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James Henderson: my HOT story will narrow discount

by Selin Bucak, Gavin Lumsden Feb 17, 2017 at 13:18

Henderson Opportunities Trust (HOT) is the smallest of the three investment trusts run by contrarian fund manager James Henderson (the other two being Law Debenture (LWDB) and Lowland Investment Company (LIC)).

Last year was a tough one for the fund, which has net assets after debts of £88 million. With two thirds of the portfolio in smaller UK companies, HOT was hit by investors' panic selling 'small caps' perceived to be higher risk with their exposure to a forecast weakening in the domestic economy.

The shares dropped 5.5% in 2016 and by December traded 23% below their net asset value. That prompted investors to buy in and the discount has narrowed to 16% today, helping the shares to rally over 15%.

In this video interview with Selin Bucak, Henderson expresses confidence that if he continues to tell the 'story' behind HOT its shares could return to the small premium above NAV at which they traded three years ago.

In the interview, Henderson explains how he turned the Brexit sell-off to his advantage, recycling profits from mining stocks into smaller exporters whose competitiveness has increased from the weak pound and yet whose shares have fallen.

The portfolio also benefited from a US bid for E2V Technologies (E2V), a top 10 holding, a sign of the value that overseas industrial buyers now saw in the UK, according to Henderson.

In the past five years HOT has generated a total return to shareholders of nearly 153%, placing it second in the UK All Companies sector of investment trusts, according to Association of Investment Companies figures.

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Comments  (3)

  • Micawber: 

    And yet Henderson has just lost his alpha manager rating at Trustnet.

    I'm happy to say we increased our stake in HOT twice in the closing months of 2016.

    I hope 4D Pharma comes through with the biome....

    13:39 on 17 February 2017

  • ascend: 

    TIME my dear Watson, TIME

    00:59 on 19 February 2017

  • Jon Page: 

    Trustnet ratings just reflect the share performance of the last 3 years. Take their ratings with a large pile of salt.

    This is a decent manager with decent track record, particularly with HOT, which was very hot a couple of years back (pre Brexit.).

    Risk-off market means this little gem is now trading at wide discount, when the underlying shares are also arguably discounted already. There are a number of small cap ITs on wide discounts currently... good buying opportunity in my view.

    Like Micawber I'm happy to buy HOT in this dip.

    22:03 on 26 July 2017

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