London, UK, 15 August 2023
Edison issues update on Lowland Investment Company (LWI)
Lowland Investment Company (LWI) targets above-average total returns, from a combination of capital and income, with a multi-cap investment policy that differentiates it from most peers in the UK Equity Income sector. Within its broad range of investment opportunities, selected large caps provide more immediate income, often with defensive characteristics, while small and mid-caps offer faster growth in income and dividends over time. LWI has a long track record of progressive dividends, which have grown c 7% pa over 10 years, and currently offers an attractive 5.2% yield. While investor focus on large-cap stocks, often with global businesses, has created a headwind for LWI's multi-cap approach and five-year NAV total return, the managers anticipate a broadening of market performance.
As they have observed in previous cycles, the managers expect market leadership to broaden as confidence grows. They believe that the market de-rating of SME companies is already discounting a severe recession, and often ignores robust performances and strong prospects. Stubborn inflation is yet to signal the peak in interest rates, making the timing of an SME recovery difficult to predict, but low valuations should mitigate further weakness and may attract further takeover activity. The potential for an SME recovery makes LWI an interesting complement to more mainstream trusts and a narrowing of the 10% discount to NAV would enhance shareholder returns.
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