Small Cap Bottom Fishing

Closed-end funds and OEICs
hiriskpaul
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Small Cap Bottom Fishing

Postby hiriskpaul » December 28th, 2016, 1:07 pm

Quite a few small cap focussed ITs have fallen out of favour and are now sitting on tempting discounts. These are the ones I have filtered out from the AIC web site:



Initial filtering based on size of discount, but have eliminated anything with outrageous charges and/or very low AUM. I will be delving deeper, but would welcome any comments on the above, or anything I may have missed. I already have a sizeable investment in VCTs, so for that reason would prefer not to hold anything with a significant amount in unlisted securities.

richfool
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Joined: November 19th, 2016, 2:02 pm

Re: Small Cap Bottom Fishing

Postby richfool » December 28th, 2016, 1:37 pm

A couple of others you might want to think about, in descending order:

Aberdeen Smaller Co's Inc: Disc: 20.4% Gearing: 112% TER: 1.58% Yield: 3.35%

Mercantile: Disc: 11.5% Gearing: 112% TER: 0.50% YIeld: 2.52%

JP Morgan Mid Cap: Disc: 6.4% Gearing: 106% TER: 0.95% Yield: 2.73%

ASCI (the first above) is attractive to me because of it's relatively higher yield, though noted it has a higher TER.

Noted some are mid caps and some small caps focused.

hiriskpaul
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Re: Small Cap Bottom Fishing

Postby hiriskpaul » December 28th, 2016, 1:53 pm

richfool wrote:A couple of others you might want to think about, in descending order:

Aberdeen Smaller Co's Inc: Disc: 20.4% Gearing: 112% TER: 1.58% Yield: 3.35%

Mercantile: Disc: 11.5% Gearing: 112% TER: 0.50% YIeld: 2.52%

JP Morgan Mid Cap: Disc: 6.4% Gearing: 106% TER: 0.95% Yield: 2.73%

ASCI (the first above) is attractive to me because of it's relatively higher yield, though noted it has a higher TER.

Noted some are mid caps and some small caps focused.


Thanks, Aberdeen looks really interesting. The downside is that TER and I already have direct sizable investments in securities in their fixed income portfolio. Only around 11% of the ITs assets though and I am very comfortable with their FI choices.

Discounts on the other ITs look a bit small compared with others I have identified, but I will take a look.

richfool
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Joined: November 19th, 2016, 2:02 pm

Re: Small Cap Bottom Fishing

Postby richfool » December 29th, 2016, 5:19 pm

I appreciate your OP referred to small caps, but may I also draw your attention to Standard Life Equity Income trust (SLET), if you are looking at discounts and which according to citywire (link below) holds:
FTSE 100 stocks - 39%
FTSE 250 stocks - 38%
FTSE small caps - 17%

SLET is at a discount of 7.9%.
Gearing: 113%
TER: 0.94%
Yield 3.93%

I believe SLET is currently out of favour because of its holdings of mid cap and smaller company stocks. That could be of interest to you.

Some fools were less keen on the smaller size of Aberdeen Smaller companies Income (and the TER), when I last posted about it.

I hold SLET, Mercantile, and Aberdeen Smaller Companies income of those mentioned. My focus tends to be income and diversification.

hiriskpaul
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Re: Small Cap Bottom Fishing

Postby hiriskpaul » December 30th, 2016, 9:43 pm

SLET has too much in FTSE 100 stocks for what I want here. Discount is not big enough either.

I have discarded Artemis Alpha as well because it has too much invested in unlisted stocks.

Plutus
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Joined: January 3rd, 2017, 11:24 am

Re: Small Cap Bottom Fishing

Postby Plutus » January 8th, 2017, 1:15 pm

hiriskpaul wrote:SLET has too much in FTSE 100 stocks for what I want here. Discount is not big enough either.

I have discarded Artemis Alpha as well because it has too much invested in unlisted stocks.

Hi, I would be interested how you would make a final decision between e.g. Aberforth and Henderson smaller companies.

Aberforth has lower gearing but higher charges.

Thanks. I have started a thread on this sub-forum re: selection criteria if it's more relevant to post there.

peka
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Joined: November 26th, 2016, 9:02 am

Re: Small Cap Bottom Fishing

Postby peka » January 10th, 2017, 9:24 am

One issue that has not been mentioned so far is bid-offer spreads, which are relatively high at present for many ITs investing in smaller companies, particularly the ones with the larger discounts to Net Asset Value. For example, Aberdeen Smaller Companies Income Trust is on a big discount today of 23% (according to the Trustnet web site), but its bid and offer prices at the time of writing are 198.5 and 208.0 pence respectively (according to the iii web site), which means its bid-offer spread at present is a massive 4.8%. So if you bought and then sold that IT today, you would suffer an immediate loss of 5.3% (= 4.8% plus 0.5% stamp duty) even if one ignores the broker's fee.

argoal
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Joined: November 4th, 2016, 10:51 am

Re: Small Cap Bottom Fishing

Postby argoal » January 10th, 2017, 10:20 am

I just got quoted 204.76 for ASCI with the offer at 208.0 so the actual spread is not as wide as it appears, at least for a small purchase.


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