Miton UK MicroCap Trust plc (LON:MINI) fund managers, Gervais Williams and Martin Turner, comment on the Trust’s August performance in their latest portfolio update.
August is often a quiet month for the stock market, with even lower volumes of daily transactions than normal this year. Even so, small company share prices generally appreciated, with the FTSE SmallCap Index (excluding Investment Companies) up 4.2% and the FTSE AIM All-Share Index up 3.4%. Generally, the valuations on long-dated bonds continue to be elevated, which tended to favour some medium sized companies, particularly many that are forecast to grow more rapidly. In contrast, many of the smallest companies (known as micro-caps) share prices were somewhat out of the limelight, and hence the NAV of the Trust rose 1.0% over August.
One of the advantages of investing in the micro-cap opportunity set is that the prospects for many are particularly overlooked by other investors at the time of purchase. Earlier in the year, the share price of Helium One, a company that has the potential to drill out some particularly prospective acreage to become one of the largest global helium suppliers in time, appreciated well as it initiated the drilling for underground accumulations. During August they reported that the geology has turned out to be more complex than expected, albeit that helium is very much present. The Helium One share price fell back towards the Trust’s original purchase price. Helium One still holds plenty of cash, and we believe that it will resolve the geological problems, albeit that they may take longer than originally envisaged. The setback in the Helium One share price was the largest detractor to the Trust’s return in August.
In contrast, MTI Wireless which manufactures 5G aerials, as well as irrigation solutions, continued to report good progress. MTI Wireless first became part of the Trust’s portfolio in January 2016 at around 21p. Over the years, it has continued to invest, which has grown its ability to generate cash. With an ongoing cash surplus in its balance sheet, the cash generated has been paid out via a stream of growing dividend payments. Despite its progress MTI Wireless’s share price remained overlooked initially, although more recently it has gathered more interest, so its share price rose to 87p in August, making it the Trust’s largest holding.
Miton UK MicroCap Trust plc (LON:MINI) is a closed-end Investment Trust incorporated in the United Kingdom. The investment objective is to provide Shareholders with capital growth, over the long term. Investing primarily in the smallest companies, measured by their market capitalisation.
It is likely that the majority of the micro cap companies held in the Company’s portfolio will be quoted on the FTSE AIM All-Share Index (an index consisting of all companies listed on the Alternative Investment Market which meet the FTSE’s eligibility criteria) and will typically have a market capitalisation of less than £150 million at the time of investment.