hands of UK shareholders, certainly for the long-term health of the London market. The Assura situation is therefore relatively
refreshing if it plays out as it looks to be at the time of writing.
In this week’s News section, James Crux reports on the consolidation which is going on in the investment trust sector – with vehicles continuing to merge amid persistent discounts.
This week’s magazine also features an examination by Steven Frazer and the rest of the team of the under-the-radar names held in some of the most popular UK funds and, as geopolitical tensions mount, we take another spin through the collectives which aim to protect your capital.
Markets have proved resilient, but it does seem there is some increasing caution about corporate earnings which will be something to watch through the remainder of the year.
Looking at the net balance of upgrades and downgrades relating to earnings per share forecasts for the year after the current one, strategists at investment bank Berenberg note the FTSE 350 has net downgrades of -19.7%, the European STOXX 600 -17.7%, the S&P 500 -11.5% and the Nikkei 225 -9.9%.
If Iran-Israel ceasefire holds and crude prices remain contained it may provide space for rate cuts
As we write, it seems the Middle East is in de-escalation mode, a shift which has seen oil prices give back a large portion of their recent gains and investors rediscover their risk appetite.
US strikes on Iranian nuclear facilities on 21 June raised the temperature before Iran came up with what appeared to be a fairly modest response in the form of a pre-warned strike on a US base in Qatar. This proved the precursor to the announcement of a ceasefire between Iran and Israel.
Whether the cessation in hostilities holds, with Israel accusing Iran of having violated the ceasefire a matter of hours after it had been announced, will determine what happens next.
A lot of the attention has focused on the strategically-important Strait of Hormuz, through which 20% of global oil and 20% of the world’s liquefied natural gas passes. Any threat to this waterway could quickly lead to a renewed surge in energy prices.
JPMorgan has signalled that in a worst-case scenario, where the production and supply of oil
Source: LSEG
from the Persian Gulf is affected, crude could trade at $130 per barrel.
However, oil, which briefly traded above $80 per barrel before dropping below $70, has pretty weak fundamentals right now.
This reflects an uncertain global economic backdrop, and the implications that has for demand, and producers’ cartel OPEC+ boosting supply by increasing its output.
Therefore, without the threat posed by mounting Middle East tensions, it is not a surprise to see crude on the back foot. The slump on 23 June represented its largest one-day fall since 2022.
Gold prices also slipped back, and traditionally defensive sectors like tobacco and utilities struggled as investors moved out of traditional safe havens.
The heavy weighting for energy stocks, precious metals miners and other defensive areas meant the FTSE 100’s gains were more limited than seen elsewhere.
However, lower oil prices may provide central banks with greater scope to lower rates as one source of inflationary pressure eases.
Suggestions from Federal Reserve vice-chair Michelle Bowman that a cut could be on the cards at its next summit on 30 July, should inflation remain under control, back up this thinking. [TS]
Two combinations in broader Europe sector and a take-private bid for renewables vehicle among the sector’s latest deals
Wide discounts to NAV (net asset value), strategic reviews and pressure from activist investors such as Saba have helped spur the record levels of takeover activity in the investment trust sector that shows no sign of letting up.
Despite a noticeable narrowing of discounts in recent months, many trusts continue to trade well below NAV, so the takeover frenzy looks set to continue. While the creation of larger trusts means improved liquidity and lower fees for shareholders, the sheer pace of takeovers has reduced choice for UK investors with fewer trusts listed on the market than a decade ago.
Among the latest mergers announced are two sensible-looking combinations in the broader Europe sector, with Henderson European Trust (HET) and Fidelity European Trust (FEV) mulling a merger.
In February, Henderson European launched a review of options for its future following the sudden departure of co-managers Tom O’Hara and Jamie Ross and has now concluded a tie-up with Fidelity is the best outcome for shareholders, who’ll own the ‘go-to’ UK-listed European trust with net assets north of £2.1 billion and benefit from the stock picking acumen of Fidelity European’s comanagers Sam Morse and Marcel Stotzel, who will manage the super-sized portfolio.
Also feeling the urge to merge are the struggling European Assets Trust (EAT) and the thriving European Smaller Companies (ESCT), which has forged a strong record under the stewardship of Janus Henderson Investors’ Ollie Beckett, who’ll steer the enlarged fund. Based on net asset values as at 30 May 2025, the combined entity would have net assets of approximately £780 million, making it the largest trust in the AIC’s European Smaller Companies sector.
Deutsche Numis says it is ‘good to see the
ESCT board highlight it will continue to target a mid-single digit discount through buybacks after the transaction, although these may need to be meaningful if it is to prevent discount volatility, but we would expect that the board of ESCT is well aware of the need to keep the discount narrow and “the wolf from the door” after recent Saba-driven corporate activity’.
Discounts remain wider on alternative asset funds than on conventional equity funds and this one reason why the property and renewable energy sectors have been hotspots for trust takeovers this year. The latest sub-scale fund to receive a bid is Downing Renewables & Infrastructure (DORE), the solar farms-tohydropower plants investor whose board has ‘unanimously’ recommended a £175 million cash offer from the trust’s biggest shareholder Bagnall Energy.
While the 102.6p bid price represents a 23.6% premium to Downing Renewables closing price on 19 June, it is also an 7.6% discount to the trust’s 112.4p NAV (net asset value per share as of 31 March 2025, which will disappoint some investors. [JC]
Infrastructure and construction services firm lifted by solid performance and bulging order book
A combination of a solid trading update and a healthy order book have helped propel Kier (KIE) shares to a new 52-week highs.
On 3 June CEO Andrew Davies said the company continued to trade well an ‘in line’ with the board’s expectations and noted that as of 30 April 2025 the order book stood at roughly £11 billion.
The FTSE 250 construction and infrastructure specialist also upgraded its three-to-five year adjusted operating margin target from 3.5%-plus to the 4%-to-4.5% range.
Year-to-date shares have gained 31% and the company has enjoyed momentum in terms of contract wins. Including an award from Anglian
Water IOS Alliance worth up to £400 million for Kier’s Natural Resources, Nuclear & Networks arm over five years and a one-year extension to work for Shropshire County Council. Berenberg analysts see ‘good growth opportunities in several areas’ including ‘water following a successful bid period gaining positions on circa £15 billion worth of frameworks’. [SG]
The company is really struggling
Alternative asset manager Litigation Capital Management (LIT:AIM), which specialises in dispute financing, has seen its shares fall 75% over the last year and recently marked a new five year low of 25.8p.
The share price weakness reflects a string of announced case losses, the most recent of which happened on 19 June when a high court judge delivered an adverse judgment in a commercial litigation matter funded by the company.
Litigation Asset Management had contributed £3.4 million from its own balance sheet and a further
£8.2 million invested from a fund it manages for third party clients. The investment was recorded at a fair value of £5 million on the balance sheet on 31 December 2024.
The company also provided a second-half trading update to 30 June which revealed a modest number of realisations comprised of two successful and two unsuccessful investments.
These exclude the commercial litigation matter and three previously announced cases which are subject to appeal. The company said it had paused marketing for a third fund
despite strong interest from existing and new investors. This was due to uncertainty surrounding potential tax changes in the US litigation market, as well as political developments affecting US university endowments. [MG]
RESULTS
1 July: Supreme
2 July: Renold
3 July: Currys FIRST-HALF RESULTS
30 June: Kitwave TRADING ANNOUNCEMENTS
1 July: Sainsbury’s
Investors
In Sainsbury’s (SBRY) last set of results for the 52 weeks ending 1 March, the company impressed investors with double-digit growth and an underlying operating profit topping £1 billion.
The company also said it had completed a £200 million share buyback and increased its full-year dividend by 4% to 13.6p.
However, Sainsbury’s can’t ignore the ‘elephant in the room’ which is the supermarket price war apparently ignited by Asda earlier in the year.
CEO Simon Roberts acknowledged the supermarket’s urgent need to gain market share by announcing that it would invest £1 billion in lowering prices.
But will Roberts’ move be enough when the company reports its firstquarter trading update on 1 July?
According to the latest data from analysts at Kantar, Sainsburys was one of the standout performers over the 12 weeks to 15 June with yearon-year sales gains of 5.7%.
Shore Capital retail guru Clive Black says: ‘Sainsbury has been consistently
gaining market share in recent years in the British grocery scene, and we see [loyalty card] Nectar, now in its third year of operation, as an important component of that achievement.
‘Whilst Sainsbury must keep its loyalty mechanism alive and interesting to customers, noting very high penetration, it is encouraging to see the engine behind it also potentially maintaining and building the high margin media income channel too. Now for the execution stage.’
Other issues the supermarket can’t ignore include escalating costs – linked to national living wage and national insurance increases brought in by the UK government in April –and pressure on profit at Argos. [SG]
The Berkshire Hathaway-backed beverage alcohol group needs to showcase its defensive attributes as spending from core consumer slows
Beers, wine and spirits producer Constellation Brands (STZ:NYSE) is suffering from a nasty hangover with its shares down almost 40% over one year amid concerns over a tough macro environment for its core Hispanic consumer.
Also weighing on sentiment are worries over the impact of Trump’s tariffs on the business, which makes beers in Mexico, not to mention a beer growth outlook downgrade and concerns over the potential demand hit from heightened awareness of the risks of alcohol use on health.
Given this downbeat backdrop, investors will be seeking reassurance that the earnings outlook hasn’t deteriorated when the Berkshire Hathaway (BRK.B:NYSE) backed company behind Corona beer, Casa Noble tequila and Modelo Especial Mexican lager delivers first-quarter earnings on 2 July.
Positive news on Constellation’s
Source: Investing.com
restructuring progress and an update on the cash-generative company’s share buyback programme from Constellation would go down well with investors and might trigger a share price rally.
At the fourth-quarter results on 9 April, Constellation Brands reduced its beer sales forecast from 7% to 9% to 2% to 4% annually, with management citing the elevated macro pressures affecting the group’s core Hispanic consumers given their lower income skew and stricter US immigration policies.
Since then, the drinks giant has completed the sale of its mainstream wine brands and repositioned its wine portfolio towards higher growth, higher margin offerings. CEO Bill Newlands says the focus in wine is now ‘exclusively on the higher-end that more closely aligns to consumerled premiumisation trends which we believe will enable us to help deliver improved performance within this segment of our business over time’. [JC]
Earnings guidance for this year is typically conservative
XPS Pensions (XPS) 363p
Market cap: £756 million
We have written about XPS Pensions (XPS) several times in the past, most notably in June 2024 when, after posting double-digit revenue growth in 2023, the firm ‘did the double’ by reporting a second year of double-digit growth.
Fast-forward to June 2025 and chief executive Paul Cuff can now claim to have ‘done the treble’ by adding yet another year of double-digit top-line growth.
In total, revenue has grown 66% and EPS (earnings per share) have grown 100% over the last three years, most of which has been organic, with the doubling of the bottom line signalling a clear improvement in margins.
So how does what on the face of it seems quite a dull business, providing pension funds, and increasingly insurance companies, with independent advice and solutions, rack up this kind of growth?
200 400
XPS Pensions (p) 2021 2022 2023 2024 2025
Source: LSEG
alone of around £2.5 billion, or 10 times what the company turned over last year, so there is considerable scope to win new mandates both in the public and private sectors.
Second, regulation is becoming ever more complex, meaning pensions funds need ever greater levels of support and advice.
Just this month, the government introduced its Pension Schemes Bill to ‘tackle schemes delivering poor returns for savers, combine smaller pension pots and create bigger and better pension funds’.
For the pensions industry, this could mean a huge amount of upheaval and new reporting requirements which many schemes may need help with, opening the door to XPS consultants.
First, the group provides a wide range of services to more than 1,300 defined benefit and defined contribution pensions schemes, including administration, actuarial advice, first-time outsourcing, accounting, payroll services, fraud prevention, data auditing, secretarial services and more.
This is a total addressable market in the UK
At the same time, strong financial markets have pushed many pensions schemes into surplus for the first time in many years, which together with regulatory change ‘creates valuable options for our clients, who need good strategic advice about the best path for them to take,’ says Cuff.
Third, the firm has been helping with remedial work on civil service pensions after a 2023 court case found rules introduced in 2015 discriminated against scheme members on the basis of age.
The so-called ‘McCloud Remedy’, based on the court case, removes that age discrimination, but has involved a huge amount of administrative work, and XPS is the only firm to have met its deadline to deliver member statements, meaning it is wellplaced to win work on projects which haven’t been completed, such as the NHS pension scheme.
If it sounds as though XPS has been lucky by being in the right place at the right time, we would argue the firm has created its own luck by being proactive, growing parts of the business organically and buying complementary businesses to increase the depth and breadth of its expertise.
For the year to March 2025, actuarial and consulting revenue rose 14% driven by continued growth in risk transfer and GMP (guaranteed minimum pension) projects, including winning competitive mandates on multi-billion-pound schemes.
Meanwhile, administration revenue grew by 30% driven by GMP, McCloud projects and new client wins, most impressively the John Lewis Partnership pension scheme, which was onboarded ahead of schedule.
The firm’s brand has been enhanced by multiple industry awards including Actuarial/Pensions Consultancy of the Year, and in a survey 97% of clients said they enjoyed working with XPS.
Internally, management attention has been on the implementation of its proprietary administration platform Aurora, which has drastically reduced costs and helped drive its success in winning new business, as well as on the ‘go-live’ of the SEI Master Trust administration.
Externally, the firm has been ‘laying the foundations for future growth,’ as Cuff puts it, by expanding into the closely related insurance consulting market, which is worth an estimated £1.5 billion per year in revenue.
The firm has created its own luck by being proactive, growing parts of the business organically and buying complementary businesses”
Bulk annuity DB (defined benefit) deals involve pension schemes selling their liabilities to insurers, who promise to pay the members a guaranteed amount, so the insurers need support not just to be able to pitch for deals but to ensure they have the resources in place to pay out for the next several decades.
To this end, XPS has been building scale, establishing a new consulting team with multiple senior hires, as well as building on its strong existing relationships with insurers and acquiring Polaris, a firm of specialist actuaries and consultants.
Despite the upside potential in insurance, however, the firm is playing down expectations for growth this year on the basis of the strong comparatives in its pensions business and lower McCloud revenue.
We suspect that caution is overdone, as does Shore Capital’s Vivek Raja, who sums up his view as follows: ‘We like XPS for its revenue visibility underpinning earnings quality, non-cyclical demand, high cash conversion and low capital intensity, all of which frame it as one of the more defensive investment cases across our financial services coverage.’ [IC]
New technology integration driving a meaningful recovery in demand
EPAM (EPAM:NYSE) $168
Market cap: $9.24 billion
Today every business is a technology business, but there are millions of organisations out there struggling to get the best out of modern tech. What the internet started, things like AI (artificial intelligence), automation, cloud computing, data analytics and much else, are continuing in terms of increased complexity for both providers and users.
This is an opportunity right up the street of Wall Street-listed EPAM Systems (EPAM:NYSE) You might not be familiar with the name, but few companies embody the partnership of strategic leadership stability and innovation quite like digital transformation and software developer EPAM, even fewer at its current valuation.
This is a stock that has typically traded on PE (price to earnings) ratios in the 25 to 40 range over the past decade yet is currently available at a multiple of less than 15. Returns on capital (13.6%) and equity
Systems
Source: LSEG
(11.6%) have run consistently in double-digits and have been nearer 20% levels for both in the past. This suggests a business currently facing temporary difficulties but where there is scope for substantial recovery. This view is born out by operating margin trends, which have fluctuated over the years, but have generally remained within the 10% to 14% range, and have been as high as 16.5%. The business is debt-free and throws off plenty of
Source: Koyfin
free cash, so it has plenty of scope to reinvest in the business, although it does not pay dividends.
Yet the shares have flopped this year, down 27%. So why has the stock been stinking up the market?
Looking at company specifics, Q4 2024 results in February beat forecasts with EPS (earnings per share) $2.84 on $1.25 billion revenue (up 8% yearon-year), yet 2025 guidance was soft, with EPAM projecting revenue growth of 10% to 15% but EPS to come in roughly flat.
Over the following weeks or so, the shares lost more than 22% and they have continued to decline since. Shares believes this is an opportunity.
Let’s be clear, EPAM has been navigating a complex business landscape, complicated macroeconomic uncertainties, geopolitical instability and potential industry headwinds. Yet EPAM has continued to produce robust financial performance and push ahead with strategic initiatives, such as developing and integrating AInative solutions which should become emerge as the engine of future growth, such as custom-built systems that embed AI into clients’ core business processes.
The indicators seem to be improving. For a start, Q1 2025 results (announced 8 May) again surpassed (albeit lowered) estimates, putting up EPS of $2.41 on $1.3 billion revenue compared to consensus estimates of $2.29 and $1.28 billion respectively.
Analysts at Stifel, Mizuho and TD Cowan were among a number to raise 2025 and 2026 forecasts, and while increases were modest, this is a good sign of improving confidence in EPAM’s future performance.
Mizuho analysts drew a direct link to EPAM’s solid Q1 performance to the success of its new technology integration, such as GenAI (generative AI), which appears to be driving the company’s demand recovery. ‘After enduring a difficult period for IT services spending over the past two and a half years, EPAM is now well-positioned to enhance its organic revenue growth in 2025 and 2026,’ they wrote in a note to clients.
The Q1 figures and commentary looked set to spark a sharp share price recovery, yet after jumping 13% directly after the results, the share price has drifted once again, presumably a response lingering economic uncertainty and escalating troubles in the Middle East.
So where does this leave us now? Koyfin consensus has the market still projecting flat EPS in 2025 but a return to doubledigit growth in 2026 and 2027.
Over the next three years (including 2025), consensus anticipates average annual growth in earnings and revenues at 8% and 10% respectively, putting the stock on a three-year average PE of 13.9.
To Shares, it looks like an awful lot of gloom is currently priced in with little or no expectation for recovery and growth. That could change fast if EPAM continues singing a more optimistic tune over the coming quarters. Put it this way, a 5% increase to 2026 and 2027 EPS estimates and a share price rerating to a PE of, say, 18, could indicate a $255 share price, close top high-end analyst price targets.
While a re-rating to past PE levels of 25, for example, would put a stock level of $355 on the cards. [SF]
We identified instant service equipment maker ME Group International (MEGP) on 29 February 2024 as a compelling investment opportunity based on the company’s dominant market position and strong growth prospects from the roll-out of its Wash.ME branded automated laundry machines.
The group’s unique business model and strong relationships with site concession holders allow the company to generate high returns on capital and cash flow.
WE SAID
On 18 June, the company announced it is evaluating strategic options to ‘enhance shareholder value’ including seeking offers for the group, although the company emphasised no proposals have been made.
The shares rallied by more than 10% on the day and sit close to all-time highs. The news was a complete surprise, although some investors may have caught wind of the strategic move, given the strong move in the shares.
It is worth reviewing how the fundamentals of the company have evolved over the last year to provide some context for what may happen next.
ME Group delivered its fourth straight year of double-digit growth in pre-tax profit in the year to October 2024, driven by 21% sales growth in the Wash.ME division as it rolled out a record 1,111 machines across the UK and France.
Momentum across the group continued into the first half of 2025, with the company posting a 17% increase in pre-tax profit, and the board expressing confidence in delivering full year profit in the range of £76 million to £80 million.
Source: LSEG
The price to earnings ratio has increased from around 11 times in February 2024, based on consensus earnings per share forecasts, to 13.5 times reflecting increasing investor confidence in the business.
That means the shares trade on a similar multiple and dividend yield to the FTSE 250 index, despite the prospect of higher growth than the average company in the mid-cap index.
ME Group is a high quality, cash generative business with strong growth coming from the roll-out of its automated laundry machines. Any potential buyer would need to pay a decent ‘control premium’ to the undisturbed stock price to get the approval of shareholders.
It is interesting that private equity backer Montefiore Capital placed 26.5 million shares at 200p (a 9% discount) on 27 February. Montefiore continued to reduce its stake after the 18 June announcement.
Founder and largest shareholder Serge Crasnianski owns 36.5% of the shares, which means the family will have a big say on any offers that land on the table. While a 42% return is not to be sniffed at, we would hold out for a higher price. [MG]
Have these vehicles protected you against volatility this year?
In December 2024, with the risks for equity markets piling up in our minds, Shares put the spotlight on capital preservation funds. As it turns out, stocks are higher now than they were then, but obviously that does not tell the whole story, with investors facing significant volatility in the intervening period.
Most of this has been centred around so-called ‘Liberation Day’ when president Donald Trump unveiled his list of tariffs in the White House’s Rose Garden on 2 April.
In this article we look at how capital preservation trusts performed through this period and consider the role they might play in portfolios amid mounting geopolitical tensions and as the tariff pause period, subsequently announced by the Trump administration on 9 April, is set to expire.
CAPITAL PRESERVATION FUNDS EXPLAINED?
The name ascribed to these products offers a pretty big clue to what they are looking to do – namely avoid losing money. More broadly they look to protect your cash during periods of volatility and
longer-term corrections and still beat inflation over the long run.
At the back end of last year, we looked at four prominent names in this space: three investments trusts, Capital Gearing Trust (CGT), Personal Assets Trust (PNL), Ruffer Investment Company (RICA), and one fund, Latitude Horizon (BDC7CZ8).
Source: FE Analytics, data to 20 June 2025
Historic data suggests they have done their job during previous sell-offs, albeit to differing degrees. They also approach the same goal in quite different ways. Below is a snapshot of their different approaches to protecting investors’ money.
But what is their track record like? During the volatility seen in April, they did their job, falling significantly less than the index. The more historic charts show they’ve also held up well during previous sell-offs.
As the table demonstrates, these vehicles do not tend to put up knock-the-lights-out performance, but this reflects the emphasis on not losing money and investors need to consider the risk-adjusted return – in other words, the profit an investment makes relative to its associated risk, taking into account both the return and the volatility or uncertainty involved in achieving that return.
At the very least, these products can be a useful diversification tool in a portfolio, particularly should you want to build in some insurance against future market turmoil.
Capital Gearing Trust manager Emma Moriarty
explained in a recent interview on the Shares and AJ Bell Money & Markets podcast that: ‘The strapline we’re using at the moment is defensively positioned with an emphasis on inflation protection. We are concerned around stretched equity valuations, particularly in US markets, and what the impact of a correction might be, the potential for contagion into other markets.’
As a result, Moriarty makes clear the trust’s risk allocation is quite low at around 30% of the portfolio with a focus on value – largely reflected in investments in UK equity income investment trusts.
‘The second concern we have is about higherfor-longer interest rates and structurally higher inflation, and because of that we have quite a high allocation to index-linked government bonds. These are 35% of the portfolio.
‘We also have more general concerns around the risk outlook in financial markets and the potential for volatility.’ Moriarty lists trade and fiscal sustainability as two areas which underpin these concerns. ‘We hold around 35% in ‘dry powder’ at the moment – which is held in a combination of government treasury bills and in short duration sterling investment grade corporate credit.’
Capital Gearing Trust is managed by CG Asset Management, a firm founded by Peter Spiller, who has been overseeing the trust since 1981 and remains actively involved in its daily management.
Source: Capital Gearing
The trust targets clients with a long-term investment perspective, an aversion to substantial short-term losses, and a goal of growing wealth ahead of inflation.
Since 2001, the trust has only posted negative returns in two years (-4% in 2022 and -2% in 2014) and has generated an annualised total NAV return significantly ahead of the average rate of inflation.
These returns have been achieved with considerably lower volatility compared to the FTSEAll Share index, providing investors with smoother returns.
The employee-owned firm’s operations are guided by three core principles: prioritising the client’s interests, avoiding greed, and maintaining a positive work environment.
A notable characteristic of Capital Gearing is its minimal reliance on gold within its portfolio; instead, the managers prefer using inflation-
protected bonds as a hedge against inflation.
The portfolio is structured into three distinct categories: equities, index-linked bonds, and cash/ short-dated bonds.
Where direct exposure to a market via investment trusts is not feasible, ETFs are utilised, with the Japanese market being a notable example.
This focus on investment trusts ensures significant diversification within the portfolio despite the indirect nature of some holdings.
Capital Gearing Trust offers competitive pricing with a management fee of 0.4% and an ongoing charge of 0.47%.
Troy Asset Management follows a capital preservation strategy in both its closed-end Personal Assets vehicle and the open-ended Troy Trojan Fund (BZ6CNS3). The managers prioritise finding high-quality companies at the right price and diversifying with lower-risk assets like bonds, gold, inflation-protected bonds, and short-term gilts.
Largest Equity Holdings
Source: Personal Assets
The level of diversification and protection depends on the perceived market risk by founder
Sebastian Lyon and assistant manager Charlotte Yonge. Currently, they are more defensive due to concerns over US stock valuations and rising geopolitical risks.
The fund’s equity exposure is 38%, below its average of 43% since 1994, but the allocation is dynamic. During 2008-2009, it was over 70% as the managers increased equity risk amid the global financial crisis and in December last year it was below 30%.
Ongoing charges on the trust are 0.65% and its shares trade at a modest discount to net asset value.
The Latitude Horizon fund allocates approximately half of its portfolio to a concentrated selection of large-cap, global stocks at modest valuations, and the other half to lower-risk assets such as indexlinked bonds, gold, currencies, and cash. This strategy aims to manage volatility at the individual stock level while seeking to reduce it at the portfolio level.
Lait employs a rigorous investment process and adopts a long-term approach to identify companies which can sustainably grow earnings per share at double-digit rates, yet are trading at a discount to his estimate of intrinsic value. This discount offers a margin of safety against unforeseen events and can mitigate volatility during market downturns. This strategy was notably effective in 2022 when stock markets declined due to central banks increasing interest rates to combat inflation.
The ongoing charge is a little higher than the other names featured in this article at 1.15%.
Ruffer distinguishes itself from other capital preservation vehicles by actively employing derivatives to manage risk and having successfully
invested in bitcoin.
Unlike other managers, who construct their portfolios first and then add hedges to protect against potential downsides, Ruffer prioritises capital protection from the outset.
Largest Equity Holdings
Source: Ruffer Investment Company
The trust provides retail investors with access to strategies they might not be able to implement directly, particularly derivative protection and non-traditional assets such as commodities or the Japanese yen.
The investment team is led by Henry Maxey and Neil McLeish, who serve as co-chief investment officers, supported by a senior asset allocation team which includes fund managers and chairman Jonathan Ruffer.
Few firms have consistently profited through past bear markets, including the dotcom bust, the credit crisis, the Covid-19 crash, and the market decline of 2022.
Similarly, few firms recorded gains in both 2008 and 2009, underscoring the value of possessing the ability and conviction to shift from a bearish to a bullish stance when conditions change.
Ruffer’s investments span a broad array of securities, including stocks, bonds, currencies, commodities, and a modest allocation to derivatives, while the ongoing charge is 1.06%.
By Tom Sieber Editor
We use a mix of protective and growth investments to seek to deliver positive returns, especially when more conventional investment strategies can’t.
This makes the Ruffer Investment Company a valuable way to help keep your plans on track.
ruffer.co.uk/ric
By James Crux Funds and Investment Trusts Editor
Ownership of intellectual property (IP) is a clear sign a business boasts the ‘economic moat’ popularised by the world’s greater investor Warren Buffett, especially in industries that rely on innovation.
A company’s ability to continually develop and protect its IP assets helps to defend its market share and profits from competitors, and the presence of a moat is reflected in the high profitability metrics such as gross margin and ROIC (return on invested capital) beloved by qualityfocused investors.
In this article we explore the benefits of having patented IP, look at big global names which enjoy this advantage and identify two UK stocks which benefit from this dynamic.
One of the ways a company can create a wide economic moat is through intangible assets like patents, trademarks and regulatory licenses, which can prevent rivals from duplicating products and allow a company to charge premium pricing. In the realm of innovation, patents are the gold standard for measuring a company’s inventive prowess and are often highly prized by investors as a result.
Source: LexisNexis PatentSight+
As the table shows, planet Earth’s patenting powerhouses are predominantly companies headquartered in China, Korea, Japan and the US and tend to emanate from sectors such as technology, automotive and energy. Another global industry where patents are pivotal to success is pharmaceuticals, since drug manufacturers rely heavily on patent protection to maintain competitive advantage.
The patent acts as a legal moat, preventing competitors from producing the same drug for a set period, and this exclusivity allows the company to recoup its research and development costs and rake in substantial profits before generic alternatives can enter the market.
The global pharmaceutical industry is heading toward a near-$236 billion ‘patent cliff’ between 2025 and 2030 as patents on blockbuster drugs expire, exposing high-revenue products to generic competition and threatening major revenue losses for ‘big pharma’.
Eric Burns, lead manager of the CFP SDL Free Spirit (BYYQC27) fund, informs Shares that a good way to look at a patent is that for a set period, it is a monopoly, and ‘a monopoly is the best moat you can get. You can’t have legal monopolies, but a
patent is perhaps the closest thing that you come to achieving that.
‘But the quid pro quo is at the end of that period everybody gets to benefit from the discovery, albeit you’ll find patents are being constantly evolved and added to, to keep them relevant and refresh their authority.’
This is certainly an exciting time to invest in innovation, judging by the stunning growth in the number of patents per year being registered in the US, the world’s biggest economy. Why does this matter to investors? Well, what follows patents with around a seven-year lag are new products, and after that, a stream of sales and profits.
Liontrust Global Innovation team members Storm Uru and Clare Pleydell-Bouverie manage the Liontrust Global Innovation (B8DLY47), Liontrust Global Dividend (B9225P6) and Liontrust Global Technology (BYXZ5N7) funds alongside James O’Connor, and believe that innovation is the single most important driver of stock returns - Liontrust Global Innovation’s top 10 holdings include patentfiling powerhouses such as Nvidia (NVDA:NASDAQ) and Eli Lilly (LLY:NYSE).
‘For us, patents really form the innovation pipeline of companies over the next decade,’ explains Pleydell-Bouverie, ‘that’s why we pay particular attention to this, because not every great innovation is a great investment. You need
to build a moat around that innovation in order to capture value as a company and pass that on to shareholders. It is one of the key moats we look for in companies and mostly we find that this form of barrier to competition, IP and patents in particular, centres around three sectors – technology, healthcare and consumer.’
When analysing patent data, sometimes it is a question of the magnitude of patents that attracts the Liontrust Global Innovation team. PleydellBouverie highlights Nike (NKE:NYSE) as a classic example of a company that has ‘built up a fortress of IP, a library of patents. It has 35,000 active patents worldwide, which is around eight times that of Adidas (ADS:ETR). For context, Nike’s patent count is a third the size of Apple’s (AAPL:NASDAQ), and Apple is a technology company, whereas Nike is stitching together pieces of leather and material.’
But what does Nike’s patent edge mean for investors? ‘It means Nike has pricing power, because its product is superior quality, so we see that in gross margins of 45% and this just reinforces its second key advantage which is brand power across the world. Nike has clung onto that number one market share across all major markets and we are excited right now because Nike’s new management team are starting to really lean into Nike’s innovation machine again and get some of those new products out to consumers.’
In other instances, it is an uptick in the rate of patenting by a company which offers the first early warning sign that an accelerated product innovation cycle is underway. ‘AI agents is a good example of something that is going to transform
How Volution has benefited from patents
Group technical director at ventilation specialist Volution (FAN), Martin Goodfellow, says: ‘Patents are one of various ways in which we can protect our intellectual property to ensure we retain a competitive advantage and increase barriers to entry in our markets.
‘It is advantageous, and the best use of our skilled resources, to seek to “platform” technology, where we can use one patent across multiple products.
‘Patents can also bring the advantage of financial incentives (e.g. through tax credits) from certain Governments, such as is the case in the UK. ‘
‘For these reasons, patents (and intellectual property in general) are also an important consideration when we make acquisitions.
‘An example is our patented delay timer. We invented a key component to use across multiple product ranges. It protects our position, increases economies of scale and attracts tax credit incentives.’
enterprises over the next five to 10 years,’ says Pleydell-Bouverie, who highlights recent Liontrust Technology Fund addition C3.ai (AI:NYSE), recently awarded a patent on its ‘AI Orchestrator’ for generative AI agents. C3.ai is ‘the only company we have come across that can compete with Palantir (PLTR:NASDAQ) in becoming the platform for enterprise AI – this is owing to their ontology,
Source: European Patent Organisation, United States Patent and Trademark Office
which solves the problem of data ingestion and persistence at massive scale required for enterprise AI,’ says Pleydell-Bouverie.
‘C3 owns a relatively young portfolio of patents, but of growing importance – the company owns 38 patents globally, with 130 applications pending. A significant rise came between 2019 and 2022, during which C3 AI filed double-digit patent applications each year. And we are already seeing some of the enterprise software companies’ innovations being rejected because of C3.ai’s patents – SAP (SAP:ETR) and IBM (IBM:NYSE) –are the two companies that have most frequently already stumbled across this hurdle.’
Two healthcare giants held across Liontrust Global Innovation and Liontrust Global Dividend are Eli Lilly and Novo Nordisk (NOVOB-B:CPH), whose patent-protected drugs carry strong pricing power and enable these firms to generate returns on invested capital in excess of their cost of capital.
Storm Uru says Eli Lilly is ‘extraordinary in terms of the number of patents it has achieved over its lifetime, a bit over 9,000. But what we really track is the acceleration or the growth in those patent filings’. This has ramped up massively over the last five or six years as the company forms an increasingly wide moat around its weight-loss drugs.
Also, deputy manager of CFP SDL UK Buffettology (BF0LDZ3), Eric Burns stresses that patent protection is more relevant for businesses in certain sectors than it is for others. ‘Croda International (CRDA) is a speciality chemicals business doing all sorts of things in beauty care, fragrances and the like, and patents are clearly quite important.
I think Croda has 1,700 patents around process, know-how, formulation and if you are in that sort of business, you need to protect you moat and keep the longevity of your monopoly. That would be an example of an industry where patents are particularly relevant and important.’ Croda’s Investor Relations team tells Shares the company holds roughly 1,650 patents spanning some 280 patent families, though it has many ingredients that are unique in the market that it has deliberately chosen not to patent, so that competitors cannot see IP that remains protected.
More generally however, Burns stresses that patents are in a much wider bucket of IP. ‘If you look at our holdings, IP is very important to most of them, but it’s not necessarily through a patent per se - it might be more through a trademark, licence
or other IP protection. One example is Rightmove (RMV), where all the intangible value is in the brand. There will be a small number of patents, but Rightmove is not a business that’s built around patents in the same way as Croda is.’
Schroders’ Ailsa Craig and Marek Poszepczynski, managers of International Biotechnology Trust (IBT), invest in companies with ‘strong IP, which means they have a composition-ofmatter patent on the drug they are developing or selling’ according to Craig. ‘And pharma will be asking exactly the same questions as us. Ultimately, strong IP is up front and centre when it comes to our investment process and also why companies get acquired.’
A cracking recent example is Intra-Cellular Therapies, a company advancing treatments for schizophrenia and bipolar depression that was snapped up by Johnson & Johnson (JNJ:NYSE) for $132 per share, a 40% premium to the share price, in January 2025. The trust’s biggest holding at the time, Intra-Cellular was acquired almost immediately after confirming its patent status. ‘It is absolutely paramount and front and centre of pharma’s minds to make sure that’s a secure piece of information before they make an acquisition,’ insists Craig.
But there is a balancing act to struck when filing patents, as Poszepczynski points out: ‘Big pharma don’t want to file too many patents because then they expose themselves for others to see what they are doing. And also, if you file a patent too early, you might actually ruin your chances to be more specific. The more vague a patent is, the easier it is to challenge it later on.’ He also points out it is quite costly for a small company to file patents. ‘Once you file you have one year to feed additional information to your patent application, and then the ball is rolling and you need to pay for patents wherever you want to file, be it the US, Europe, China etc.’ [JC]
Source: LSEG
Genus (GNS) £19.46
Market cap: £1.3 billion
Animal genetics specialist Genus (GNS) helps farmers select the best animals for breeding by identifying and selecting desirable animal traits for animal wellbeing, productivity and resilience to diseases.
The company has patents on its breeding stocks and related technologies like Sexcel which allows farmers to control the sex of their cow’s offspring.
Genus stepped-up the number of patent filings in recent times in relation to a regulatory application for its groundbreaking gene editing technology to breed piglets which are resistant to the devastating PRRS (Porcine Reproductive and Respiratory Syndrome) virus.
A recent study from Iowa State University reported that PRRS costs $1.2 billion per year, in the US alone.
The US FDA (Food and Drug Administration) approved the use of Genus’ technology for use in the food supply on 30 April 2025, which means the company can commercialise the invention.
Analysts estimate the full commercial benefits will take time to appear but have the potential to double pre-tax profit for Genus from 2027 onwards.
Genus’ expanding intellectual property portfolio generates increasing royalty revenue, which is almost pure profit, although it does take around four years for the royalty model to reach maturity.
At the first-half results (27 February), the company revealed royalty revenue of around £90 million, just under a third of group revenue. [MG]
2,000 4,000 6,000 8,000
Source: LSEG
Judges Scientific (JDG:AIM) £82.55
Market cap: £555.1 million
It’s been an ugly past year or so for Judges Scientific (JDG:AIM), a one-time high quality technology equipment manufacturing business that has built a long tail following among retail investors. It’s been a spell of intense volatility for stock market valuations and markets have understandably fretted over economic stability during president Trump’s tumultuous first six months in office.
Inflationary pressures have eased considerably yet they and interest rates remain stubborn obstacles to corporate investment, and Judges’ own soggy growth illustrates these points. Last year, for example, headline sales declined 2%, versus a 10% compound growth average since 2019. That profits fell far more sharply is symptomatic of any relatively high fixed cost business seeing soft sales.
But the wheels are not coming off this exceptional growth story, in our view, and a valuable library of patents is among the many reasons why. Take its Luciol Instruments business, for example, a fibre optic kit maker acquired in February 2024. Judges paid just £1.8 million, so it is a tiny business, yet its equipment is relied on by giants like Airbus (AIR:EPA), Boeing (BA:NYSE), and ASML (ASML:AMS) to monitor and discover fibre optic faults while capping disruption and downtime.
That’s exactly the kind of small, patent-rich, and profitable operator Judges has been pulling
off for years, broadening its technology and science kit exposure and expertise for minimal risk.
As Judges itself admits, this is an international business that generally thrives on peace and free trade, and there’s seemingly less of both right now. But Judges has seen geopolitical turmoil before, just as it has experienced weak growth and market volatility in the past, and it has managed through the troughs to prosper again, all while paying investors a steady a not unattractive income while they wait from highly robust cash flows.
Dividends per share has growth from 22.8p to 97.7p over the past decade, helping shareholders benefit from compounded total returns of 17.8% since 2015. That the 12-months rolling PE (price to earnings) multiple still stands at 21 (according to Stockopedia data) shows how far earnings underlying estimates have come back, yet that also implies a high ceiling when end markets improve. [SF]
1 July 2025 – 18.00
The Bankers Investment Trust (BNKR) has a long history of providing growth and income returns for its shareholders through the peaks and troughs of the economy and markets. The trust aims to be a core portfolio holding for its shareholders by focusing on finding the best investment ideas globally in a bid to deliver capital growth and inflationbeating income over the long term. The trust looks for the strongest opportunities across four regions, informed by the expertise and perspectives of specialist managers.
Schroder Japan Trust (SJG) aims to achieve long-term capital growth by investing in a diversified portfolio of 50-60 of the best quality but undervalued companies in Japan.
If you’ve been investing for a while, there’s a good chance that certain funds will have found their way into your portfolio. An S&P 500 and/ or Nasdaq ETF are likely inclusions. FTSE 100, 250 and World Index trackers are very good bets, as are a handful of actively managed vehicles.
Take Fundsmith Equity (B41YBW7), for example. When Terry Smith launched the fund in late 2010, many investors were understandably cautious. Smith, the East London born son of a lorry driver, had earned a reputation as a City maverick, so his refusal to advertise Fundsmith, ignoring doubters who said the only way to build a new funds business was a big media campaign, cemented this reputation.
Even so, it didn’t take long for investors to cotton on that there was something compelling about Fundsmith’s concentrated investment strategy, selecting only the very best global companies with sustainable growth prospects. Smith’s mantra to ‘buy good companies, don’t overpay, then do nothing’, has become an investment axiom.
Today, the fund manages more than £20 billion worth of investor’s money, even if recent performance has lost the fund a tad of its lustre. Household names like Microsoft (MSFT:NASDAQ), Meta Platforms (META:NASDAQ), Philip Morris (PM:NYSE), Visa (V:NYSE) and L’Oreal (OR:EPA) litter the portfolio.
But even concentrated quality global funds own stakes in companies largely unknown to most ordinary investors. To address this information imbalance, Shares has selected five popular funds and investments trusts with a high-quality company tilt.
Having spun through these portfolios, we have picked out a stock from each fund, a company you may know very little about, yet features within the fund’s top 10 largest holdings.
The funds we landed on are Blue Whale Growth (BD6PG78), Fidelity Special Situations (B88V3X4), JPMorgan Global Growth & Income (JGGI), and Finsbury Growth & Income Trust (FGT), plus the previously mentioned Fundsmith Equity.
It is worth noting that while Finsbury Growth & Income Trust and Fidelity Special Situations have a remit that allows them to invest globally, they both prefer to focus mainly on UK companies.
You can see from the table, there are several names with a familiar ring to them that feature in more than one of our selected funds, yet you might think it’s a relatively small number considering the investment style overlap. For example, the Finsbury Growth & Income Trust and Fidelity Special Situations fund, which we have noted, largely concentrate on UK stocks, don’t have a single shared stock pick between them (although there may be commonality below the top 10 stock lists).
Here we present a quick hit guide to what these companies do, what attractions their shares might hold, and what are the risks to be watchful of.
Stryker (SYK:NYSE) $373.1
Market cap: $142.7 billion
Source:
Medical technology company Stryker has established itself as a dominant player in the orthopaedic robotics space with its Mako SmartRobotics platform.
The technology integrates robotic precision with proprietary implants such as Stryker knees. Patient outcomes are improved through quicker recovery times and less time in hospital, creating recurring demand for Stryker’s joints.
The company also offers products and services in medical surgery and neurotechnology.
WHAT IS THERE TO LIKE ABOUT THE
The business generates high margins and strong free cash flow, which has grown at an annualised rate of 17% over the last five years.
There is a significant growth opportunity outside the US where the company is underrepresented, contributing just 25% of net sales. Mergers and acquisitions provide enhanced growth opportunities with a focus on innovative medical technologies.
WHAT TO BE CAREFUL OF
Not surprisingly, quality growth companies like Stryker trade on premium valuations. With a 2026 forecast PE (price to earnings) ratio of 25 times, based on consensus forecasts, there is little room for error. [MG]
Southern Company (SO:NYSE) $88.83
Market cap: $97.4 billion
Source: LSEG
Southern Company is the second largest utility company in the US, in terms of its 4.68 million retail customers, with a power infrastructure system that draws on multi-energy sources, including natural gas, solar power, wind power, carbon-free nuclear, battery storage, microgrids and other sustainable sources.
WHAT IS THERE TO LIKE ABOUT THE STOCK
As a highly regulated utility, cash flows are predictable and strong which means investors have access to de-risked income years into the future, great for those thinking about switching from a salary-based to portfolio-based earnings steam.
Another thing that stands out to us is its operating margins, which stood at 26.4% last year, from which we infer a streamlined workforce and operating model. Yet, with margins having been as high as 36% in the past, we perceive this to mean that there are still efficiency gains to be drawn out, potentially bolstering dividend growth down the line. Income yield is not the largest, forecast at 3.3% in 2025 (to December) but cover pf 1.45 times looks overly cautious, which adds to the case for faster payout growth in time.
WHAT TO BE CAREFUL OF
Perhaps higher dividend growth will not materialise,
Feature: Under the radar
which may cause investors to think again about paying 20 times earnings for a 3.3% income yield, is one risk. Beyond that, it’s the same story as with any utility, with regulators forcing the company to pump millions of dollars into an aging infrastructure.
Blue Whale Growth
Lam Research (LRCX:NASDAQ) $92.2
Market cap: $118 billion
to retain its best-in-class position in the rapidly changing semiconductor ecosystem.
The big elephant in the room is the soured relationship between Washington and Beijing that has led to tightening restrictions on Chinese companies’ access to US technology. How this will ultimately play out, and the impact on Lam, remains to be seen. However, it has managed the situation impressively to date, with record-breaking quarterly revenues and earnings announced for Q3 fiscal 2025 in April (post an October 2024 10-for-one stock split).
Market cap: £1.14 billion Lam Research
Cairn Homes (CRN) 183p
Cairn Homes
Source: LSEG
Lam is a Silicon Valley-based tech firm that designs and makes a range of unique semiconductor manufacturing equipment focused on meeting the industry’s escalating demands and complexity. Lam Research designs specialist equipment that helps semiconductor manufacturers improve yields, lower costs, shrink processing time and reduce defects on microchips.
As the world increasingly embraces a digital-first future, anything that can help the semiconductor industry to drive down costs, boost efficiency and bulk up the power of microchips should have a bright future, and this is exactly where Nasdaq-listed Lam oozes pedigree.
Operating margins have averaged 28.7% over the past five years, while returns on investment and equity has averaged over 36% and nearly 60% since 2019, while impressive free cash flows allow the company to continue to invest in the business
Source: LSEG
Developer Cairn Homes (CRN) is a leading Irish apartment and house builder. In 2024, the firm built just over 2,200 homes, posting a 29% increase in revenue to €860 million and a 36% increase in pretax profit to €135 million.
Return on equity rose from 11% to 15%, allowing the company to increase the dividend by 30% and taking total shareholder returns to €115 million including buybacks.
At its AGM trading update in May, the firm reported ‘very positive trading’ in the year so far with ‘continued scaling of our operating platform and increased investment in our growing number of
active sites throughout Ireland’.
Chief executive Michael Stanley commented: We’ve experienced sustained, positive momentum since the start of the year, as evidenced by the growth in our order book to over 3,000 new homes.’
Alex Wright, manager of Fidelity Special Situations (B88V3X4), is a staunch supporter of the firm.
‘Today there are only two truly scaled Irish housebuilders compared to more than 10 in the UK. The market is supported by strong population growth, a strengthening mortgage market and favourable government initiatives aimed at boosting housing,’ says Wright.
‘Cairn is well-positioned to benefit from these trends and is attractively valued. Its latest trading update revealed positive momentum in its pipeline and strong profitability.’
As a housebuilder, Cairn’s fortunes are likely to be tied to interest rates, which dictate mortgage availability and affordability, and the economic backdrop in Ireland, both of which, in turn, feed into demand for homes. A downturn in the economy could hit sentiment and performance. [IC]
Provides crucial business management software to more than six million largely small and mediumsized businesses. Its roots are in accountancy products, but this has expanded over the decades to include things like payroll, human resources, and business management tools.
Sage is one of those UK companies that seems to have been around forever but seldom gets talked about. This is a built-in-Newcastle tech business that has become a genuine global player. Competition is fierce yet Sage has proven time and again that it can fight its corner and continue to grow with a consistency that will appeal to many buy and hold investors.
Because software development costs are largely upfront, its means revenues from onboarding new customers falls largely through to the bottom line, as evidenced by improving operating margins in recent years (19.4% in fiscal 2024), with a company target pitch at 23% over time.
Sage has also cleverly been deepening its partnership with Microsoft, knitting the US tech giant’s AI Copilot tools into its own Sage Copilot assistant and rolling it out to more customers. And unlike many tech stocks, Sage comes with an income yield, estimated at 1.9% for fiscal 2026 (to end September).
Perhaps it is often overlooked because, let’s face it, the accounting software space isn’t very sexy and is savagely competitive. Start-ups such as Freshbooks, New Zealand’s Xero (XRO:ASX) and former AIMlisted FreeAgent (now owned by NatWest) can irritatingly swipe new customers away, but it is giants like Germany’s SAP (SAP:ETR), Quickbooksowner Intuit (INTU:NASDAQ) and Netsuite which present a far bigger threat.
DISCLAIMER: The author of this article (Steven Frazer) owns a personal interest in Fundsmith Equity and Blue Whale Growth.
Looking at different metrics to get a sense of how stocks in the world’s second largest economy stack up
Chinese shares, as represented by the MSCI China index, have outperformed wider emerging markets in the first part of 2025 but, overall, valuations still lag those seen in the wider developing and developed world.
As at 31 May, constituents of the MSCI China index traded on an average forward PE (price to earnings) ratio of 11 times. This compares with 12.2 times for the MSCI Emerging Markets index and 18.1 times for the global MSCI ACWI (AllCountries World Index).
On a price to book basis, MSCI China is on 1.5 times compared with 1.8 for the broad emerging markets index and 3.2 for the MSCI ACWI. Comparing China with other major individual
emerging markets, constituents of the MSCI India index trade at a significant premium on a forward PE of some 22.3 times and a price to book value of 3.9 times. Meanwhile, MSCI Taiwan is on a forecast PE of 14.6 times and a price to book of 2.7 times.
MSCI Korea and MSCI Brazil are examples of emerging markets which look optically cheaper than China. MSCI Korea has a PE of 8.5 and a price to book of 0.96 and MSCI Brazil has a PE of 8.1 –although the latter trades at a slight premium to MSCI China in price to book terms with a ratio of 1.6 times.
Sponsored by
Three things the Templeton Emerging Markets Investment Trust team are thinking about right now
1.
Tariff uncertainty: Tensions between the United States and China have resurfaced after an agreement in Geneva in May to temporarily lower tariffs and start negotiations on a mutually agreeable solution. The United States has accused China of withholding approval for the export of rare earths, and China has countered that the United States is not approving licences for the export of semiconductors and has cancelled visas for Chinese students. The bigger issue for investors is how China will respond in the long term to the US policy of containments toward China. Continued uncertainty appears to be the only certainty.
2.
Emerging market outperformance: Over the past 12 months, developed markets, as represented by the MSCI World Index, have outperformed EMs. However, year-to-date the performance trends have reversed. The MSCI China Index has led the way on policy easing and a reversal of prior market pessimism. US dollar weakness has contributed to emerging market outperformance, as has attractive valuations. If these trends persist in the second half of 2025, we believe the outperformance could continue.
3.
EM foreign exchange (FX) appreciation: The US dollar has been on a weakening trend year to date as the trade war and policy uncertainty has led foreign investors to question the sustainability of US exceptionalism.
Asian currencies including the Thai baht and new Taiwan dollar have reached 12 months highs while the Brazilian real and Mexican peso have reached year-to-date highs. US dollar weakness is typically positive for EM equity and fixed income performance. However, we note that these historical relationships may break down in the future given the apparent decline in US exceptionalism. This will require careful monitoring by investors.
TEMIT is the UK’s largest and oldest emerging markets investment trust seeking long-term capital appreciation.
‘Finfluencers’ are all over our feed. Should we be listening?
The rise of people offering investment advice on social media is a growing trend
The morning I wrote this article, my Instagram feed informed me that a group of stocks were a ‘slam dunk’ for investing. The evidence? A series of clips of CEOs from those companies shaking hands with foreign leaders. Frankly, it did not convince me to make any portfolio changes.
I then scrolled through a series of other videos. The next showed me F1 driver Lando Norris taking the podium after his Monaco win. The one after told me what I should do with £5,000 (a few index funds to invest in, and a few more stock suggestions). The next video was a woman who told me how she made £500,000 by the time she turned 25.
I don’t follow any of those accounts on social media. But my platforms feed them to me, and millions of their other users, constantly.
The issue is, I don’t know who the person is. And without additional research, it’s impossible to know if you should trust them.
THE RISE OF THE FINFLUENCERS
When it comes to videos about cats or gardening tips, this stream of information can be relatively
harmless. But in recent years, social media has seen the rise of influencers who focus on creating investment content, sometimes with little or no expertise on the topic.
There has been a growing trend of people offering financial advice, guidance, or information on social media. And sometimes, this comes from advisers or experts in the industry. But it could just as easily be coming from someone who has no knowledge of the investing world or its regulations.
According to a study by Barclays, over half of investment scams now happen over social media. And a study from Capital One found that out of those who have followed investment advice on social media, 74% have either lost money on the investment or hurt their credit score.
And not knowing who someone is seems to do little to deter people from listening. Barclays found that almost a quarter of Brits use social media or online forums for investment advice, which raises to 40% among people ages 18 to 24.
Like when searching for pretty much anything on the internet, there’s a lot of useless information to
wade through before you find the helpful bits. But there are many (qualified) people who talk about investing online. It’s even led to an increase in investments: 38% of Gen Z investors in the UK cited social media as a major decision maker to invest, according to the Chartered Financial Analyst Institute.
There can be positive impacts of finance content on social media. But as a user, the trick is choosing the trustworthy sources.
One of the first steps to making sure an influencer is a reliable source is checking their affiliations and qualifications. The FCA has made this easier by offering a register of firms and advisers. This can be a helpful cross check to ensure a company or individual person has a legitimate standing. It’s also important to note that your social media feeds may hand you influencers from different countries. Remember that these countries likely have different rules and regulations to the UK, so even if they are accurate, it simply may not be relevant to you.
Once you’ve determined the baseline of if the influencer is qualified, it’s still worth double checking any information they share. Be especially wary of posts that hold affiliate links or seem like they are advertising other products.
According to research by the CFA Institute, 27%
of posts by finfluencers contained an affiliate link. Many of these would come in the form of someone suggesting an investment and then suggesting a platform they should be investing on. Be conscious of what people are saying, and what motivation they have to say it.
It’s also worthwhile to understand what kind of content you’re being fed. Are you simply being given information about investing, or are you being told what you should do? Even if you are just being given information, you can cross check the information with other sources you trust.
If you’ve determined that you have reliable information, it’s also worth considering if that information applies to your own situation. Depending on where you are in life, such as if you’re nearing retirement or about to buy a new house, you may have differing investment strategies. Or, you may just be comfortable with a lower level of risk. Even when information is true, it’s important to remember that this person isn’t aware of your specific situation. And it’s helpful to proceed with caution.
The investment industry has long struggled with the reputation that putting money into the market is complicated and difficult. Finance is filled with jargon and acronyms that simply aren’t used in life otherwise. And finfluencers have found a way to make investing accessible to people who might have felt alienated by it before.
The CFA noted that many influencers were able to make investing fun – they introduced games or animations that made the concepts come to life. This is certainly valuable to get people engaged and can provide a more digestible format.
So, can we listen to finfluencers? At least for the moment, not fully. Although there is great content available, it’s mixed in with many bad apples. If you do choose to engage, it’s really important to find some second (and even third) opinions.
Hannah Williford AJ Bell Content Writer
with other commodities are a useful reality-check
Gold bugs will be beside themselves as the precious metal pops above $3,400 an ounce, taking its one-year gain to 46% (in dollar terms), and tries to set another all-time high in response to ongoing worries about inflation, government debt and now fresh tensions in the Middle East.
The Bank of Japan is tightening monetary policy as a result of higher inflation USD /
Bank of Japan is tightening monetary policy as a result of higher inflation
Source: LSEG
Source: LSEG Gold is soaring again The Bank of Japan is tightening monetary policy as a result of
Having spent years shouting about gold and its protective qualities, holders of the metal may soon have a different decision to take if it keeps going. The more investors who buy in, the more of a consensus position it becomes, and the more of a consensus position it becomes, the fewer incremental buyers there are to drive up the price.
True believers will continue to warn of the dangers of debt, inflation and geopolitics. Others may at least think about a portfolio rebalancing to ensure they do not become over exposed.
The trick is how to assess fair value.
Source: LSEG
The all-in-sustained cost (AISC) of production can perhaps help to gauge what the downside may be. This is around $1,400 to $1,500 per ounce for major producers such as Newmont (NEM:NYSE) or Barrick Mining (GOLD:NYSE)
However, that does not help judge any possible upside. And, gold is inert, so there are no earnings, and it generates no cash so there is no yield.
Those issues support Warren Buffett’s view that the precious metal has no role in portfolios, but gold has been money since time immemorial and the
latest rounds of central bank stockpiling imply this latter view still holds currency at the highest level. So, where to begin?
One crude way may be to measure how much gold the average pay packet can buy. If the metal moves beyond the reach of the average worker, that could at least crimp jewellery demand and one source of incremental buying.
Consistent wage data with real longevity is hard to find, but the US Federal Reserve offers nearly 60 years of figures for ‘production and non-supervisory employees’.
In plain English, this sounds like factory-floor jobs, for want of a better phrase, so it should do nicely.
Before president Nixon took America off the Gold Standard and smashed up the Bretton Woods
monetary system in August 1971, it took a blue-collar American worker 12 hours to earn enough to buy one ounce of gold.
That figure peaked at 97 hours in late 1980 and 94 hours in 2011. In this context, the current score of 105 hours could be seen as ominous for gold’s affordability, since the best cure for high prices is high prices – they stoke supply and suppress demand, prompting the search for an alternative.
Gold miners have lagged gold, and that may be an option as they should start to generate plentiful profits and copious cash flow if gold prices stay elevated and they suffer no meteorological, geological, political or regulatory mishaps (admittedly, that is a big ‘if’ in some cases, and some jurisdictions, as Barrick Mining will attest).
The Bank of Japan is tightening monetary policy as a result of higher inflation
The Bank of Japan is tightening monetary policy as a result of higher inflation
An average US worker would need to work 105 hours to earn enough to buy an ounce of gold
USD / JPY (inverse) FTSE All World index
Source: LSEG
Source: LSEG
The Bank of Japan is tightening monetary policy as a result of higher inflation
USD / JPY (inverse) FTSE All World index
Gold bugs will counter by saying inflation – and central bank money printing to cover monstrous government debt – can drag wages along for the ride, so they may not budge, especially as the metal’s gains still pale compared to those of the inflationwracked 1970s when uncertainty in the Middle East was also a key global issue.
Equally, it may be no coincidence that other commodity prices are starting to motor, particularly those which look cheap relative to gold. For example: Since 1970, one ounce of gold has on average bought 17 to 18 barrels of oil. It currently buys 46 barrels.
… as does platinum …
The Bank of Japan is tightening monetary policy as a result of higher inflation
USD / JPY (inverse) FTSE All World index
Source: LSEG The Bank of Japan is tightening monetary policy as a result of higher inflation
Source: LSEG
• Since 1976, an ounce of gold has on average bought one ounce of platinum. It currently buys 2.7 ounces.
The Bank of Japan is tightening monetary policy as a result of higher inflation
… as does silver ….
USD / JPY (inverse) FTSE All World index The Bank of Japan is tightening monetary policy as a result of higher inflation
USD / JPY (inverse) FTSE All World index
Oil looks cheap relative to gold ….
200 400
The Bank of Japan is tightening monetary policy as a result of higher inflation
USD / JPY (inverse) FTSE All World index
The Bank of Japan is tightening monetary policy as a result of higher inflation
USD / JPY (inverse) FTSE All World index
Source: LSEG
Source: LSEG
The Bank of Japan is tightening monetary policy as a result of higher inflation
The Bank of Japan is tightening monetary policy as a result of higher inflation
USD / JPY (inverse) FTSE All World index
Source: LSEG
Source: LSEG
The Bank of Japan is tightening monetary policy as a result of higher inflation
• Since 1970, one ounce of gold has on average bought 60 ounces of silver. It currently buys 94 ounces.
USD / JPY (inverse) FTSE All World index
and perhaps copper, too.
• Since 1970, one tonne of gold has on average bought nearly 5,700 tonnes of copper. It currently buys just over 11,100 tonnes.
These historic, price-relative trading ranges offer no guarantees for the future at all. Those advisers and clients who fear higher inflation may like to maintain a bias to raw materials relative to ‘paper’ ones like
cash and bonds, but diversify their exposure to ‘real’ assets beyond gold.
Those advisers and clients who fear a slowdown, recession or even debt deflation, may take the entirely opposite view.
One way portfolio builders may be able to judge current market thinking is by using the gold-tocopper relationship.
The stronger gold is relative to copper, the greater the worries over inflation and central bank loss of control.
The stronger copper is relative to gold, the more upbeat markets may be feeling on the economy and corporate earnings.
Ask Rachel: Your retirement questions answered
Our resident expert helps with a question from someone confused about the status of their retirement pot
I have two pensions, a BT pension (defined benefits, which I have started to draw from) and a SIPP which is yet to be crystallised.
At the time of starting to take my workplace pension in 2022/23, I was told that this amounted to 27% of LTA (lifetime allowance). I took a lump sum as well as a monthly payment. I understand that in 2024 the LTA was removed and replaced with a maximum tax-free lump sum of £268,275.
Are you please able to explain how I can take out lump sums from my SIPP and know how to calculate this tax-free lump sum, and how the amount I took out previously from the workplace pension is incorporated into this tax-free lump sum.
My apologies in advance if I have mixed up terminology - but I do find pensions quite confusing! Lily
Rachel Vahey, AJ Bell Head of Public Policy, says:
You are right – pensions are confusing at times Especially when the tax rules change, which is what happened in April 2024.
When the lifetime allowance (LTA) was abolished in April 2024 it was set at £1,073,100. It was replaced with a new set of rules which included two main limits on the amount of tax-free lump sums you can take.
The first is the lump sum allowance (LSA) which is the total amount of tax-free lump sums you take in your life. This is usually set at £268,275.
The second is the lump sum and death benefit allowance (LSDBA) which is the total amount of taxfree lump sums you took in your life plus those paid out on your death. This is usually set at £1,073,100.
When you are working out the tax-free lump sums you can take you need to start with £268,275 (unless you previously applied for some form of lifetime allowance protection, and in that case it may be higher) and then deduct from that 25% of the amount of lifetime allowance you used up previously, as at 5 April 2024.
You said you used up 27% of your lifetime allowance, so the amount you’d deduct would be £72,434.25 (£1,073,100 x 27% x 25%). This means you now have £195,840.25 of your lump sum allowance remaining (£268,275 - £72,434.25).
This calculation assumes you took 25% tax-free cash when you accessed your pension. If you didn’t, either because of the way the rules of the scheme worked or because you chose not to, you might want to consider if a transitional tax-free
Ask Rachel: Your retirement questions answered
amount certificate could help you. This certificate allows you to deduct the actual amount of tax-free cash you received instead, so you could end up with more lump sum allowance left over.
Whichever option you choose, this will give you a new balance for your lump sum allowance. Then, every time you take some part of your SIPP you can usually take up to 25% of that as a tax-free lump sum. You then simply deduct that amount from your starting LSA figure. Once you run out of LSA you won’t be able to take any more tax-free cash, and the rest of your pension will be subject to income tax when you draw on it.
If you think you might want to apply for a certificate, you need to do so before you take any tax-free lump sums from any pension after April 2024. It may be worthwhile speaking to a financial adviser who could provide you with personalised advice to check if it’s right for you. Or, you could contact Pension Wise, a government-backed service provided by MoneyHelper which provides free, impartial pension guidance which may help you make a decision.
Send an email to askrachel@ajbell.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.
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Gold has continued its strong run since our January 2025 thematic note, pushing above $3,050/oz. We now argue that investors should shift focus to gold mining equities to maximise returns.
With Gold Fields’ recent bid for Gold Road Resources at a 28% premium, we believe a sector consolidation phase is beginning, offering compelling opportunities across the mining spectrum.
We explore a structured approach to gold equity investment, examining optimal timing within the cycle and offering a tiered strategy for portfolio construction across streamers, majors, mid-tiers, and selective juniors.
In January, we presented a three-pillar framework for understanding gold price movements.
Our analysis pointed to potential upside to $3,300–4,500/oz, with gold now having passed $3,050/oz.
This confirms our thesis that we are in the early stages of a major rebasing rather than approaching a peak, with parallels to the 1970s cycle when gold surged during the transition from negative to positive real rates.
Central bank buying has continued to provide structural support, with demand remaining above the long-term trend of 500 tonnes annually, contributing 7–10% to gold’s price performance. While gold has performed exceptionally well, our analysis now suggests
that the most compelling opportunities lie in the mining equities space.
Historical analysis demonstrates distinct waves in which rising gold prices flow through different segments of the market. Understanding this progression is crucial for timing investments and maximising returns in each phase of the cycle.
From our analysis of market performance since 2019, a clear pattern emerges:
1. Gold price appreciation: the initial phase of any bull market starts with the metal itself.
2. Major producers respond: after approximately nine months, large-cap miners begin to outperform.
3. Mid-tier producers follow: as major producer outperformance wanes, mid-tier producers accelerate.
4. Junior explorers’ surge: the final and often most explosive phase of outperformance is from the juniors. This differs from historical patterns of a generation ago, when juniors, mid-tiers and majors would move more in tandem.
Today’s more sequential progression allows investors to strategically rotate through the sector as the bull market matures.
Constructing an optimal precious metals portfolio requires balancing concentration for
maximum returns against diversification for risk management.
Gold itself should be considered the ‘riskfree’ asset within the precious metals space, providing a foundation upon which to build additional exposure through mining equities.
For investors already holding physical gold, a more concentrated approach to mining equities is appropriate.
Our analysis suggests that within a portfolio of 10 junior exploration stocks, holding just one to three positions may optimise returns without substantially increasing risk, as gold provides downside protection.
For investors without a gold position, we recommend greater diversification, with perhaps five junior positions or even full diversification across all 10 potential holdings. This approach acknowledges that losses at the portfolio’s weaker performers will likely be more than offset by gains from the strongest positions.
This risk-conscious approach can be proportionally applied to larger portfolios. For example, in a universe of 100 potential junior stocks, an investor with gold holdings might concentrate on 30 positions, while those without might opt for broader exposure.
Looking at performance since March 2019, gold has outperformed most mining indices over the full period. However, this masks significant periods of outperformance within specific segments.
HUI Gold Bugs Index and FT Gold Mines Index (representing major unhedged producers) were the first to respond to gold’s move in late 2019, with junior explorers (proxied by the S&P/ TSX Venture Composite) initially lagging but eventually delivering superior performance.
As we assess the current market positioning, with gold having sustained levels above $3,000/ oz, we believe investors should now be rotating capital towards the mining equities, with a particular focus on quality majors and select mid-tiers, while beginning to build positions in juniors ahead of their typical outperformance phase.
Streaming companies
For investors seeking their first exposure to the gold equities sector, streaming companies offer
an appealing entry point. While they typically command premium valuations compared to traditional miners, they provide significant advantages:
1. Reduced operational risk through diversified streaming agreements.
2. Limited exposure to capital expenditure overruns.
3. Geographic diversification across multiple mining jurisdictions.
4. Attractive dividend yields exceeding many majors.
5. Exposure to exploration upside without direct exploration costs.
Wheaton Precious Metals exemplifies this model, offering a combination of gold exposure, yield, and growth potential. While its current P/E ratio appears elevated compared to major producers, this reflects the market’s forward-looking assessment of production growth and its lower risk profile rather than overvaluation.
producers
When evaluating major gold producers, investors should look beyond simple P/E ratios to assess the relationship between quality (measured by historical earnings outperformance relative to gold) and current valuation metrics.
Our analysis of major producers from 2010–24 examines adjusted earnings per share outperformance versus gold price appreciation. Agnico Eagle Mines, for example, has delivered EPS (earnings per share) growth approximately 30% greater than gold’s price movement over this period, reflecting superior operational execution and capital allocation.
Written by analysts, Andrew Keen, Neil Shah, Lord Ashbourne at Edison
This is an excerpt from a report: From gold to gold miners: Extracting higher returns in the current bull run by Edison, first published in April 2025.
Other thematic reports are available at www.edisongroup.com/thematics
The success of Oriole Resources’ (ORR:AIM) systematic but efficient approach to exploration is shown by the progress at its two main gold projects in Cameroon, Central Africa.
Within two years of the first drill hole at the Bibemi project in northern Cameroon, Oriole published Cameroon’s first JORC Compliant Mineral Resource Estimate (MRE) for gold.
While rapidly progressing the Bibemi project, Oriole also expanded its operations into central Cameroon with the acquisition of a contiguous licence package covering more than 4,000km2 of highly prospective ground.
Within this licence package, the Mbe project became Oriole’s flagship, and has been rapidly advanced over the last four years, from a greenfield site to a maiden drilling programme that is already revealing the potential to host a multi-million-ounce deposit.
Oriole’s exploration at these two projects has ramped up significantly since January 2024, following the signing of earn-in agreements with Ghana-based BCM International which is funding up to $8 million in total exploration expenditure, split equally across the two licences.
Initial systematic surface exploration has delivered excellent results, with two priority targets identified for follow-up. The southernmost target, MB01-S, is currently the subject of a 6,590 metres maiden diamond drilling programme that is approximately 70% complete.
Results from the first ~3,500 metres of drilling have been impressive, delivering best intersections of 86.50 metres at 1.36g/t gold,
21.30 metres at 1.61g/t gold, 2.00 metres at 25.77g/t Au and 2.50 metres at 10.31g/t gold.
In fact, almost 200 mineralised intersections have been reported by the company to date, equating to one gold intersection for every 18.5 metres drilled.
The Mbe system has been proven over a strike length of 200 metres, up to 400 metres width, and to at least 290 metres vertical depth; it remains open at depth and along strike.
Exploration to date has demonstrated the potential for narrower high-grade zones within wider envelopes of lower grade gold mineralisation.
Oriole has recently completed a Phase 5 drilling programme, increasing the total drilling to over 13,000 metres across the project.
Since the maiden drilling programme in 2018, much of the drilling has focused on the ~1kmlong BZ1-MRE zone within the Bakassi Zone 1 prospect, where the company has defined a MRE of 460,000 ounces contained gold in the JORC Indicated and Inferred categories.
Outside of the MRE, an additional JORC Compliant Exploration Target has been defined at between 145,000 and 400,000 ounces
contained gold, which covers a further three prospects and highlights the upside potential within the licence area.
Oriole’s flagship Mbe project is located within one of nine contiguous licences forming the CLP (Central Licence Package).
Regional-scale exploration has been conducted across the five eastern licences (inclusive of Mbe), with multiple kilometre-scale gold-in-soil anomalies identified within all licences. As such, the package has district-sale potential for further major gold discoveries.
Oriole’s other Cameroon asset, Wapouzé, has recently been renewed with a focus on assessing the economic potential for cementquality limestone that’s been identified within the licence.
A shift towards sourcing material in-country, and the proximity of Wapouzé to existing cement plants, means that the project should be attractive for industry partners and has the potential to deliver a royalty-based income from a commercial quarrying operation.
Oriole has a non-controlling beneficial ownership of the Senala project, Senegal, with a wholly owned subsidiary of Managem Group retaining the controlling ownership.
In 2021, it completed a JORC compliant MRE estimate for Faré South (one of three prospects at Faré) at 155,000 ounces contained gold.
Earlier this month, the company also published a JORC Exploration Target range, for material outside of the MRE, of 17 to 24 million
tonnes at a grade of 0.69 to 0.84g/t Au for 380,000oz to 650,000oz contained Au.
Discussions on the formation of a joint venture company are underway.
In addition to the Cameroon and Senegal operations, Oriole also retains interests and royalties in companies operating in East Africa and Turkey that could deliver future cash payments.
This year has the potential to be a significant one of achievement for Oriole. The maiden drilling programme at MB01-S is scheduled for completion in the third quarter, at which point Oriole anticipates preparing a maiden pit constrained JORC resource estimate for publication in the fourth quarter.
Later this year, the company also plans to start drilling at MB01-N, a second substantial target only 500 metres to the north of MB01-S that offers significant upside potential, and is targeting a multi-million-ounce, open pitable resource.
The company is also progressing the exploitation licence application for Bibemi, by conducting various technical studies, including an environmental and social impact assessment and economic studies during the iterative negotiation period of the application.
