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VOL 23 / ISSUE 15 / 22 APRIL 2021 / £4.49

BIN THE
TAXMAN:
Stocks that could help
you avoid inheritance tax

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TAXMAN: BIN THE - AJ Bell ...
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STA0421359244-001_2587_ASI_IT_AD_2021_ASIAN_A4_Shares.indd 1                                                                     09/04/2021 10:32
TAXMAN: BIN THE - AJ Bell ...
EDITOR’S VIEW

The value rally is being
powered by ratings
change not earnings
We’ve reached the point where the rising tide may no longer lift all boats

A
          nother week, another push forward for
          the UK stock market. We’ve waited for a
          long time for this to happen and it’s very
satisfying to see the FTSE 100 and FTSE 250 finally
get some winds in their sails.
   The key question is whether the rally has legs.      rating, whereas previously it was on a depressed
Some companies look like they’ve already priced in      rating? Or is that rating too high for this type of low
a significant amount of potential future growth so      margin business?
that they a) no longer look good value and b) stand        Wagamama owner Restaurant Group (RTN)
to experience a big share price correction if the       has risen by 204% since 1 November yet its 2022
earnings growth doesn’t materialise.                    earnings per share forecasts have fallen by 28% over
   There are stocks still priced attractively versus    that period, putting it on a price to earnings ratio of
their prospects, four of which we featured in this      24.9 – not the sort of rating you’d associate with a
recent article. However, it does feel as if we are      leisure company.
approaching the stage where parts of the market            Since 1 November, 315 stocks from the FTSE 350
may find it harder to keep rising without stronger      – which combines both the FTSE 100 and FTSE 250
earnings upgrades.                                      indices – have increased in price, 16 of which by
   Shares has looked at the performance data since      more than 100% and 97 delivering more than 50%
1 November 2020 which is roughly when the market        return, according to SharePad. The ones delivering
rotated towards value-style shares. In theory, the      negative returns have seen an average share price
vaccine rollout has improved value stocks’ chance of    decline of 4.2% over that period.
growing earnings and investors suddenly found they         Shares is certainly not calling the top of the value
no longer needed to pay top price to access growth.     rally, merely highlighting the need to be more
   For the past five months, these value stocks         selective with stock picking at this stage.
have principally risen because investors have been         It’s also worth looking at the ones that haven’t
prepared to pay a higher rating for them. For           rallied as there could be some decent companies
example, if a company was trading on 10 times           trading on lower ratings than their historical average.
forecast earnings for 2021 and enjoyed a 50% rise          This group is likely to include some quality names
in its share price, it would be trading on 15 times –   with a long track record of delivering good returns,
assuming no change to earnings estimates.               but which are temporarily out of favour because
   Cleaning provider Mitie (MTO) has seen its 2022      investors can find potential growth stories on a
earnings per share forecast increase by 5% since the    cheaper rating. As we explain in this article, now
start of November 2020, according to Stockopedia        could be a good time to load up on quality names.
data. Its share price has risen by 129% over that
period, meaning the gains are almost entirely down
to the rating change.                                               By Daniel Coatsworth Editor
   Mitie now trades on 13.1 times 2022’s expected
earnings. Investors need to ask – is that now a fair

                                                                                         22 April 2021 | SHARES |   3
TAXMAN: BIN THE - AJ Bell ...
Contents                                                                                                                               CFA UK
                                                                                                                                    Publication of
                                                                                                                                      the Year
                                                                                                                                       CFA UK
                                                                                                                                     Journalism
                                                                                                                                    Awards 2019
                                                                                                                                                                 News
                                                                                                                                                               Provider
                                                                                                                                                              of the Year
                                                                                                                                                         (Highly Commended)
                                                                                                                                                                CFA UK
                                                                                                                                                              Journalism
                                                                                                                                                             Awards 2020

         EDITOR’S
      03 VIEW                                      The value rally is being powered by ratings change not earnings

                                                   London-listed banks should report strong first quarter but challenges remain /
                                                   Biden regulation and tax changes could derail certain investments / Pressure builds
     06 NEWS                                       on GlaxoSmithKline as activist enters the fray / Get the inside track on new float
                                                   MusicMagpie

            GREAT                                  New: It’s a great time to feast on McDonald’s shares / Virgin Wines’ shares are
        1 1 IDEAS                                  cheap for an online retailer and it is profitable
                                                   Updates: Elementis / DiscoverIE / Tracsis / Touchstone Exploration / Treatt

      22 FUNDS                                     Evenlode to rival Fundsmith with new global growth fund

      25 FEATURE                                   $63 billion Coinbase is an easy way to play bitcoin

      27 FEATURE                                   Bin the taxman: Stocks that could help you avoid inheritance tax

         INVESTMENT
      34 TRUSTS                                    Follow Nick Train and buy quality ‘plodders’ while they’re on sale

         UNDER THE
      37 BONNET                                    Don’t miss PZ Cussons’ big turnaround effort as the shares are moving up

      42 RUSS MOULD                                Where are we in the market cycle?

      46 ETFS                                      ETF demand to rise as funds added to popular comparison tool

      49 ASK TOM                                   Can you help with rules around crystallising a pension?

        51 INDEX                                   Shares, funds, ETFs and investment trusts in this issue

                                                                                           securities, derivatives or positions with spread betting organisations that they
      DISCLAIMER                                                                           have an interest in should first clear their writing with the editor. If the editor
                                                                                           agrees that the reporter can write about the interest, it should be disclosed to
                                                                                           readers at the end of the story. Holdings by third parties including families, trusts,
    IMPORTANT                                                                              self-select pension funds, self select ISAs and PEPs and nominee accounts are
                                                                                           included in such interests.
    Shares publishes information and ideas which are of interest to investors. It
    does not provide advice in relation to investments or any other financial matters.     2. Reporters will inform the editor on any occasion that they transact shares,
    Comments published in Shares must not be relied upon by readers when they              derivatives or spread betting positions. This will overcome situations when the
    make their investment decisions. Investors who require advice should consult a         interests they are considering might conflict with reports by other writers in the
    properly qualified independent adviser. Shares, its staff and AJ Bell Media Limited    magazine. This notification should be confirmed by e-mail.
    do not, under any circumstances, accept liability for losses suffered by readers as
    a result of their investment decisions.                                                3. Reporters are required to hold a full personal interest register. The whereabouts
                                                                                           of this register should be revealed to the editor.
    Members of staff of Shares may hold shares in companies mentioned in the
    magazine. This could create a conflict of interests. Where such a conflict exists it   4. A reporter should not have made a transaction of shares, derivatives or spread
    will be disclosed. Shares adheres to a strict code of conduct for reporters, as        betting positions for 30 days before the publication of an article that mentions
    set out below.                                                                         such interest. Reporters who have an interest in a company they have written
                                                                                           about should not transact the shares within 30 days after the on-sale date of the
    1. In keeping with the existing practice, reporters who intend to write about any      magazine.

4    | SHARES | 22 April 2021
TAXMAN: BIN THE - AJ Bell ...
Small &
                                                                            Mid Cap
                                                                            Inve s tment s
                                                                            That
                                                                            Have
                                                                            Superior
                                                                            O per ating
                                                                            Number s

% Total Return
                                                                            Fundsmith LLP (“Fundsmith”) is authorised and regulated by the Financial
12 months                                           Since inception         Conduct Authority and only acts for the funds to whom it provides regulated
                               2021      2020
ending March                                          to 31.03.21           investment management and transaction arrangement services. Fundsmith does
                                                                            not act for or advise potential investors in connection with acquiring shares in
Smithson Investment                                                         Smithson Investment Trust plc and will not be responsible to potential investors
                              +43.4       +0.8           +65.8
Trust Price                                                                 for providing them with protections afforded to clients of Fundsmith. Prospective
                                                                            investors are strongly advised to take their own legal, investment and tax advice
MSCI World                                                                  from independent and suitably qualified advisers. The value of investments may
                              +55.1      -15.6           +33.4
SMID Cap Index (£ net)                                                      go up as well as down and be affected by changes in exchange rates. Past
                                                                            performance is not a guide to future performance.
Source: Financial Express Analytics. Inception 19.10.18.

A Fundsmith fund                                                                                    Available through your stockbroker
  Fundsmith LLP is a limited liability partnership registered in England and Wales with number OC354233. Its registered office address is 33 Cavendish Square, London, W1G 0PW.
                                                                                  www.smithson.co.uk
TAXMAN: BIN THE - AJ Bell ...
NEWS

    London-listed banks should
    report strong first quarter
    but challenges remain
    Key points to expect from Barclays, HSBC, Lloyds, NatWest and more

W
                 ith the major UK banks due to report
                 their first quarter results in the next
                 couple of weeks, we believe the
    rally in the sector which began last autumn has
    staying power based on valuation grounds.
      However, this is only a sector to trade short-
    term and we would be wary of brokers pushing an
    overly bullish narrative.

    WHAT TO EXPECT                                                     UK BANKS: DIVIDEND YIELDS
    The reporting season starts with HSBC (HSBA)
    on 27 April, followed by Lloyds (LLOY) and Metro                                             FY21 Div    FY22 Div
    Bank (MTRO) on 28 April, NatWest Group (NWG)                                                 Yield Est   Yield Est
    on 29 April and Barclays (BARC) on 30 April.           Barclays                                  3.0%      4.2%
       Key numbers important to the market are net         HSBC                                      3.7%      4.8%
    interest income and the net interest margin.           Lloyds                                    4.0%      5.6%
    The first is the amount the banks are making on        NatWest                                   5.0%      6.8%
    money they have lent out minus the income paid         Standard Chartered                        2.6%      3.6%
    on deposits. The second is the same thing but
                                                           Source: Shares, based on market prices 20 April
    expressed in percentage points as a margin on
    total loans and deposits.                              report bumper earnings from these divisions if the
       Net interest income and margins have been           US investment banks are any yardstick.
    whittled away by low base rates over the last             Of the two, Barclays is generally acknowledged
    couple of years, so the banks have had to try to       to have the better investment banking business
    grow their loan books faster than their deposits.      and has taken market share from its Wall Street
    However, during the pandemic people and                rivals in certain markets in recent quarters.
    companies ended up borrowing less and saving              HSBC and emerging markets rival Standard
    more so there’s unlikely to be great news on           Chartered (STAN), which reports on 29 April, are
    that front.                                            likely to have seen strong growth in the Asia Pacific
       The news on bad loans should be better though.      region, although both are likely to warn that year-
    The banks have put aside billions of pounds for        on-year growth will slow in 2021 as the region
    expected credit losses which have so far failed to     was the first to recover from the initial impact of
    materialise, so the market is expecting them to        Covid and performed well from the second quarter
    announce – or at least hint at – special dividends     onward.
    and share buybacks later this year.                       Finally, with India struggling to control a new
                                                           wave of the virus, Standard Chartered in particular
    INVESTMENT BANKS COME GOOD                             is likely to stay cautious on its full year guidance
    For a change, the two firms with big investment        and the message will be one of ‘controlling the
    banking businesses – Barclays and HSBC – should        controllable’, i.e. costs. [IC]

6   | SHARES | 22 April 2021
TAXMAN: BIN THE - AJ Bell ...
NEWS

Biden regulation and
tax changes could derail
certain investments
The new administration could make life harder for many companies

T
         he latest signs that the Biden                   The key question is whether these changes are
         administration is getting tough on             being factored into analysts’ earnings estimates
         corporate regulation and tax have put the      and market valuations.
tobacco sector under pressure.                            The impact of Trump’s corporation tax cut in late
   Shares in British American Tobacco (BATS)            2017 was significant, helping to drive big upgrades
and Imperial Brands (IMB) fell between 5% and           to earnings forecasts and provided a significant
6% on 20 April, mirroring similar moves for their       catalyst for the US stock market.
US-listed counterparts, on reports the Biden
team is considering plans to cap nicotine levels         3000
                                                                   S&P 500 US MARKET INDEX
in cigarettes.
   This could make tobacco companies’ core               2800
product less addictive and undermine sales. If                                   2
these reports are correct, it’s another reason why       2600
                                                                             1
the new president is turning out to be less than
friendly to the business world, with tax increases
clearly on the table.                                    2400
                                                                     2017                       2018
   There is talk of a global minimum tax rate,
agreed by the world’s biggest economies. Biden’s           1    2 Nov 2017
                                                                Trump tax cut introduced in the House of
administration might also force big companies to                Representatives
pay taxes where their revenues are earned, not             2    22 Dec 2017
where the profits can be shifted to.                            Tax cut signed into law
   Biden needs to pay for his stimulus and
infrastructure spending plans, and it looks like this      This only came through once the Trump tax
will encompass a big hike in the US corporation         cut had been introduced to Congress and signed
tax rate to 25% or even 28% from the current 21%.       into law, suggesting it may take some time for the
Such a change would hit businesses like Google          negative impact of Biden’s tax increases to feed
and Facebook which have their international             through to markets.
headquarters in Dublin to take advantage of                These new tax plans are still in their early stages
Ireland’s 12.5% rate.                                   and may be diluted as the administration looks to
   The Biden administration is looking at expanding     get them approved by US lawmakers. However,
the ‘global intangible low-tax income’ tax which        these issues are likely to garner increasing
was introduced under Donald Trump to make               attention as we move through 2021.
it harder to shelter intangible profit – i.e. that         Industries like healthcare and technology which
secured from intellectual property, copyrights and      derive a significant chunk of their profit overseas
trademarks – overseas.                                  and pay limited tax on this profit look most
   There are also proposals to levy a 15% minimum       vulnerable to any changes and this could reinforce
rate on book income to effectively ensure that all      the current rotation out of these sectors and into
businesses pay something.                               value stocks. [TS]

                                                                                             22 April 2021 | SHARES |   7
TAXMAN: BIN THE - AJ Bell ...
NEWS

    Pressure builds on
    GlaxoSmithKline as
    activist enters the fray
    The arrival of Elliott Investment Management on the share register could
    galvanise management

S
            hares in GlaxoSmithKline (GSK) are on
            an upward path after the Financial Times           200
                                                                       GLAXOSMITHKLINE
            reported that activist US investor Elliott         180     ASTRAZENECA
    Investment Management had taken a ‘significant’
    multi-billion-pound stake.                                 160

       The $42 billion fund, known for active campaigns        140
    at miner BHP (BHP) and Premier Inn owner
    Whitbread (WTB), is expected to heap pressure on           120

    Glaxo chief executive Emma Walmsley.                       100
       Although we don’t know the precise reasons
    for Elliott’s actions, we can construct a possible         80
                                                                     2018         2019           2020     2021
    narrative. The shares have lagged the sector and
    the company is in the middle of one of the biggest
    transformations in its history which will see the          One of Walmsley’s first actions in 2018 was the
    consumer healthcare division demerged in 2022.          $5.1 billion purchase of US biotech company Tesaro,
       Given the huge amounts of investment in              which spearheaded the relaunch of the cancer
    research and development needed to build a drug         franchise.
    pipeline it could be argued that the full sale of the      Although small today, Liberum expects the cancer
    consumer health division would serve long term          franchise to generate sales of $2.7 billion by 2030,
    shareholders better than a demerger.                    driven by Zejula (ovarian cancer) and Blenrep
       The deal with Pfizer in 2019 to combine              (multiple myeloma).
    respective consumer health businesses has created          In vaccines, Shingrix, which is used to treat
    one of the best quality consumer franchises             the chicken-pox related disease shingles, has
    boasting such iconic brands as Panadol, Sensodyne       shown good efficacy and is expected to remain
    and Advil. Such a high-quality asset might command      an important driver of growth until the end of
    a high multiple should it be sold in its entirety.      the decade.
                                                               Liberum estimates the cancer and vaccines
    BUILDING THE PIPELINE                                   franchises could add around $7bn to revenues over
    At the same time Glaxo is in the process of beefing     the decade which will more than compensate for
    up its biopharma division. It takes a long time         stagnant sales elsewhere.
    to build a pipeline of new drugs, but Glaxo has            Liberum analyst Alistair Campbell commented:
    arguably made good progress and expects to launch       ‘Our detailed work shows that contrary to market
    more than 20 new products over the next five            scepticism GSK’s biopharma business will deliver
    years.                                                  above sector sales growth and high single digit
       The biggest drivers of value over the coming         earnings per share growth to 2025. In fact, even in a
    decade are expected to be the cancer and vaccine        bear case GSK will still deliver sales growth to 2030,
    franchises according to Liberum.                        in our view.’ [MG]

8   | SHARES | 22 April 2021
TAXMAN: BIN THE - AJ Bell ...
NEWS

Get the inside track on
new float MusicMagpie
The smartphones, consoles and computers reseller has a clear ESG angle

S
       martphones-to-computers recycler and
       reseller MusicMagpie (MMAG:AIM) is set
       to swoop onto AIM (22 April) today through
a flotation valuing the ‘re-commerce’ business at
£208 million.
   That market valuation equates to roughly 1.4
times historic sales and 15 times historic earnings.
   Trading as musicMagpie in the UK and Decluttr in
the US, MusicMagpie is a specialist online reseller
of used electronic products, games, CDs and DVDs.
   A ‘comfortably’ oversubscribed placing at 193p
raised £15 million of new money for the company,
though selling shareholders took £95 million off
the table.
   Chief executive Steve Oliver tells Shares that
investments in proprietary technology and the trust
it has built with consumers give MusicMagpie an
edge in the market, with competition coming from
peoples’ propensity to leave old tech in drawers.      about £153.4 million in the year to November
   MusicMagpie estimates that in the UK alone,         2020, a compound annual growth rate of about
‘people are sitting on around £16.5 billion worth of   15.2%.
technology that they no longer use, and that only         Over the same period, earnings before interest,
a small percentage of consumer technology items        tax, depreciation and amortisation sparked up from
are currently recycled’.                               £2.6 million to approximately £13.9 million for a
   The company takes these unwanted products           CAGR of approximately 132%, demonstrating the
and uses proprietary technology to optimise            operational leverage in the business.
the sales price for every item, simultaneously            The new money raised at the stock market
listing them across multiple sales sites, including    listing will repay debt and fund the expansion of
the musicMagpie and Decluttr websites and              MusicMagpie’s smartphone rental proposition as
applications, as well as Amazon and eBay.              well as the roll-out of its SMARTDrop kiosk concept,
   The group has the highest number of seller          which is a way for sellers to recycle phones for
reviews on both Amazon and eBay, where it              cash, with kiosks now being rolled out in Asda and
consistently achieves positive feedback scores.        Co-op branches.
   MusicMagpie resold over 400,000 consumer               MusicMagpie also expects to qualify for the
technology products to consumers in the year           London Stock Exchange’s Green Economy Mark
to November 2020 and Oliver estimates the              when it arrives on the stock market. This recognises
company resells around 2,500 tonnes of books and       companies that derive 50% or more of their total
disc media each year that could have ended up          annual revenue from products and services that
as waste.                                              contribute to the global ‘Green Economy’ and could
   MusicMagpie’s sales increased from roughly          make the shares more attractive to ESG-minded
£115.5 million in the year to November 2018 to         investors in the future. [JC]

                                                                                       22 April 2021 | SHARES |   9
TAXMAN: BIN THE - AJ Bell ...
TIME FOR VALUE?
Temple Bar Investment Trust Plc is a
well-established investment company,
with a new portfolio management team
at the helm. RWC’s UK Equity Income
team, was appointed to manage the
trust in November 2020. Led by Nick
Purves and Ian Lance, the team
employs a disciplined, value-oriented
investment approach.

Value investing has a very long history
of outperformance, but it has struggled
in the growth-dominated markets of
the last decade. Recent market
behaviour suggests this may be
beginning to change.

The Temple Bar Investment Trust is well
placed to benefit should this rotation
into UK value stocks continue.

For further information, please visit
templebarinvestments.co.uk

                                                                                    “In my 30-year career as a fund manager, there have been
                                                                                    two occasions in which a market dislocation has created an
                                                                                    opportunity for investors to potentially make very attractive,
                                                                                    outsized returns. The 2000 dotcom boom, and in 2009
                                                                                    following the global financial crisis. I believe we are now
                                                                                    witnessing a third.”
                                                                                    Ian Lance, Portfolio Manager

No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. Investments can go up and
down in value and you may not get back the full amount invested. RWC Asset Management LLP is the appointed portfolio manager to the Temple Bar
Investment Trust Plc and this is issued by RWC Partners Limited. Both firms are authorised and regulated by the Financial Conduct Authority.
It’s a great time to feast on
McDonald’s shares
Growth and decent income are on the menu at the fast-food chain

O
          n 29 April McDonald’s
          will release its first            MCDONALD’S
          quarter earnings and if            BUY
analysts are right, the numbers             (MCD:NYSE) $231.81
will be good.
   Earnings of about $1.80 per              Market cap: $173 billion
share is predicted, based on
Refinitiv forecast data, which
would smash the same period in
2020 where it reported $1.47 per
share and put the burger giant
back on its pre-pandemic track.
   Like restaurants everywhere,
McDonald’s was happy to see the
back of 2020 as Covid-19 ripped
across the world and saw us all                Despite this setback, as an        ANALYSTS ARE LOVIN’ IT
at home for months at a time.               investment McDonald’s did             The Trefis analysts err on
McDonald’s saw revenue decline              remarkably well last year. The        the cautious side with their
9% in 2020 to $19.2 billion, while          share price ended 2020 at nearly      calculations. The consensus
earnings per share fell to $6.35            the same level as just before the     earnings per share estimate
from $7.95 in 2019.                         pandemic broke, at around $215.       for this year is $8.43, rising to
                                               With most of the world             $9.30 for 2022 and $10.26 for
        McDonald’s growing                  now in reopening mode and             2023, according to Refinitiv.
            dividends                       people rediscovering the              Interestingly, of the 39 analysts
                                            freedom to get out and about,         that follow McDonald’s, 30 rate
Year                           Dividends
                                            see friends and family, visit         the stock as a buy, 10 with very
2023*                               $5.81   shops and leisure outlets and so      high conviction. Not one single
2022*                               $5.52   on, investors can begin to look       analyst calls the stock a sell.
2021*                               $5.25   ahead with far more confidence.          The potential for increasing
2020                                $5.04   McDonald’s is a prime                 market share is a key reason why
2019                                $4.73   beneficiary of greater movement       analysts are bullish. Thousands
2018                                $4.19   of people as it is a popular choice   of restaurants have been forced
2017                                $4.04   for ‘food on the go’.                 to close their doors since the
2016                                $3.61
                                               Analysts at US broker Trefis       onset of the pandemic, and
                                            forecast McDonald’s revenues          many of them will never reopen.
2015                                $3.44
                                            to grow by around 11% to $21.2           Their loss is McDonald’s
2014                                $3.28
                                            billion in 2021. They said: ‘Net      opportunity. With its powerful
2013                                $3.12   income is likely to grow to $5.5      and pervasive global brand and
2012                                $2.87   billion as recovery post Covid-19     infrastructure, McDonald’s could
2011                                $2.53   gains pace, increasing its            become stronger as the weaker
Source: McDonald’s, *Refinitiv forecast     earnings per share to $7.48.’         players pull out of the market.

                                                                                               22 April 2021 | SHARES |   11
It has more than 38,000
 restaurants in 120 countries
 worldwide and it is said in
 some marketing circles that
 the chain’s ‘Golden Arches’ are
 more widely recognised than the
 Christian cross.
    Last year Forbes ranked
 McDonald’s as the tenth most
 valuable corporate brand in the     millennials, one of the chain’s      bonds. The income stream also
 world, worth $46.1 billion, and     longer-run challenges, according     looks very secure, with the
 the fourth most prized non-         to critics.                          payout ratio returning to fairly
 technology business. McDonald’s       It is also embracing               typical 60% levels after inflating
 owns and runs around 2,600          technology and data analytics        to 80% last year. The dividend
 outlets itself. The remainder are   to improve efficiency and            itself has more than doubled
 franchises, where the company       customer experience while            over the past decade.
 licences its operating model        lowering running costs, such            Measured versus its peer
 to franchisees in a profit share    as automated, multi-language         group McDonald’s stands
 arrangement.                        robotics ordering.                   on an enterprise value to
    In recent years restaurants                                           earnings before interest, tax,
 have been refitted, brightened      GROWTH AND INCOME                    depreciation and amortisation,
 up and dragged into the 21st        While there is a long-run growth     or EV/EBITDA, of 18.2 versus
 Century, with free customer         story, income seekers will also      the average of 17.3; a price to
 wi-fi, phone charging points,       be pleased. The company has          cash flow of 20.1 against its
 self-order kiosks and curb-side     an unbroken 40-year-plus             industry average of 13.9; and
 pick-up through mobile app          record for growing its dividend      the peer group’s dividend yield
 ordering.                           stretching back to 1976, even        of 1.15%. Yet McDonald’s price
    McDonald’s has been              during Covid, where it increased     to earnings ratio of 26.5 is just
 providing home delivery in many     the 2020 dividend by 6.5% to         an 8% premium, based on a
 markets for some time through       $5.04. A $5.25 per share award is    next 12-months basis. That’s not
 deals with Uber Eats and Just       expected this year.                  excessive, in our view.
 Eat Takeaway (JET) in the UK. It       That’s not a huge income yield,      McDonald’s shares aren’t
 is also testing meat-alternative    about 2.3%, but it knocks the        going to be a multi-bagger, but
 products, which could bolster       socks off the 0.625% on five-year    the stock could make good gains
 its social cachet with healthier-   UK government bonds or 0.75%         through 2021 as reopening
 eating and ecology-mindful          from five-year US government         continues. Beyond this year, the
                                                                          shares should continue to offer
                                                                          the sort of sleep-easy steady
                                                                          progress year after year that
                                                                          helps built wealth through solid
                                                                          capital gains and ever-increasing
                                                                          dividends. [SF]
                                                                           240
                                                                           230
                                                                           220
                                                                           210
                                                                           200
                                                                           190
                                                                           180
                                                                                               MCDONALD’S
                                                                           170
                                                                                      2020          2021

12   | SHARES | 22 April 2021
AS FOCUSED
ON DIVIDENDS
AS YOU ARE
The Merchants Trust PLC
The Merchants Trust aims to provide a rising income by investing in large UK companies with the potential
to pay attractive dividends. Although past performance is no guide to the future, we’ve paid a rising dividend
to our shareholders for 38 consecutive years, earning us the Association of Investment Companies’ coveted
Dividend Hero status. Beyond a focus on dividends, Merchants offers longevity too. Founded in 1889, we are
one of the oldest investment trusts in the UK equity income sector. To see the current Merchants dividend
yield or to find out more about us, please have a look at our website.
A ranking, a rating or an award provides no indicator of future performance and is not constant over time.
You should contact your financial adviser before making any investment decision.

www.merchantstrust.co.uk

 INVESTING INVOLVES RISK. THE VALUE OF AN INVESTMENT AND THE INCOME FROM IT MAY
 FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK THE FULL AMOUNT INVESTED.

This is a marketing communication issued by Allianz Global Investors GmbH, an investment
company with limited liability, incorporated in Germany, with its registered office at
Bockenheimer Landstrasse 42-44, D-60323 Frankfurt/M, registered with the local court
Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht
(www.bafin.de). Allianz Global Investors GmbH has established a branch in the United
Kingdom deemed authorised and regulated by the Financial Conduct Authority. Details of
the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a
limited period while seeking full authorisation, are available on the Financial Conduct
Authority’s website (www.fca.org.uk).
Virgin Wines’ shares
 are cheap for an online
 retailer and it is profitable
 The premium wines purveyor should flourish long after lockdown restrictions ease

 I
      f you missed out on the
      pandemic-driven share           VIRGIN WINES
      price gains at Naked Wines       BUY
 (WINE:AIM) fear not, for another     (VINO:AIM) 224p
 listed online wine retailer offers
 a tasty proposition and fruitful     Market cap: £126.5 million
 growth prospects.
    Open a position in Virgin
 Wines (VINO:AIM) at 224p,
 where the stock market
 newcomer trades at a steep
 discount to online peers.
    Based on estimates for            as they couldn’t get out to       growth, driven by increased
 the year to June 2022, Virgin        bars, pubs and restaurants,       investment in new customers
 Wines trades on 19.1 times           benefiting the likes of Virgin    and underpinned by predictable
 forward earnings, considerably       Wines. While the sector is now    subscription revenues.
 less than many other online-         lapping tough comparative sales     The near-term outlook
 focused companies on the UK          figures, investors should look    for consumer spending is
 stock market.                        at the longer-term prospects      positive and Virgin Wines’
    For example, fashion retailer     rather than focus on whether      exposure to trends including
 ASOS (ASC:AIM) trades on             2020’s big growth spike can be    premiumisation in the alcoholic
 33 times forward earnings            repeated.                         drinks market, the shift to online
 and sector peer Boohoo                  Virgin Wines offers exposure   and the growth of subscription
 (BOO:AIM) trades on almost           to direct-to-consumer digital     models mean outer year
 32 times. Online musical                                               earnings forecasts could prove
 instruments retailer Gear4Music          Customers signed up to        conservative.
 (GFM:AIM) trades on 38 times          Virgin Wines’ WineBank club
 forward earnings.                                                      PREMIUM FOCUS
    Virgin Wines is cash generative   As of                  Numbers    AIM-traded Virgin Wines is one
 and profitable, whereas rival        Jun-17                  66,000    of the UK’s largest direct-to-
 Naked Wines is forecast to           Jun-18                  72,000    consumer online wine retailers
 remain loss-making as it invests     Jun-19                  75,000    and the exclusive licensee of the
 heavily to acquire customers and     Feb-20                  86,000    Virgin Wines brand in the UK and
 build stock levels.                  Jun-20                  96,000    Ireland from Virgin Enterprises,
                                      Oct-20                 102,000    an arm of Richard Branson’s
 THIRSTY CUSTOMERS                    Dec-20                 118,000
                                                                        Virgin empire.
 A lot of people ordered wine via                                          Firmly focused on the
 the internet during the pandemic     Source: Virgin Wines
                                                                        premium wine market, the

14   | SHARES | 22 April 2021
company has a reputation for                                                                         figure is through direct-to-
supplying high-quality wines                                                                         consumer online retail channels,
curated to customers’ tastes and                                                                     with Virgin Wines speaking for
good customer service.                                                                               just 9%, so there is still a big
   The company has been                                                                              growth opportunity.
profitable in every year since                                                                          Furthermore, the market for
Jay Wright’s appointment as                                                                          wine specialists is expected to
CEO in 2008. It is highly cash                                                                       grow by circa 3% per year with
generative, and it is benefiting                                                                     the online segment growing by
from the structural shift in how                                                                     roughly 11% to 12% per year
people buy more through digital                                                                      from 2021 to 2025.
channels. The pandemic has                                    turn and much higher margin               Growing its craft beers and
further entrenched delivery as                                structure all point to Virgin          spirits range, Virgin Wines also
a more viable and convenient                                  Wines scoring as the premium           sees opportunities to expand in
option for wine drinkers.                                     investment case on offer.’             overseas territories such as the
                                                                 Virgin Wines’ business model        US, Europe and Australia over
UNCORKING THE POTENTIAL                                       is ideally suited for a digital age;   the long term.
Liberum Capital says the group                                it uses a wealth of customer
has ‘a more disciplined and                                   data and an open source buying         SALES PROFILE
targeted approach to growth’                                  model which ensures the                Virgin Wines generated 33%
than rival Naked Wines, offering                              company can source the best            sales growth to £56.5 million in
more choice in terms of its                                   product at the best prices             the year to June 2020, and then
subscription schemes.                                         while also creating a range            reported £40.6 million sales
   Its wine clubs include                                     of wines suited for the tastes         in the first half of its current
something called WineBank                                     and stylistic preferences of its       financial year. Liberum is looking
whereby a customer deposits a                                 customers. By selling exclusive        for £70.3 million sales for the full
set amount of money into their                                products, Virgin Wines maintains       year, which implies second-half
account each month and then                                   premium prices and benefits            sales of £29.7 million.
buys wine when they are ready.                                from minimal returns.                     While that second-half figure
For every £5 a customer saves                                                                        would be slightly lower than
into their account, Virgin Wines                              TASTY OPPORTUNITY                      the £30.3 million recorded
gives them £1 extra to spend                                  Management estimates the               in the same period in 2020,
on wine.                                                      current UK addressable retail          Liberum believes its estimates
   Liberum says: ‘Stability of                                wine market, defined as                are ‘prudent considering the
management and track record,                                  households who buy more than           positive momentum across
consistent delivery of profits,                               three bottles of wine per month        unit economics and key
stronger sales retention and                                  with price points of over £6 per       performance indicators’.
paybacks, better cash flow                                    bottle, is around £2.4 billion.           For fiscal 2021, it forecasts
generation from high stock                                      Around £780 million of that          £4.6 million pre-tax profit (2020:
                                                                                                     £2.8 million), rising to £6.5
                          Virgin Wines: Earnings and valuation                                       million in 2022 and £8.1 million
                                                                                                     in 2023. [JC]
                                         PBT                           EPS             PE
                                                                                                      230
         2020a                         £2.8m                           4.7p           47.7                             VIRGIN WINES
         2021e                         £4.6m                           8.3p           27.0
         2022e                         £6.5m                          11.7p           19.1            225

         2023e                         £8.1m                          13.2p           17.0
Source: Liberum Capital, Virgin Wines. June year end                                                  220
PBT = Profit before tax, EPS = Earnings per share, PE = Price to earnings ratio
A = Actual, E = Estimate                                                                                         MAR              APR

                                                                                                                   22 April 2021 | SHARES |   15
Sponsored content

WHAT IS REFLATION AND WHY IT IS PARTICULARLY
BENEFICIAL TO VALUE AND RECOVERY STOCKS?

                                                            shorter duration ones. Therefore, in an inflationary
                                                            environment, where interest rates are rising, these
                                                            shorter duration value stocks become relatively more
                                                            attractive.

                                                            At a stock and sector specific level, there are many
Hugh Sergeant, Head of Value and                            cheaply valued stocks in sectors which are more
                                                            financially geared to interest rates moving upwards.
Recovery at River and Mercantile.                           Perhaps the most obvious of these is financials.
                                                            Banks, for example, have struggled in the context of
                                                            the very low interest rates we have seen for several
REFLATION CAN BE broadly defined as expansion               years now, as it’s difficult to make much margin
in the level of output of an economy, by increasing         between what you charge to lend money and your
government stimulus, using fiscal or monetary policy.       cost of borrowing when both are near zero! As rates
This is intended to stimulate corporate and consumer        rise, this will support a better environment for banks’
spending, so benefits value and in particular, cyclical     revenues and profitability.
recovery stocks, which by their nature are geared
towards an uptick in the economy.                           Given the benefit that a reflationary environment can
                                                            bring to certain stocks and sectors, it is interesting to
There is also what is known as the ‘duration’ effect        look at how we position a portfolio to take advantage
– how sensitive a company’s valuation is to changes         of this. We will be looking in more detail at this in our
in interest rates. Duration refers to how long it takes     next article.
for an investor to be paid back by a future stream of
cash flows. Much of a high growth stock’s value is
derived from earnings which will be delivered quite a         The ES R&M UK Recovery Fund enables investors
long time into the future, so they are known as long           to have targeted exposure to those companies
duration stocks. Value stocks on the other hand,                 that R&M believe to have particularly strong
tend to have their value based on more imminent                 potential to create value, following a period of
earnings, making them shorter duration. Changes                depressed profits that could enable significant
in interest rates affect the valuations of the longer               recovery. To find out more, visit here.
duration stocks more than they do those of the

This is a financial promotion within the meaning of the FCA rules. For further details of the specific risks and the
overall risk profile of this fund; as well as the share classes within it, please refer to the Key Investor Information
Documents and ES River and Mercantile Funds ICVC Prospectus which are available on our website
www.riverandmercantile.com.
The value of investments and any income generated may go down as well as up and is not guaranteed.
An investor may not get back the amount originally invested. Past performance is not a reliable guide
to future results. Changes in exchange rates may have an adverse effect on the value, price or income of
investments. The information and opinions shared are subject to updating and verification and may be
subject to amendment. The information and opinions do not purport to be full or complete. No representation,
warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or
opinions shared by R&M, its partners, or employees. No liability is accepted by such persons for the accuracy or
completeness of any such information or opinions. As such, no reliance may be placed for any purpose on the
information and opinions contained in this article.
Prepared and issued by River and Mercantile Asset Management LLP (“R&M”), registered in England and
Wales under Company No. OC317647, with its registered office at 30 Coleman Street, London EC2R 5AL. R&M
is authorised and regulated by the UK Financial Conduct Authority (FRN 45308) and is a subsidiary of River
and Mercantile Group PLC which is registered in England and Wales under Company No. 04035248, with its
registered office at 30 Coleman Street, London EC2R 5AL. Equity Trustees Fund Services Ltd is the Authorised
Corporate Director (the “ACD”) of the ES River and Mercantile Funds ICVC and of its sub-funds. The ACD is
authorised in the United Kingdom and regulated by the Financial Conduct Authority (FRN 227807) and has its
registered office at Pountney Hill House, 4th floor, 6 Laurence Pountney Hill, London EC4R 0BL.
ELEMENTIS                                               DISCOVERIE
(ELM) 137p                                              (DSCV) 797p
Gain to date: 8.8%                                      Gain to date: 32.8%
Original entry point:                                   Original entry point:
Buy at 125.9p, 18 February 2021                         Buy at 600p, 10 December 2020

REPORTS THAT chemicals group Elementis                  ELECTRONICS ENGINEER
(ELM) had been the subject of a takeover                DiscoverIE (DSCV) is riding high
deal that could value it at over 200p per share         after its latest trading update
proved unfounded.                                       drove material upgrades to
   Late on 20 April its US-listed rival Innospec        analysts’ earnings forecasts.
revealed it had made a cash and shares bid of              The company designs and
160p but that this offer had been rebuffed and a        manufactures bespoke kit for highly regulated
deal was no longer under active consideration.          industries including healthcare, renewables,
   Analysts at Jefferies say that while they ‘expect    transport and aerospace.
the market to be disappointed by this news, the            On 20 April the company said it expected
ongoing takeover interest in Elementis implies          underlying earnings for the 12 months to 31
that its shares have been cheap’.                       March 2021 to be above the upper end of market
   These latest developments came after                 expectations as trading momentum in the final
Elementis rejected three takeover bids last year        two months of the year continued to strengthen.
from another US firm, Mineral Technologies,                Group sales in the second half were 9% ahead
the highest of which valued Elementis at 130p           of the first half with a return to organic growth
per share.                                              of 1% in the last two months of the year, with
   The stock is still trading significantly below       overall group sales for the full year 3% lower.
the 200p mark, which is the level at which the             ‘The strong order book and momentum
company has long since argued it should be              provide a solid base for sustained organic
valued, and we think shareholders should be             sales growth whilst further investing in growth
patient until the shares reach this level.              initiatives,’ the company said.
                                                           Broker Peel Hunt upgraded its March 2021 and
                                                        March 2022 pre-tax profit forecasts by 8% apiece
                                                        to £29.6 million and £32.3 million respectively.
                                                           Based on the upgraded forecasts for March
                                                        2022, the shares trade on a price to earnings ratio
                                                        of 29.9.

                                                         850
                                                                DISCOVERIE GROUP
  140                                                    800
  130                                                    750
             ELEMENTIS
  120                                                    700
  110                                                    650
  100                                                    600
   90                                                    550
   80                                                    500
   70                                                    450
   60                                                    400
   50                                                                     2020                          2021
                  2020                        2021
                                                        SHARES SAYS: 
SHARES SAYS:                                           While the shares trade on a rich rating, we’re happy
We still think there is considerable unrealised value   to stick with them while there is positive earnings
in Elementis. [TS]                                      momentum. [TS]

                                                                                         22 April 2021 | SHARES |   17
TRACSIS                    TOUCHSTONE
                       TOP
 (TRCS:AIM) 820p STOCKS EXPLORATION
                        FOR (TXP:AIM) 101.6p
 Gain to date: 30.2%   2021
 Original entry point:      Gain to date: 95.4%
 Buy at 630p, 23 December 2020                        Original entry point:
                                                      Buy at 52p, 25 June 2020
 INVESTORS ARE getting far more confident that
 big events will get back going again this summer     IT HAS been a volatile few
 as the UK’s vaccine rollout filters through the      weeks for small cap oil and gas
 population, and investors have been snapping up      play Touchstone Exploration
 Tracsis (TRCS:AIM) stock in anticipation. About      (TXP:AIM) as it announced
 half of the Leeds-based transport infrastructure     mixed news from its Ortoire
 and analytics software company’s business comes      block in Trinidad & Tobago.
 from planning and running music festivals, motor        However, confirmation that
 races and other major events that attract people     the Cascadura Deep-1 well had
 in their thousands.                                  yielded a significant natural gas discovery (12 Apr)
    Reopening came too late to save Glastonbury       helped set the shares on the right path.
 this year but there is optimism that events later       Touchstone had been knocked off course by
 in the summer will go ahead, such as the world-      news that another well – Chinook-1 – contained
 renowned Isle of Wight Festival, pencilled in for    oil rather than gas as investors had hoped and
 mid-September.                                       expected (31 Mar).
    Tracsis management remain understandably             Natural gas is particularly in demand in
 cautious given the difficulty of predicting the      Trinidad thanks to its large industrial sector and
 Covid virus impact over the coming weeks and         Touchstone’s apparent bias towards gas had also
 months, yet the company remains convinced            insulated it from volatility in the oil price.
 of hitting its own 10% organic revenue growth           The company has a large inventory of prospects
 target this year to 31 July 2021.                    to drill on Ortoire with a well on its Royston
    With a little luck and sensible precautions,      prospect expected to be in focus soon.
 getting some ‘live’ shows going this summer             Shore Capital analyst Craig Howie
 could push performance beyond that, and              says the latest announcement provides ‘a
 importantly, spark a series of upgrades for fiscal   robust basis for upgrades – which we would
 2022, helped by roughly £2.5 million of costs        expect to process following discussions with
 permanently stripped out of the business.            management to firm up our expectations
                                                      regarding commercial deliverability, timing and
                                                      follow-on development plans.’
     850
     800                   TRACSIS
     750                                               180
                                                       160
                                                               TOUCHSTONE
     700                                                       EXPLORATION
     650                                               140
                                                       120
     600
                                                       100
     550                                                80
     500                                                60
                           2020               2021
                                                        40
                                                        20
 SHARES SAYS:                                                          2020                       2021

 The stock is up 25% since the end of March, and
 this could be the start of a run of positive news    SHARES SAYS: 
 events. [SF]                                         We see scope for further upside in Touchstone. [TS]

18   | SHARES | 22 April 2021
TREATT                                                                     reflected the growth in those categories and the
                                                                           transition into ‘more sophisticated, solution-
(TET) £11.45                                                               driven’ products in citrus.
                                                                              The company is also in the process of a moving
Gain to date: 88.6%                                                        to a new headquarters in Bury St Edmunds
                                                                           which should boost efficiency and capacity.
Original entry point:                                                         Investec analyst Nicola Mallard commented:
Buy at 607p, 29 October 2020                                               ‘Despite the pandemic’s obvious impact on
                                                                           the global beverage trade, Treatt continues to
OUR BELIEF that it would be premature to take                              deliver strong momentum. The move to cleaner,
profit in extracts and ingredients manufacturer                            healthier foods and beverages is increasing the
Treatt (TET) in January has been vindicated with                           size of Treatt’s addressable market.’
the shares extending their recent gains off the
back of another strong trading update (12 Apr).                               1200

  The company said it expected to grow its first-                             1100
                                                                              1000
                                                                                                TREATT
half revenue by 14%, while also achieving an                                   900
improvement in margins.                                                        800
  Revenue for the six months to 31 March was                                   700
                                                                               600
seen rising to around £60.8 million.                                           500
  Growth was particularly strong in the tea,                                   400
health and wellness, and fruit and vegetables                                                          2020                          2021

categories, ‘meeting growing global consumer
demand for healthier living,’ Treatt said.                                  SHARES SAYS: 
                                                                            We continue to see Treatt as a buy. [TS]
  The company said gross margin improvements

                                                                DESIGNED TO PERFORM
                                                                ACTIVELY MANAGED
                                                                TRUSTED FOR OVER 35 YEARS

                       DISCOVER AGT AT
                     WWW.AVIGLOBAL.CO.UK

Past performance should not be seen as an indication of future performance. The value of your investment may go down as well as up and you may not
get back the full amount invested. Issued by Asset Value Investors Ltd who are authorised and regulated by the Financial Conduct Authority.
This is an advertising promotion

The stars align for UK equities
We believe a rare set of events have combined to make the UK equity market a highly attractive prospect right now -
and Claverhouse Investment Trust could provide an attractive vehicle to capitalise on it.

The income outcome                                                 EXHIBIT A – UK EQUITY INCOME INVESTMENT COMPANIES
The Mercantile’s portfolio of medium and smaller-
Investors around the world have grown                                                  1.16
accustomed to dark times. The effects of the                                                        Peer group
                                                                                       1.14
pandemic continue to crush income hopes. In the
                                                                                       1.12
UK, dividend values fell by 44% in the course of                                                                                                                            JPMorgan
2020, hitting their lowest level since 2011.1 Against                                  1.10                                                                               Claverhouse
                                                                                                                                                                           Investment
this backdrop, rare chinks of good news shine                                                                                                                                Trust plc
                                                                                       1.08
even more brightly – notably the announcement in
                                                                      Dividend cover

January by JP Morgan’s Claverhouse Investment                                          1.06
Trust that it was increasing its dividend by 1.7%.                                     1.04
This remarkable achievement speaks to the in-                                          1.02
built advantage of investment trusts. Unlike ‘open-
ended’ funds, they can draw on a fixed pool of                                         1.00

capital that allows them to plan for the long term,                                    0.98
since they can retain 15% of their income. And
                                                                                       0.96
Claverhouse’s enjoys especially strong reserves. In                                           0.0   0.2            0.4              0.6              0.8            1.0      1.2
fact, the trust has now increased its dividend 48                                                                 Revenue reserves (Years’ dividend)
years in a row. That’s among the longest record of
unbroken rises of any UK equity-focused trust.                     Source: Numis Securities Research, Datastream, Company Data, Bloomberg, as at 19 May 2020.

The case for UK equities                                           EXHIBIT B - UK EQUITIES CHEAP VS. OWN HISTORY (UK MARKET PRICE TO BOOK (X)
Claverhouse managers firmly believe that having a
                                                                                                    UK Market Price To Book Value          Max   Min       Median
UK focus will give investors a positive advantage in
                                                                    4.0
the market of early 2021. With Covid-19 vaccine
                                                                    3.5
programmes rolling out, recovery is tangible. The
investment skies are clearing. Given the heavy fiscal               3.0
support delivered by governments to bridge the                      2.5
pandemic, interest rates are likely to be suppressed                2.0
for some time. But the US election and the long-                    1.5
awaited resolution of Brexit have bolstered political               1.0
stability on either side of the Atlantic.                           0.5
                                                                    0.0
                                                                       1980                          1990                           2000                   2010                    2020

                                                                   Source: Datastream, Morgan Stanley Research. Data from 1 January 1980 to 27 October 2020. Past performance is not a
At this pivotal point of the pandemic,                             reliable indicator of current and future results
UK stocks offer a tantalising prospect.
WILL MEADON, CLAVERHOUSE PORTFOLIO DIRECTOR.
                                                                   UK equity prices are currently trailing well below recent performance: a glance at the records shows
                                                                   them hovering near the lows of the 1980s. “They are not only historically cheap, but attractively valued
                                                                   compared to overseas markets – notably the US, which is dominated by sky-high tech valuations,”
                                                                   Meadon says.

1 https://www.linkgroup.eu/insights/publications/uk-dividend-monitor-q4-2020/
This is an advertising promotion

Under-performance in recent years has led many                        EXHIBIT C – UK MARKET CHEAP VS OTHER EQUITY MARKETS – THE >30% DISCOUNT FOR MSCI UK
investors to avoid UK stocks. Yet the coming                          VS. MSCI WORLD IS AT OVER 40 YEAR LOW
recovery might be their chance to shine. In
particular, it could lift the currently unfashionable                                                                  MSCI UK vs MSCI World Average % Premium On PE, PBV & PDiv
                                                                        10
‘value’ stocks – long-established sectors that
appear to be undervalued compared to their                               0
performance and potential – such as construction,                      -10
oil and gas and financial services. Claverhouse is                                                                                                       Median
                                                                       -20
well placed to capitalise on such a development:
its portfolio includes a range of both blue-chip                       -30
and mid-cap value stocks.                                              -40

                                                                       -50
Buy UK, buy global
                                                                       -60
Investing in UK equities doesn’t mean turning                            1974      1977    1980     1983    1986         1989       1992   1995   1998   2001     2004   2007    2010        2013    2016    2019
your back on the rest of the world; quite the
reverse. AstraZeneca’s UK-Swedish base and its                        Source: Source: J.P. Morgan Asset Management using data from MSCI, I/B/E/S, Morgan Stanley Research. Based on PE (Price
international vaccine rollout is currently the most                   to Earnings),PBV (Price to Book Value) and PD (Price to Dividend). Average relative valuations use 12 month forward data
prominent example of the worldwide footprint of                       where available. Data from 31 December 1974 to 31 May 2020. Past performance is not a reliable indicator of current and
nominally UK companies. Like BP, Unilever or                          future results.
GlaxoSmithKline, it’s a global firm that happens to
be UK-listed.                                                         EXHIBIT C – LONG-TERM CAPITAL MARKET ASSUMPTION EXPECTED RETURNS IN COMING 10-15
“In fact, 70% of the revenues of the UK’s top 100                     YEARS
stocks originate from overseas,” Meadon points
out. “The UK economy is not the UK stock market,                             %, annualised return in GBP

and the UK stock market is not the UK economy.                                                    UK large cap
                                                                                            Emerging markets
                                                                                                  Asia ex-Japan
                                                                                           UK core real estate
                                                                                           Eurozone large cap
“So investing in UK equities is a way of
                                                                                                         Japan
buying into some of the best global
                                                                                          Global infrastructure
companies without having to pay the
                                                                                                  US large cap
inflated valuations you see in other
                                                                      UK investment-grade corporate bonds
equity markets. By opting for an
                                                                                                       UK cash                                                                       Equity
investment trust, investors can exploit                                                                                                                                              Fixed income
                                                                                                       UK Gilts                                                                      Alternatives
this anomaly in a diversified way, while
                                                                                      UK inflation-linked Gilts                                                                      Historical return since 2009
benefiting from increased income.
                                                                                                                  -2            0          2      4        6         8          10          12        14        16

The case for investing now
                                                                      Past performance is not a reliable indicator of current and future results
Given the twists of the past year, the course of the
recovery remains uncertain. We believe this
                                                                      Even Meadon, who has spent much of his 38-year                               opportunity to get involved is brief – and
underlines the case for investing in a structure
                                                                      industry experience at JP Morgan, has rarely                                 narrowing. “Investors globally are, for the first
such as Claverhouse, where future income is
                                                                      witnessed such an auspicious moment for UK                                   time in 10 years at least, starting to show interest
supported by a strong revenue reserve base. But
                                                                      equities. “This is a very unusual confluence of                              in value stocks,” Meadon warns. In our view, that
a market that’s historically and globally cheap,
                                                                      events: those stars don’t align very often,” he                              means there’s a limited time for informed
and simultaneously well placed for recovery, is a
                                                                      declares.                                                                    investors to jump on board the UK equities craft
singular event.
                                                                      Like any heavenly collision, however, the                                    before it takes off.

 Find out more about JPMorgan Claverhouse Investment Trust
This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest
thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management
for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions,
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LV-JPM53174 | 03/21 | 0903c02a82b0521d
Evenlode to rival
 Fundsmith with new
 global growth fund
 The fund manager is best known for its income funds but is now looking at growth to
 accommodate its investment ideas

B
           est known for its UK and
           global income funds,
           asset manager Evenlode
 is to launch a growth-themed
 global equity fund after its
 research unearthed many strong
 investment ideas which don’t pay
 much in the way of dividends and
 therefore wouldn’t feature in its
 other funds.
    TB Evenlode Global Equity
 (BMFX289) will invest in
 companies with attractive                                  have low portfolio turnover with        portfolio includes US tech
 structural growth opportunities,                           long-term holding periods.              firms Accenture, Microsoft and
 sustainable competitive                                      That puts it in direct                Google owner Alphabet, as
 advantages, and sustainable                                competition for investors’              well as payment giants Visa and
 reinvestment that safeguards and                           money with Fundsmith Equity             Mastercard, UK names including
 extends their businesses.                                  (B4MR8G8) which follows a               Relx (REL) and Unilever (ULVR),
    It will follow the same                                 similar investment approach.            and others like Heineken,
 principles of other Evenlode                                                                       Nestlé, Booking Holdings,
 funds in looking for stocks with                           PORTFOLIO NAMES                         L’Oreal and LVMH.
 high return on capital and strong                          According to the March                     Now might be a good time to
 free cash flow and will aim to                             factsheet, Evenlode’s new               launch a fund aimed at quality
                                                                                                    and growth stocks, with the
                          Evenlode income funds: Track record                                       market rotation into value and
                                                                                                    small caps creating a buying
                                                3 years               5 years            10 years   opportunity for bigger names
  EVENLODE INCOME                                   26.9%              57.3%              188.6%    that have seen their share
  IA UK EQUITY INCOME                               10.4%              29.0%              92.6%     price weaken in the past few
 Source: FE Fundinfo, 19 April 2021. Total return                                                   months. It means Evenlode
                                                                                                    can pick up certain stocks
                                                                                                    potentially at a discount to
                                                       1 year                         3 years       their historical average.
  EVENLODE GLOBAL INCOME                               28.0%                           49.6%           But co-manager Chris Elliott
  MSCI WORLD (IN GBP)                                  37.2%                           53.5%        says that didn’t come into the
 Source: FE Fundinfo, 19 April 2021. Total return                                                   team’s thinking in launching the
 Evenlode Global Income launched in November 2017, so there is no 5 or 10 year data                 fund, rather that after testing the

22   | SHARES | 22 April 2021
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