Martin Currie Securities Trust of Scotland (LSE:STS)
Securities Trust of Scotland aims to achieve rising income and long-term capital growth through investment in a balanced portfolio constructed from global equities. It was launched in June 2005 within the global equity income sector.
The manager typically runs a focused 35-55 stock equity portfolio that is unconstrained by geography, sector, stock or market capitalisation. This provides the opportunity to invest in their best ideas, not just because they are listed in a market index.
Our investment philosophy
Our philosophy is that stock focused portfolios, driven by fundamental research, are the best way to exploit market inefficiencies and generate consistent outperformance. We believe that dividends are an important feature of wealth creation.
Mark joined Martin Currie as Head of Income in November 2015 and has over 19 years’ experience. He was appointed Portfolio Manager of Securities Trust of Scotland in May 2016 and co-manages the Martin Currie Global Equity Income strategy. Previously, Mark worked at Sarasin & Partners where he constructed and managed a range of income, balanced, growth, and absolute return portfolios; he became lead manager for its thematic funds in the Global Dividend range in 2007, and latterly was appointed Head of Equity Income from 2010.
Martin Currie are active equity specialists, crafting high-conviction portfolios for client-focused solutions.
Central to Martin Currie's investment philosophy is the belief that equity markets undervalue companies that deliver growth through sustainable long-term value creation. We believe that the very best way to capture returns for our clients is to invest for the long term by identifying high-quality opportunities at sensible valuations.
So how do we go about this? We believe fundamental research is the most effective method to identify these high-quality opportunities, and that by combining bottom-up stockpicking with skilled portfolio construction we will deliver consistent risk-adjusted returns for our clients. Overlaying all of this is an independent and dynamic risk function that enables an optimum risk allocation, with all portfolios continuously monitored for correlated, unintended and excessive risk.
Effective stewardship of capital is at the heart of our client proposition. Central to this is a highly differentiated approach to ESG analysis which is embedded in every part of the investment process. From this we gain a holistic view of investee companies and an insight into their culture. This builds an understanding of material risks and opportunities, develops conviction in ideas, and allows us to deliver differentiated client outcomes.
At a stock level, the top performer over the period was US diversified manufacturer Leggett & Platt driven by its strong bedding business. Taiwan Semiconductor Manufacturing Company was also a notable contributor following a better-than-expected quarter driven by several new product launches in smartphones and high-performance computers.
European multinational aerospace corporation, Airbus was another positive for the portfolio during the month. The company moved on from tariff concerns to deliver a decent third quarter and though there are some short-term aircraft delivery issues, Airbus looks set to deliver on its 2021 production targets. On the other side, French multinational advertising and PR firm Publicis was the biggest drag on portfolio performance.
Its third quarter organic sales growth was worse than expected and it reduced guidance owing to the commercial realignment of a new acquisition and a weak US market. Elsewhere, French food-products business Danone also struggled after lower-than-expected organic sales in the quarter; although guidance for the medium term remains intact. Global aerospace giant Lockheed Martin was another disappointment during the period. Despite having a decent third quarter, its 2020 guidance was seen as conservative and weighed on investor sentiment. In terms of portfolio activity, there were no new purchases or outright sales during the period.
This information is issued and approved by Martin Currie Investment Management Limited. It does not constitute investment advice. Market and currency movements may cause the capital value of shares, and the income from them, to fall as well as rise and you may get back less than you invested. Please note that, as the shares in investment trusts are traded on a stockmarket, the share price will fluctuate in accordance with supply and demand and may not reflect the value of underlying net asset value of the shares.
Depending on market conditions and market sentiment, the spread between purchase and sale price can be wide. As with all stock exchange investments the value of investment trust share purchases will immediately fall by the difference between the buying and selling prices, the bid-offer spread. The value of investments and the income from them may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested.
Investment trusts may borrow money in order to make further investments. This is known as 'gearing' and can enhance shareholder returns in rising markets but, conversely, can reduce them in falling markets. The majority of charges will be deducted from the capital of the Company. This will constrain capital growth of the Company in order to maintain the income streams.
The company employs an active but tactical options strategy by using derivatives, predominantly writing (selling) puts and covered calls for investment purposes, this being principally to generate income. This may be at the expense of generating capital gains.
A sold put option obligates an investor to take delivery, or purchase of shares, of the underlying stock at a specified price within a specified time in return for receiving the payment of a premium.
Any use of derivatives for efficient portfolio management and options for investment purposes will be made on the basis of the same principals of risk spreading and diversification that apply to the company's direct investments.