WEBVTT 00:00:00.000 --> 00:00:05.710 align:middle line:90% 00:00:05.710 --> 00:00:09.460 align:middle line:84% Welcome to the 2023 annual general meeting 00:00:09.460 --> 00:00:13.240 align:middle line:84% of JP Morgan Claverhouse Investment Trust PLC. 00:00:13.240 --> 00:00:16.540 align:middle line:84% Arrangements have also been made for registered shareholders 00:00:16.540 --> 00:00:19.360 align:middle line:84% and other interested parties to view this meeting 00:00:19.360 --> 00:00:21.880 align:middle line:84% and ask any questions via webcast. 00:00:21.880 --> 00:00:26.330 align:middle line:84% Welcome also to those joining us online today. 00:00:26.330 --> 00:00:29.620 align:middle line:84% Let me start by introducing the members of your board. 00:00:29.620 --> 00:00:33.580 align:middle line:84% My name is David Fletcher and I am chairman of the board. 00:00:33.580 --> 00:00:36.490 align:middle line:84% The other members of the board with me in person 00:00:36.490 --> 00:00:40.630 align:middle line:84% today are on my right, so your left, Nicholas Melhuish, 00:00:40.630 --> 00:00:42.700 align:middle line:90% chairman of the audit committee. 00:00:42.700 --> 00:00:46.060 align:middle line:84% Next to him is Joanne Fintzen, who joined the board 00:00:46.060 --> 00:00:48.670 align:middle line:90% on the 3 of October 2022. 00:00:48.670 --> 00:00:52.540 align:middle line:84% To my left at the far end is Jill May, 00:00:52.540 --> 00:00:55.690 align:middle line:84% who is a senior independent director 00:00:55.690 --> 00:00:58.570 align:middle line:84% and the chair of nomination and management engagement 00:00:58.570 --> 00:00:59.950 align:middle line:90% committees. 00:00:59.950 --> 00:01:03.910 align:middle line:84% Next to her is Victoria Stewart, who 00:01:03.910 --> 00:01:07.150 align:middle line:84% is chair of the remuneration committee. 00:01:07.150 --> 00:01:10.420 align:middle line:84% Next to me is Emma Lamb, representing the company 00:01:10.420 --> 00:01:14.410 align:middle line:84% secretary on behalf of Meagan Funds Limited. 00:01:14.410 --> 00:01:18.370 align:middle line:84% We also have portfolio managers William Eden and Callum 00:01:18.370 --> 00:01:22.690 align:middle line:84% Abbott, who are sitting in the front row. 00:01:22.690 --> 00:01:25.150 align:middle line:84% Finally we have representatives of JP Morgan 00:01:25.150 --> 00:01:28.120 align:middle line:84% here, including Sam Elliott, a client director 00:01:28.120 --> 00:01:31.180 align:middle line:84% within JP Morgan investment trust department, 00:01:31.180 --> 00:01:33.850 align:middle line:84% and representatives of the company's broker, 00:01:33.850 --> 00:01:36.740 align:middle line:90% Numis, and the registrar. 00:01:36.740 --> 00:01:39.680 align:middle line:84% Now let me explain the format of today's meeting. 00:01:39.680 --> 00:01:42.770 align:middle line:84% We'll start, as always, with the presentation from William 00:01:42.770 --> 00:01:45.860 align:middle line:84% Meadon and Callum, after which shareholders 00:01:45.860 --> 00:01:49.200 align:middle line:84% will have an opportunity to ask questions. 00:01:49.200 --> 00:01:52.340 align:middle line:84% We will then deal with the formal business of the meeting 00:01:52.340 --> 00:01:54.530 align:middle line:84% as laid out in the notice of meeting 00:01:54.530 --> 00:01:59.650 align:middle line:84% on pages 92 and 93 of the annual report on accounts. 00:01:59.650 --> 00:02:02.530 align:middle line:84% In line with the practice of many public companies, 00:02:02.530 --> 00:02:05.410 align:middle line:84% voting for all resolutions during the annual general 00:02:05.410 --> 00:02:08.919 align:middle line:84% meeting will be conducted by way of a poll 00:02:08.919 --> 00:02:12.010 align:middle line:90% rather than on a show of hands. 00:02:12.010 --> 00:02:15.340 align:middle line:84% Calling a poll can aid the smooth running of the AGM, 00:02:15.340 --> 00:02:17.980 align:middle line:84% and is recommended by investor bodies 00:02:17.980 --> 00:02:21.370 align:middle line:84% since the process is deemed to give greater transparency 00:02:21.370 --> 00:02:23.230 align:middle line:90% to the voting figures. 00:02:23.230 --> 00:02:26.810 align:middle line:84% I will explain the poll procedure later in the meeting. 00:02:26.810 --> 00:02:29.570 align:middle line:84% Finally, we will adjourn for refreshments, 00:02:29.570 --> 00:02:31.340 align:middle line:84% which will give you an opportunity 00:02:31.340 --> 00:02:35.480 align:middle line:84% to meet the directors, the portfolio managers, and others 00:02:35.480 --> 00:02:38.460 align:middle line:90% on an informal basis. 00:02:38.460 --> 00:02:41.570 align:middle line:84% So firstly, let me hand over to William and Callum 00:02:41.570 --> 00:02:42.680 align:middle line:90% for the presentation. 00:02:42.680 --> 00:02:53.650 align:middle line:90% 00:02:53.650 --> 00:02:56.150 align:middle line:84% Well good afternoon, ladies and gentlemen. 00:02:56.150 --> 00:02:59.800 align:middle line:84% It is very nice to see so many familiar faces here again 00:02:59.800 --> 00:03:00.980 align:middle line:90% today. 00:03:00.980 --> 00:03:02.920 align:middle line:84% My name is William Meadon, and I've 00:03:02.920 --> 00:03:05.710 align:middle line:84% been the manager of the Claverhouse portfolio for you 00:03:05.710 --> 00:03:10.060 align:middle line:84% since March 2012, and I was joined some 00:03:10.060 --> 00:03:13.900 align:middle line:84% five years ago by Callum to co-manage 00:03:13.900 --> 00:03:16.270 align:middle line:90% the portfolio with me. 00:03:16.270 --> 00:03:19.210 align:middle line:84% Callum and I have a presentation of some 25 minutes 00:03:19.210 --> 00:03:22.660 align:middle line:84% or so, and afterwards will be very happy to take 00:03:22.660 --> 00:03:25.030 align:middle line:90% any questions you may have. 00:03:25.030 --> 00:03:29.530 align:middle line:84% We're going to look back at 2022 and the longer term 00:03:29.530 --> 00:03:32.530 align:middle line:84% record of the house and the events that have taken place. 00:03:32.530 --> 00:03:36.100 align:middle line:84% And 2022 was, of course, a particularly bleak year 00:03:36.100 --> 00:03:37.660 align:middle line:84% following the invasion of Ukraine 00:03:37.660 --> 00:03:40.840 align:middle line:84% by Russia at the end of February last year, 00:03:40.840 --> 00:03:45.070 align:middle line:84% the consequences of which, of course were still living with. 00:03:45.070 --> 00:03:50.020 align:middle line:84% But there was some good news to report in 2022, 00:03:50.020 --> 00:03:53.950 align:middle line:84% and that was that the board of the Claverhouse 00:03:53.950 --> 00:03:56.650 align:middle line:84% put up the dividend to you, the shareholders, 00:03:56.650 --> 00:04:00.940 align:middle line:90% for the 50th consecutive time. 00:04:00.940 --> 00:04:04.710 align:middle line:84% We think it's difficult surprisingly difficult to find 00:04:04.710 --> 00:04:07.210 align:middle line:84% out exactly what that dividend, that first dividend was back 00:04:07.210 --> 00:04:11.020 align:middle line:84% in 1972 that was increased change of currency 00:04:11.020 --> 00:04:14.900 align:middle line:84% from decimalization in the mid 70s share splits and so forth. 00:04:14.900 --> 00:04:16.450 align:middle line:84% But we think it was approximately 00:04:16.450 --> 00:04:18.800 align:middle line:90% a ha'penny of today's money. 00:04:18.800 --> 00:04:23.350 align:middle line:84% And that compares to the 33P dividend, which you all 00:04:23.350 --> 00:04:26.980 align:middle line:90% received for 2022. 00:04:26.980 --> 00:04:31.040 align:middle line:84% And we have a page here, which shows each individual year's 00:04:31.040 --> 00:04:31.540 align:middle line:90% dividend. 00:04:31.540 --> 00:04:33.140 align:middle line:84% And the takeaway from that, of course, 00:04:33.140 --> 00:04:34.870 align:middle line:90% is the power of compounding. 00:04:34.870 --> 00:04:38.350 align:middle line:84% If you increase every year just by a little bit, 00:04:38.350 --> 00:04:41.170 align:middle line:90% the chart goes to the parabolic. 00:04:41.170 --> 00:04:44.480 align:middle line:84% And we've listed some of the events in the last 50 years, 00:04:44.480 --> 00:04:48.040 align:middle line:84% and sadly, I was around for all this 50 years. 00:04:48.040 --> 00:04:49.630 align:middle line:90% I can remember all of them. 00:04:49.630 --> 00:04:51.580 align:middle line:84% My birth is sort of off the scale here, 00:04:51.580 --> 00:04:54.100 align:middle line:84% but as one of my younger colleagues pointed out. 00:04:54.100 --> 00:04:56.110 align:middle line:90% But we've lived through wars. 00:04:56.110 --> 00:04:58.480 align:middle line:84% We've lived through the Falklands War, the Gulf War 00:04:58.480 --> 00:05:01.570 align:middle line:84% and changed the prime minister, crashes of stock market. 00:05:01.570 --> 00:05:03.910 align:middle line:84% But looking back at the 70s in particular, 00:05:03.910 --> 00:05:07.930 align:middle line:84% it is uncanny, actually, how similar the key issues 00:05:07.930 --> 00:05:11.780 align:middle line:84% were then back in the 70s to the issues 00:05:11.780 --> 00:05:14.050 align:middle line:84% that we're all grappling with today. 00:05:14.050 --> 00:05:17.230 align:middle line:84% Inflation was a major problem back in the 70s. 00:05:17.230 --> 00:05:21.550 align:middle line:84% It peaked as we have here shown you are at 24%. 00:05:21.550 --> 00:05:24.550 align:middle line:84% So if you think inflation is bad now, really bad 00:05:24.550 --> 00:05:26.540 align:middle line:90% back in the 1970s. 00:05:26.540 --> 00:05:32.170 align:middle line:84% You had a weak Tory government under Ted Heath, if you recall, 00:05:32.170 --> 00:05:35.290 align:middle line:84% who was grappling with strikes and unions 00:05:35.290 --> 00:05:39.760 align:middle line:84% and some of the things that we're experiencing today. 00:05:39.760 --> 00:05:42.310 align:middle line:84% Europe was a major issue-- a lot of debate about 00:05:42.310 --> 00:05:46.120 align:middle line:84% whether we should join what was then the EC, the European 00:05:46.120 --> 00:05:50.710 align:middle line:84% Economic Community, which we joined 1st of January 73, 00:05:50.710 --> 00:05:52.960 align:middle line:90% I think it was. 00:05:52.960 --> 00:05:54.580 align:middle line:90% Russia was number one enemy-- 00:05:54.580 --> 00:05:57.067 align:middle line:84% Leonard Brezhnev, the head of the Soviet Union, 00:05:57.067 --> 00:05:58.150 align:middle line:90% causing a lot of problems. 00:05:58.150 --> 00:06:02.170 align:middle line:84% So, uncanny the similarities, but throughout it 00:06:02.170 --> 00:06:05.530 align:middle line:84% all against this very volatile backdrop, 00:06:05.530 --> 00:06:08.060 align:middle line:84% one of the few constants was the labor house dividend, 00:06:08.060 --> 00:06:11.590 align:middle line:84% which we hope you're pleased with, that we've given you 00:06:11.590 --> 00:06:14.530 align:middle line:84% that 50th consecutive dividend increase this year. 00:06:14.530 --> 00:06:16.420 align:middle line:84% And it is one of the three exciting things 00:06:16.420 --> 00:06:21.020 align:middle line:84% to shout about Claverhouse, the 50 consecutive dividend 00:06:21.020 --> 00:06:21.520 align:middle line:90% increase. 00:06:21.520 --> 00:06:24.430 align:middle line:84% It's the longest consecutive dividend 00:06:24.430 --> 00:06:26.470 align:middle line:84% increases of any investment trust 00:06:26.470 --> 00:06:29.620 align:middle line:84% invested or quoted on the London Stock Exchange, which is 00:06:29.620 --> 00:06:32.020 align:middle line:90% invested solely in UK equities. 00:06:32.020 --> 00:06:33.582 align:middle line:84% There are four or five other trusts 00:06:33.582 --> 00:06:35.290 align:middle line:84% that have a slightly longer track record, 00:06:35.290 --> 00:06:37.040 align:middle line:84% but they all have money invested overseas. 00:06:37.040 --> 00:06:39.550 align:middle line:84% So if you want UK equities, if you want income, 00:06:39.550 --> 00:06:41.950 align:middle line:84% Claverhouse has ticked both those boxes. 00:06:41.950 --> 00:06:44.590 align:middle line:84% We have a strong medium and long term performance record. 00:06:44.590 --> 00:06:46.910 align:middle line:84% I know you're all medium long term investors. 00:06:46.910 --> 00:06:48.910 align:middle line:84% I've seen you coming here for years after years. 00:06:48.910 --> 00:06:52.750 align:middle line:84% We appreciate your support and your patience and your time 00:06:52.750 --> 00:06:55.510 align:middle line:84% horizon, and I think that's particularly 00:06:55.510 --> 00:06:58.600 align:middle line:84% important in the current very volatile world 00:06:58.600 --> 00:07:01.030 align:middle line:84% that we live in at the moment, and we'll 00:07:01.030 --> 00:07:03.600 align:middle line:84% be going through that record again in a second. 00:07:03.600 --> 00:07:05.350 align:middle line:84% As I say, the third exciting thing-- and I 00:07:05.350 --> 00:07:08.950 align:middle line:84% think it is genuinely exciting, if that's 00:07:08.950 --> 00:07:12.190 align:middle line:84% how you define excitement-- is that we're invested wholly 00:07:12.190 --> 00:07:14.240 align:middle line:90% in the UK stock market. 00:07:14.240 --> 00:07:15.340 align:middle line:90% And I think it's just-- 00:07:15.340 --> 00:07:17.530 align:middle line:84% I think it's a really good place to be 00:07:17.530 --> 00:07:20.680 align:middle line:84% invested at the moment for reasons 00:07:20.680 --> 00:07:24.010 align:middle line:90% that we'll give you shortly. 00:07:24.010 --> 00:07:26.620 align:middle line:90% A bit more on the dividend then. 00:07:26.620 --> 00:07:29.890 align:middle line:84% If we go back here to 2008, and if you 00:07:29.890 --> 00:07:33.760 align:middle line:84% were having 100 pounds of income from Claverhouse, which 00:07:33.760 --> 00:07:37.700 align:middle line:84% is the yellow line, that income, that 100, will have gone, 00:07:37.700 --> 00:07:38.450 align:middle line:90% will have doubled. 00:07:38.450 --> 00:07:39.800 align:middle line:90% It'd be 201 now. 00:07:39.800 --> 00:07:41.990 align:middle line:84% That's the income you would be getting. 00:07:41.990 --> 00:07:44.870 align:middle line:84% Inflation over that period has gone up 44%. 00:07:44.870 --> 00:07:46.823 align:middle line:90% That's the blue line. 00:07:46.823 --> 00:07:48.490 align:middle line:84% What's really surprising here-- actually 00:07:48.490 --> 00:07:51.430 align:middle line:84% surprised me when it came out-- if you had an index 00:07:51.430 --> 00:07:56.080 align:middle line:84% fund in the UK stock market, the dividends you'd have had 00:07:56.080 --> 00:08:00.650 align:middle line:84% would now, would just be 29% higher. 00:08:00.650 --> 00:08:03.190 align:middle line:84% And as you can see, it's been a pretty volatile ride 00:08:03.190 --> 00:08:04.160 align:middle line:90% along the way as well. 00:08:04.160 --> 00:08:06.190 align:middle line:84% You've had years like 2008 where dividends 00:08:06.190 --> 00:08:07.270 align:middle line:90% were cut substantially. 00:08:07.270 --> 00:08:08.390 align:middle line:90% You've had better years. 00:08:08.390 --> 00:08:10.090 align:middle line:84% But it's been volatile, it's been bumpy, 00:08:10.090 --> 00:08:12.220 align:middle line:84% and you haven't ended up with so much at the end. 00:08:12.220 --> 00:08:16.280 align:middle line:84% So Claverhouse has given you much better dividends, 00:08:16.280 --> 00:08:17.860 align:middle line:90% and in a much smoother way. 00:08:17.860 --> 00:08:20.890 align:middle line:84% And on the right hand side, it's a bit technical-- 00:08:20.890 --> 00:08:24.160 align:middle line:84% this chart is basically showing you on the vertical axis 00:08:24.160 --> 00:08:26.230 align:middle line:90% dividend cover, i.e. 00:08:26.230 --> 00:08:28.870 align:middle line:84% the profits, the earnings, are those greater 00:08:28.870 --> 00:08:30.620 align:middle line:90% than the dividend paid out. 00:08:30.620 --> 00:08:32.409 align:middle line:84% And as you can see last year we're 00:08:32.409 --> 00:08:33.850 align:middle line:90% quite high up on that axis. 00:08:33.850 --> 00:08:36.070 align:middle line:90% We paid a cover dividend. 00:08:36.070 --> 00:08:38.620 align:middle line:84% And the horizontal axis going along the bottom 00:08:38.620 --> 00:08:39.580 align:middle line:90% is revenue reserves. 00:08:39.580 --> 00:08:41.740 align:middle line:84% As you know, one of the key strengths 00:08:41.740 --> 00:08:43.179 align:middle line:84% of investing in investment trusts 00:08:43.179 --> 00:08:46.960 align:middle line:84% is that boards such as ours can in very good times where money 00:08:46.960 --> 00:08:48.760 align:middle line:84% is plentiful, dividends are plentiful, 00:08:48.760 --> 00:08:52.450 align:middle line:84% take some of that money away for when the inevitable happens, 00:08:52.450 --> 00:08:54.370 align:middle line:90% and tougher times come along. 00:08:54.370 --> 00:08:56.740 align:middle line:84% And this board and its predecessors 00:08:56.740 --> 00:08:59.530 align:middle line:84% have managed I think that process very well, 00:08:59.530 --> 00:09:04.060 align:middle line:84% and I think deserve thanks for their prudent and canny 00:09:04.060 --> 00:09:06.340 align:middle line:90% management of dividend reserves. 00:09:06.340 --> 00:09:08.230 align:middle line:84% But those healthy reserves that we still 00:09:08.230 --> 00:09:11.920 align:middle line:84% have give us great confidence that we can keep those dividend 00:09:11.920 --> 00:09:13.130 align:middle line:90% increases going for you. 00:09:13.130 --> 00:09:18.280 align:middle line:84% So we have no intention of stopping at 50. 00:09:18.280 --> 00:09:19.990 align:middle line:84% In terms of performance, I say, I 00:09:19.990 --> 00:09:22.860 align:middle line:84% was appointed as your fund manager back in 2012. 00:09:22.860 --> 00:09:25.490 align:middle line:84% Callum joined me some five years ago. 00:09:25.490 --> 00:09:28.300 align:middle line:84% And here is the chart of total return for Claverhouse 00:09:28.300 --> 00:09:32.920 align:middle line:84% on the blue line, and you've had exactly 150% 00:09:32.920 --> 00:09:35.590 align:middle line:84% return over that period against the stock market, which 00:09:35.590 --> 00:09:37.100 align:middle line:90% has returned 96%. 00:09:37.100 --> 00:09:39.310 align:middle line:90% So 9.1% per annum. 00:09:39.310 --> 00:09:41.410 align:middle line:84% Yes, it's been volatile along the way, 00:09:41.410 --> 00:09:42.790 align:middle line:90% particularly in recent years. 00:09:42.790 --> 00:09:46.630 align:middle line:84% COVID, when economies closed down for some two years, 00:09:46.630 --> 00:09:49.120 align:middle line:84% in China's case three years, the Brexit referendum 00:09:49.120 --> 00:09:52.480 align:middle line:84% which wrong footed many people and of course, the events 00:09:52.480 --> 00:09:53.620 align:middle line:90% of February last year. 00:09:53.620 --> 00:09:56.380 align:middle line:84% But 9.1% return if you've been invested 00:09:56.380 --> 00:09:58.600 align:middle line:84% over that period, which I know many of you have, 00:09:58.600 --> 00:10:01.900 align:middle line:84% and that's substantially better than the UK stock market, which 00:10:01.900 --> 00:10:05.210 align:middle line:90% has returned 6.7%. 00:10:05.210 --> 00:10:09.990 align:middle line:84% 2022 was-- it was really easy to lose a lot of money 00:10:09.990 --> 00:10:12.630 align:middle line:84% in 2022 because of the invasion of Ukraine. 00:10:12.630 --> 00:10:14.522 align:middle line:84% The world started quite optimistic, 00:10:14.522 --> 00:10:16.230 align:middle line:84% growth seemed to be picking up, inflation 00:10:16.230 --> 00:10:17.355 align:middle line:90% seemed to be under control. 00:10:17.355 --> 00:10:19.680 align:middle line:84% Then February the 24th, as we all know, 00:10:19.680 --> 00:10:21.840 align:middle line:84% Putin invaded Ukraine, and that had 00:10:21.840 --> 00:10:25.320 align:middle line:84% major consequences for the world and for investors. 00:10:25.320 --> 00:10:27.930 align:middle line:84% The top yellow line-- the good news is the UK market 00:10:27.930 --> 00:10:29.910 align:middle line:90% was exactly the place to be. 00:10:29.910 --> 00:10:31.982 align:middle line:84% You didn't make-- you didn't lose any money. 00:10:31.982 --> 00:10:33.690 align:middle line:84% It was volatile, but if you were invested 00:10:33.690 --> 00:10:35.732 align:middle line:84% at the beginning of the year, you had pretty much 00:10:35.732 --> 00:10:36.940 align:middle line:90% the same money at the end. 00:10:36.940 --> 00:10:38.940 align:middle line:84% Claverhouse-- it wasn't one of our better years. 00:10:38.940 --> 00:10:40.830 align:middle line:84% We were wrongly positioned for the war 00:10:40.830 --> 00:10:43.620 align:middle line:84% we, like so many others, didn't anticipate, 00:10:43.620 --> 00:10:45.150 align:middle line:84% and we had to make a lot of changes 00:10:45.150 --> 00:10:48.307 align:middle line:84% in the portfolio, which Callum will discuss with you shortly. 00:10:48.307 --> 00:10:50.890 align:middle line:84% Thank goodness we did, and the second half was so much better. 00:10:50.890 --> 00:10:54.660 align:middle line:84% But you ended up with a total return of minus 5, 00:10:54.660 --> 00:10:58.060 align:middle line:84% which underperformed the index of flat. 00:10:58.060 --> 00:11:00.720 align:middle line:84% But look what happened in Europe. 00:11:00.720 --> 00:11:04.750 align:middle line:84% You lost 14% if you had an index fund there in local currency. 00:11:04.750 --> 00:11:07.222 align:middle line:84% The US market down 18% in local currency. 00:11:07.222 --> 00:11:08.680 align:middle line:84% I haven't put the NASDAQ down here, 00:11:08.680 --> 00:11:11.550 align:middle line:84% which is the tech index which so many people were invested in 00:11:11.550 --> 00:11:14.820 align:middle line:90% down some 25 to 26%. 00:11:14.820 --> 00:11:16.995 align:middle line:84% I mentioned Bitcoin and some of the things 00:11:16.995 --> 00:11:18.870 align:middle line:84% that were so fashionable eighteen months ago. 00:11:18.870 --> 00:11:22.900 align:middle line:84% I think you lost 50, 60% of your money in cryptocurrencies. 00:11:22.900 --> 00:11:24.630 align:middle line:90% So an easy year to lose money. 00:11:24.630 --> 00:11:27.570 align:middle line:84% We're disappointed that you are down 5%, 00:11:27.570 --> 00:11:29.800 align:middle line:90% and we're shareholders as well. 00:11:29.800 --> 00:11:32.610 align:middle line:84% But again, what could have happened if you 00:11:32.610 --> 00:11:34.440 align:middle line:90% had your money elsewhere? 00:11:34.440 --> 00:11:36.420 align:middle line:84% We don't think that's too bad a result, 00:11:36.420 --> 00:11:39.490 align:middle line:84% and markets have bounced a bit since the year end. 00:11:39.490 --> 00:11:42.830 align:middle line:84% But even if you were invested within the UK, 00:11:42.830 --> 00:11:45.770 align:middle line:84% there weren't many outperformers. 00:11:45.770 --> 00:11:49.250 align:middle line:84% Only 23% of stocks in the UK outperformed last year. 00:11:49.250 --> 00:11:50.670 align:middle line:90% There was a very narrow cohort. 00:11:50.670 --> 00:11:54.080 align:middle line:84% The market went very, very risk averse, understandably, 00:11:54.080 --> 00:11:56.870 align:middle line:84% after the events of February, and the market took the view 00:11:56.870 --> 00:11:59.450 align:middle line:84% that only a few companies were well placed to deal with this. 00:11:59.450 --> 00:12:01.010 align:middle line:84% Those companies that had profits that 00:12:01.010 --> 00:12:06.960 align:middle line:84% didn't depend upon the economy and could cope with inflation 00:12:06.960 --> 00:12:08.730 align:middle line:90% that was coming down the line. 00:12:08.730 --> 00:12:11.210 align:middle line:84% So the tobacco stocks, the pharmaceutical stocks, 00:12:11.210 --> 00:12:13.640 align:middle line:84% the utility stocks, and we had most of those, 00:12:13.640 --> 00:12:14.960 align:middle line:90% as Callum will show. 00:12:14.960 --> 00:12:18.170 align:middle line:84% But in a risk controlled portfolio like Claverhouse, 00:12:18.170 --> 00:12:20.810 align:middle line:84% we think it's right not to have all your money in just 00:12:20.810 --> 00:12:21.470 align:middle line:90% a few stocks. 00:12:21.470 --> 00:12:23.930 align:middle line:84% We run a 60 to 80 stock portfolio for you. 00:12:23.930 --> 00:12:26.130 align:middle line:90% It's a diversified portfolio. 00:12:26.130 --> 00:12:27.830 align:middle line:84% And you can see how painful it was 00:12:27.830 --> 00:12:29.300 align:middle line:84% if you had any if you were anything 00:12:29.300 --> 00:12:30.950 align:middle line:90% outside that top cohort. 00:12:30.950 --> 00:12:33.590 align:middle line:84% 77% of stocks underperformed, some 00:12:33.590 --> 00:12:36.320 align:middle line:84% of them markedly so, and not because they did badly. 00:12:36.320 --> 00:12:38.540 align:middle line:84% It was just a D rating from investors 00:12:38.540 --> 00:12:40.850 align:middle line:84% saying there's a really tough world coming, 00:12:40.850 --> 00:12:42.140 align:middle line:90% there's a storm brewing-- 00:12:42.140 --> 00:12:43.710 align:middle line:90% quite right. 00:12:43.710 --> 00:12:45.590 align:middle line:84% Let's mark those shares down, which we just 00:12:45.590 --> 00:12:47.450 align:middle line:90% don't think they can cope. 00:12:47.450 --> 00:12:50.240 align:middle line:90% So difficult-- really difficult. 00:12:50.240 --> 00:12:52.040 align:middle line:90% There's our track record. 00:12:52.040 --> 00:12:56.520 align:middle line:84% So not our best year-- down 5.4% in terms of share price, 00:12:56.520 --> 00:12:59.450 align:middle line:84% which has hit the 3 numbers, the five year numbers on share 00:12:59.450 --> 00:13:00.320 align:middle line:90% price still ahead. 00:13:00.320 --> 00:13:03.840 align:middle line:84% I know many of you who have been investors for 10 years 00:13:03.840 --> 00:13:08.120 align:middle line:84% but with 2.4% per annum ahead over the 10 year period, 00:13:08.120 --> 00:13:11.270 align:middle line:84% and there's a pick up in the most recent numbers-- 00:13:11.270 --> 00:13:14.507 align:middle line:84% bring you right up to date for first start of this year. 00:13:14.507 --> 00:13:15.965 align:middle line:84% The UK market has rallied slightly. 00:13:15.965 --> 00:13:19.930 align:middle line:84% The overseas markets have been better. 00:13:19.930 --> 00:13:23.770 align:middle line:84% Our shares actually are flat, roughly year to date, 00:13:23.770 --> 00:13:27.400 align:middle line:84% and the main reason for that is that the discount has gone out 00:13:27.400 --> 00:13:29.530 align:middle line:90% to a discount from a premium. 00:13:29.530 --> 00:13:31.340 align:middle line:84% We can go into the reasons for that later, 00:13:31.340 --> 00:13:33.220 align:middle line:84% but there was a big placing of Claverhouse 00:13:33.220 --> 00:13:38.980 align:middle line:84% in the market from the merger of two investment trusts. 00:13:38.980 --> 00:13:41.620 align:middle line:84% So in a short outcome, I'll give you our investment outlook, 00:13:41.620 --> 00:13:44.020 align:middle line:84% but just before I do that, I'll hand over to Callum 00:13:44.020 --> 00:13:52.110 align:middle line:84% to give you some more detail on the year of 2022. 00:13:52.110 --> 00:13:54.130 align:middle line:84% Thanks Will, and good afternoon, everyone. 00:13:54.130 --> 00:13:55.980 align:middle line:84% It's great to see some familiar faces, 00:13:55.980 --> 00:14:01.005 align:middle line:84% and looking forward to catching up over some food shortly. 00:14:01.005 --> 00:14:02.880 align:middle line:84% I'm going to take you through our performance 00:14:02.880 --> 00:14:06.210 align:middle line:84% attribution for last year, and as well, discuss 00:14:06.210 --> 00:14:09.600 align:middle line:84% a bit about our process, a reminder there, and then 00:14:09.600 --> 00:14:12.420 align:middle line:90% how we're positioned currently. 00:14:12.420 --> 00:14:14.880 align:middle line:84% So starting with the performance attribution. 00:14:14.880 --> 00:14:17.490 align:middle line:84% As Will said, it was an incredibly narrow market 00:14:17.490 --> 00:14:21.183 align:middle line:84% last year as investors fled to just a few stocks 00:14:21.183 --> 00:14:23.100 align:middle line:84% that they thought were well positioned to cope 00:14:23.100 --> 00:14:25.060 align:middle line:90% with the market environment. 00:14:25.060 --> 00:14:27.780 align:middle line:84% The good news was we had significant capital 00:14:27.780 --> 00:14:29.790 align:middle line:84% in a lot of those stocks, and you 00:14:29.790 --> 00:14:34.380 align:middle line:84% can see that the likes of Shell, BP, Glencore and AstraZeneca 00:14:34.380 --> 00:14:37.380 align:middle line:84% were big active positions there that did generate 00:14:37.380 --> 00:14:39.420 align:middle line:90% a lot of positive alpha. 00:14:39.420 --> 00:14:42.790 align:middle line:84% However, as Will alluded to earlier, 00:14:42.790 --> 00:14:45.880 align:middle line:84% there was a lot of pain behind the benchmark. 00:14:45.880 --> 00:14:48.190 align:middle line:84% And so while the benchmark was flat, 00:14:48.190 --> 00:14:50.490 align:middle line:84% the vast majority of stocks underperformed, 00:14:50.490 --> 00:14:52.830 align:middle line:84% and a lot of them underperformed that benchmark quite 00:14:52.830 --> 00:14:54.270 align:middle line:90% materially. 00:14:54.270 --> 00:14:56.220 align:middle line:84% And as Will said, it wasn't really driven 00:14:56.220 --> 00:14:59.550 align:middle line:84% by earnings downgrades or profit warnings from companies. 00:14:59.550 --> 00:15:01.590 align:middle line:84% It was more that investors wanted 00:15:01.590 --> 00:15:04.470 align:middle line:84% to focus only on a few stocks, and everything else 00:15:04.470 --> 00:15:07.080 align:middle line:90% got D rated by the side. 00:15:07.080 --> 00:15:09.630 align:middle line:84% And so as we look at our top detractors, 00:15:09.630 --> 00:15:11.370 align:middle line:84% there are a lot of names we still like. 00:15:11.370 --> 00:15:13.920 align:middle line:84% Intermediate Capital Group, Watches of Switzerland, 00:15:13.920 --> 00:15:14.700 align:middle line:90% Dunelm-- 00:15:14.700 --> 00:15:17.310 align:middle line:84% we think these are long time winners, 00:15:17.310 --> 00:15:19.680 align:middle line:84% but last year fell significantly, 00:15:19.680 --> 00:15:23.250 align:middle line:84% and these kind of positions cause us quite a lot of pain. 00:15:23.250 --> 00:15:26.640 align:middle line:84% Unfortunately, there is a longer tail of these kind of stocks 00:15:26.640 --> 00:15:28.440 align:middle line:84% than there were of the winners that you 00:15:28.440 --> 00:15:32.068 align:middle line:84% see in those top contributors, and that ultimately drove 00:15:32.068 --> 00:15:33.360 align:middle line:90% the underperformance last year. 00:15:33.360 --> 00:15:37.170 align:middle line:90% 00:15:37.170 --> 00:15:40.410 align:middle line:84% And I'm happy to go into more detail process in the Q&A 00:15:40.410 --> 00:15:42.250 align:middle line:90% or over lunch. 00:15:42.250 --> 00:15:44.730 align:middle line:84% So just a reminder on our process. 00:15:44.730 --> 00:15:49.600 align:middle line:84% We build a portfolio that has both value and growth. 00:15:49.600 --> 00:15:52.255 align:middle line:84% And so what you're getting there is a core exposure. 00:15:52.255 --> 00:15:54.630 align:middle line:84% You're getting exposure to cheap stocks as well as growth 00:15:54.630 --> 00:15:57.180 align:middle line:84% stocks, and we think there's some clear benefits 00:15:57.180 --> 00:15:58.750 align:middle line:90% to this approach. 00:15:58.750 --> 00:16:01.680 align:middle line:84% First of all, it gives you natural risk diversification, 00:16:01.680 --> 00:16:04.960 align:middle line:84% because typically value and growth work at different times. 00:16:04.960 --> 00:16:06.480 align:middle line:84% So you have a diversified portfolio 00:16:06.480 --> 00:16:08.470 align:middle line:90% from a risk perspective. 00:16:08.470 --> 00:16:11.220 align:middle line:84% So you don't have all your eggs in just one of those baskets, 00:16:11.220 --> 00:16:14.310 align:middle line:84% and so if you call value wrong or you call growth wrong, 00:16:14.310 --> 00:16:16.710 align:middle line:84% it can be very painful if your portfolio is only 00:16:16.710 --> 00:16:19.770 align:middle line:84% exposed to just one of those approaches. 00:16:19.770 --> 00:16:22.890 align:middle line:84% It also means that we had the broadest opportunity set 00:16:22.890 --> 00:16:24.930 align:middle line:84% as we can select the best value and growth 00:16:24.930 --> 00:16:27.830 align:middle line:90% stocks within the market. 00:16:27.830 --> 00:16:30.890 align:middle line:84% In terms of those specific buckets, 00:16:30.890 --> 00:16:33.020 align:middle line:84% I won't go into each individual stock, 00:16:33.020 --> 00:16:34.970 align:middle line:84% but if you look at our growth names, 00:16:34.970 --> 00:16:37.010 align:middle line:84% it tends to be structural winners. 00:16:37.010 --> 00:16:39.170 align:middle line:84% They tend to be market share gainers, perhaps 00:16:39.170 --> 00:16:41.090 align:middle line:84% where a company can use its scale 00:16:41.090 --> 00:16:44.390 align:middle line:84% or technological advantage or operational excellence 00:16:44.390 --> 00:16:47.750 align:middle line:84% to win market share against weaker competitors, 00:16:47.750 --> 00:16:51.030 align:middle line:84% or it's companies that have got a lot of innovation-- 00:16:51.030 --> 00:16:54.720 align:middle line:84% renewables or pharmaceuticals developing life changing 00:16:54.720 --> 00:16:57.090 align:middle line:84% drugs like AstraZeneca does, which we believe 00:16:57.090 --> 00:17:00.330 align:middle line:84% is going to drive a lot of growth into the future. 00:17:00.330 --> 00:17:02.280 align:middle line:84% In the value side of the portfolio, 00:17:02.280 --> 00:17:05.250 align:middle line:84% we see significant value in the UK. 00:17:05.250 --> 00:17:07.109 align:middle line:84% It is clearly one of the cheapest, 00:17:07.109 --> 00:17:10.115 align:middle line:84% if not the cheapest, developed market in the world, 00:17:10.115 --> 00:17:11.490 align:middle line:84% and a lot of the stocks within it 00:17:11.490 --> 00:17:13.680 align:middle line:84% are not only cheap by their history, 00:17:13.680 --> 00:17:16.380 align:middle line:84% but they let remarkable value against peers, 00:17:16.380 --> 00:17:19.829 align:middle line:84% and Will will pick that up later in the presentation. 00:17:19.829 --> 00:17:21.930 align:middle line:84% But we think for patient investors 00:17:21.930 --> 00:17:25.510 align:middle line:84% that value will eventually be realized, and in the meantime, 00:17:25.510 --> 00:17:27.869 align:middle line:84% we're getting paid significant dividend income 00:17:27.869 --> 00:17:29.310 align:middle line:90% to hold those companies. 00:17:29.310 --> 00:17:33.610 align:middle line:90% 00:17:33.610 --> 00:17:36.210 align:middle line:84% So just dive into two of our biggest holdings. 00:17:36.210 --> 00:17:38.190 align:middle line:90% Firstly, we have 3i Group. 00:17:38.190 --> 00:17:40.920 align:middle line:84% This is a private equity company whose biggest 00:17:40.920 --> 00:17:43.973 align:middle line:84% holding is a discount retailer called action. 00:17:43.973 --> 00:17:45.390 align:middle line:84% Unfortunately, they haven't rolled 00:17:45.390 --> 00:17:47.700 align:middle line:84% out any stores in the UK, but they're 00:17:47.700 --> 00:17:51.140 align:middle line:84% rolling out across Europe a very rapid rate. 00:17:51.140 --> 00:17:53.010 align:middle line:84% There's a lot of white space ahead 00:17:53.010 --> 00:17:58.420 align:middle line:84% of them, which means that growth opportunity has long duration, 00:17:58.420 --> 00:18:00.100 align:middle line:84% The rest of the prize portfolio is 00:18:00.100 --> 00:18:05.470 align:middle line:84% in a variety of diverse sectors with different end markets, 00:18:05.470 --> 00:18:08.380 align:middle line:84% and they've got a great track record of picking winners. 00:18:08.380 --> 00:18:10.750 align:middle line:84% And you can see in that top left hand 00:18:10.750 --> 00:18:14.320 align:middle line:84% chart which shows NAV per share, which is effectively 00:18:14.320 --> 00:18:16.880 align:middle line:84% how much value they've created over time. 00:18:16.880 --> 00:18:20.560 align:middle line:84% And since 2012, they've increased the value 00:18:20.560 --> 00:18:22.610 align:middle line:90% of their portfolio by 5 times. 00:18:22.610 --> 00:18:24.790 align:middle line:84% So really fantastic track record. 00:18:24.790 --> 00:18:27.670 align:middle line:84% And yet if you look at that top right hand chart, 00:18:27.670 --> 00:18:29.950 align:middle line:84% that shows its price to book ratio, 00:18:29.950 --> 00:18:33.820 align:middle line:84% an indication of the value of the shares. 00:18:33.820 --> 00:18:36.460 align:middle line:84% And clearly they don't look particularly highly 00:18:36.460 --> 00:18:39.520 align:middle line:84% rated compared to history, despite the fantastic track 00:18:39.520 --> 00:18:41.090 align:middle line:90% record and execution. 00:18:41.090 --> 00:18:42.820 align:middle line:84% So we think this is a real long term 00:18:42.820 --> 00:18:45.550 align:middle line:84% winner with a lot more growth to go that's trading 00:18:45.550 --> 00:18:47.380 align:middle line:90% at a very attractive valuation. 00:18:47.380 --> 00:18:50.530 align:middle line:90% 00:18:50.530 --> 00:18:53.500 align:middle line:84% On the next slide, you can see SSE. 00:18:53.500 --> 00:18:55.480 align:middle line:90% SSE is a utility company. 00:18:55.480 --> 00:18:57.680 align:middle line:84% It's got three main business parts to it. 00:18:57.680 --> 00:19:00.280 align:middle line:84% First is its networks business, which is effectively 00:19:00.280 --> 00:19:02.110 align:middle line:90% power infrastructure. 00:19:02.110 --> 00:19:05.500 align:middle line:84% This is a highly regulated steady business 00:19:05.500 --> 00:19:08.680 align:middle line:84% that gives some ballast to the SSE's earnings. 00:19:08.680 --> 00:19:12.260 align:middle line:84% Next largest bit is their wholesale business, 00:19:12.260 --> 00:19:14.440 align:middle line:84% which is effectively power generation, 00:19:14.440 --> 00:19:17.530 align:middle line:84% and has been trading very well, mostly 00:19:17.530 --> 00:19:20.920 align:middle line:84% related to the high energy prices 00:19:20.920 --> 00:19:22.612 align:middle line:90% that we're all familiar with. 00:19:22.612 --> 00:19:24.820 align:middle line:84% And then finally, and probably the most exciting part 00:19:24.820 --> 00:19:27.010 align:middle line:84% of the business, it's renewables. 00:19:27.010 --> 00:19:30.340 align:middle line:84% It's got large exposure to offshore wind 00:19:30.340 --> 00:19:35.330 align:middle line:84% but is looking to triple that in the years up to 2030. 00:19:35.330 --> 00:19:37.960 align:middle line:84% So we see significant growth opportunity 00:19:37.960 --> 00:19:41.540 align:middle line:84% as it builds up its renewables business. 00:19:41.540 --> 00:19:44.150 align:middle line:84% But once again, interesting about SSE 00:19:44.150 --> 00:19:47.990 align:middle line:84% is that if you look at that top right hand chart, that's 00:19:47.990 --> 00:19:50.090 align:middle line:84% its price earnings ratio, and you 00:19:50.090 --> 00:19:52.010 align:middle line:84% can see that over the last five years 00:19:52.010 --> 00:19:54.980 align:middle line:84% it's really right towards the bottom of the range. 00:19:54.980 --> 00:19:58.790 align:middle line:84% Yet we think the opportunity is that for SSE is as attractive 00:19:58.790 --> 00:20:00.120 align:middle line:90% as it's really ever been. 00:20:00.120 --> 00:20:03.050 align:middle line:84% And so we believe it should be trading much higher multiple 00:20:03.050 --> 00:20:03.725 align:middle line:90% than it is. 00:20:03.725 --> 00:20:07.685 align:middle line:90% 00:20:07.685 --> 00:20:10.400 align:middle line:84% This is a bit of a busy slide, but I just 00:20:10.400 --> 00:20:13.310 align:middle line:84% wanted to flag a few of the portfolio characteristics 00:20:13.310 --> 00:20:14.250 align:middle line:90% at the moment. 00:20:14.250 --> 00:20:16.070 align:middle line:84% And so the three key points, really, 00:20:16.070 --> 00:20:18.870 align:middle line:84% are our level of gearing is currently about 3%, 00:20:18.870 --> 00:20:20.870 align:middle line:84% but in the chart-- this is at the end of March-- 00:20:20.870 --> 00:20:23.075 align:middle line:90% you can see it's 1 1/2 %. 00:20:23.075 --> 00:20:25.850 align:middle line:84% So we're sailing quite close to the shore 00:20:25.850 --> 00:20:27.890 align:middle line:84% from a gearing perspective, reflecting 00:20:27.890 --> 00:20:29.540 align:middle line:84% how challenging the macro environment 00:20:29.540 --> 00:20:32.360 align:middle line:84% is, although we do see a lot of opportunities 00:20:32.360 --> 00:20:34.440 align:middle line:90% within the market. 00:20:34.440 --> 00:20:38.130 align:middle line:84% Secondly, if you look at that right hand graph, 00:20:38.130 --> 00:20:41.810 align:middle line:84% you can see that we're leaning into the FTSE 100, 00:20:41.810 --> 00:20:43.730 align:middle line:84% and that's where we see the most value. 00:20:43.730 --> 00:20:46.820 align:middle line:84% And we see a lot of robust cash generative businesses 00:20:46.820 --> 00:20:48.620 align:middle line:84% that we believe are well positioned 00:20:48.620 --> 00:20:51.793 align:middle line:84% to deal with a challenging macro environment. 00:20:51.793 --> 00:20:53.960 align:middle line:84% And finally, if you look at the star characteristics 00:20:53.960 --> 00:20:55.922 align:middle line:84% box in the bottom left, you can see 00:20:55.922 --> 00:20:58.130 align:middle line:84% that the portfolio is cheaper than the market, better 00:20:58.130 --> 00:21:00.305 align:middle line:84% quality, and better earnings revisions, 00:21:00.305 --> 00:21:03.410 align:middle line:84% and we think over the long term that's 00:21:03.410 --> 00:21:05.750 align:middle line:84% exactly what you want your portfolio to do, 00:21:05.750 --> 00:21:07.520 align:middle line:90% and that will generate value. 00:21:07.520 --> 00:21:11.910 align:middle line:90% 00:21:11.910 --> 00:21:16.050 align:middle line:90% Also, our sector positioning-- 00:21:16.050 --> 00:21:19.140 align:middle line:84% I'm going to dive too deeply into any individual sector. 00:21:19.140 --> 00:21:22.500 align:middle line:84% Again, I'd be very happy to take any questions on it later. 00:21:22.500 --> 00:21:24.900 align:middle line:84% But you'll see there's a mixture of both value and growth 00:21:24.900 --> 00:21:25.680 align:middle line:90% sectors. 00:21:25.680 --> 00:21:27.940 align:middle line:84% It's quite diversified, and again, 00:21:27.940 --> 00:21:30.210 align:middle line:84% that reflects that barbell approach, 00:21:30.210 --> 00:21:32.850 align:middle line:84% while sector positioning is ultimately driven by the stock 00:21:32.850 --> 00:21:34.740 align:middle line:90% opportunities we see. 00:21:34.740 --> 00:21:38.640 align:middle line:84% And so really, it's just an outcome of our stock picks, 00:21:38.640 --> 00:21:40.590 align:middle line:84% but we think this is a portfolio that's 00:21:40.590 --> 00:21:43.830 align:middle line:84% built well positioned to deal with a challenging macro 00:21:43.830 --> 00:21:44.977 align:middle line:90% environment. 00:21:44.977 --> 00:21:48.640 align:middle line:90% 00:21:48.640 --> 00:21:51.180 align:middle line:84% And then, on to the portfolio positions. 00:21:51.180 --> 00:21:55.800 align:middle line:84% Again, I won't dive too deep into any one stock, but if-- 00:21:55.800 --> 00:21:58.500 align:middle line:84% I'd be very happy to take any questions later-- 00:21:58.500 --> 00:22:00.300 align:middle line:84% but it's a highly diversified portfolio 00:22:00.300 --> 00:22:03.150 align:middle line:84% in terms of both value and growth. 00:22:03.150 --> 00:22:07.410 align:middle line:84% And we are seeing significant opportunities to deploy capital 00:22:07.410 --> 00:22:10.050 align:middle line:84% whilst being conscious of how challenging the macro 00:22:10.050 --> 00:22:12.170 align:middle line:90% environment is. 00:22:12.170 --> 00:22:15.380 align:middle line:84% So I'll leave it there and pulse back to Will to take you 00:22:15.380 --> 00:22:17.910 align:middle line:90% through the outlook. 00:22:17.910 --> 00:22:18.410 align:middle line:90% Thanks. 00:22:18.410 --> 00:22:22.340 align:middle line:90% 00:22:22.340 --> 00:22:26.450 align:middle line:84% So the economic and stock market outlook. 00:22:26.450 --> 00:22:29.540 align:middle line:84% I preface everything I'm about to say with, 00:22:29.540 --> 00:22:32.510 align:middle line:84% it's much more difficult than usual 00:22:32.510 --> 00:22:34.970 align:middle line:84% to say anything with any high degree of conviction, 00:22:34.970 --> 00:22:38.840 align:middle line:84% given the backdrop of Ukraine Russia, which 00:22:38.840 --> 00:22:42.350 align:middle line:84% is having many serious consequences which 00:22:42.350 --> 00:22:45.560 align:middle line:84% the authorities and individuals are struggling to get to grips 00:22:45.560 --> 00:22:46.100 align:middle line:90% with. 00:22:46.100 --> 00:22:48.020 align:middle line:84% And one of those, of course, is inflation, 00:22:48.020 --> 00:22:50.150 align:middle line:84% and we've got something here called our inflation 00:22:50.150 --> 00:22:53.300 align:middle line:84% heatmap, which basically-- when it's dark red, 00:22:53.300 --> 00:22:56.870 align:middle line:84% inflation is sort of up towards the double digits, 00:22:56.870 --> 00:22:59.990 align:middle line:84% and when it's blue, it was very low inflation, 00:22:59.990 --> 00:23:02.700 align:middle line:84% or sometimes deflation-- prices going down. 00:23:02.700 --> 00:23:06.860 align:middle line:84% And you can see how over the last just two years, 00:23:06.860 --> 00:23:10.370 align:middle line:84% the inflation backdrop has changed markedly. 00:23:10.370 --> 00:23:14.240 align:middle line:84% And the UK does seem to have a particular problem. 00:23:14.240 --> 00:23:16.280 align:middle line:84% It's the only country in the G7 still 00:23:16.280 --> 00:23:19.220 align:middle line:90% to have double digit inflation. 00:23:19.220 --> 00:23:21.860 align:middle line:84% The latest print for March was 10.1. 00:23:21.860 --> 00:23:25.370 align:middle line:84% And this is important because it dictates what 00:23:25.370 --> 00:23:26.702 align:middle line:90% interest rates are going to be. 00:23:26.702 --> 00:23:28.160 align:middle line:84% It dictates how well off people are 00:23:28.160 --> 00:23:30.900 align:middle line:84% going to be, can we get wage rises to match inflation. 00:23:30.900 --> 00:23:34.700 align:middle line:84% So this is what one of the main reasons why 00:23:34.700 --> 00:23:38.810 align:middle line:84% it's so difficult to make any firm predictions because quite 00:23:38.810 --> 00:23:42.470 align:middle line:84% clearly inflation isn't anywhere near down 00:23:42.470 --> 00:23:44.510 align:middle line:90% to target levels in the UK. 00:23:44.510 --> 00:23:46.880 align:middle line:84% The target is 2% We're currently 10.1. 00:23:46.880 --> 00:23:51.890 align:middle line:90% 00:23:51.890 --> 00:23:52.910 align:middle line:90% That's sort of known. 00:23:52.910 --> 00:23:54.218 align:middle line:90% It's in the newspapers. 00:23:54.218 --> 00:23:55.010 align:middle line:90% I've just told you. 00:23:55.010 --> 00:23:57.470 align:middle line:84% It isn't it isn't a well kept secret 00:23:57.470 --> 00:23:58.880 align:middle line:90% that inflation's a problem. 00:23:58.880 --> 00:24:01.520 align:middle line:90% Of course it's bad news. 00:24:01.520 --> 00:24:04.010 align:middle line:84% The UK has a particular problem, but what is 00:24:04.010 --> 00:24:05.780 align:middle line:90% in stock market prices already? 00:24:05.780 --> 00:24:09.320 align:middle line:84% And there's a chart here of the rating of the UK 00:24:09.320 --> 00:24:12.160 align:middle line:90% market against world market. 00:24:12.160 --> 00:24:15.440 align:middle line:84% So when the line is high, people have high expectations 00:24:15.440 --> 00:24:19.700 align:middle line:84% for the UK and you pay a lot for the UK stock market. 00:24:19.700 --> 00:24:22.610 align:middle line:84% And when it's low as it is now, you're 00:24:22.610 --> 00:24:24.470 align:middle line:84% getting the UK stock market on the cheap 00:24:24.470 --> 00:24:26.663 align:middle line:90% compared to overseas markets. 00:24:26.663 --> 00:24:28.580 align:middle line:84% And I talked to you earlier about the problems 00:24:28.580 --> 00:24:33.420 align:middle line:84% in the 1970s, which were far more acute than they are now. 00:24:33.420 --> 00:24:36.800 align:middle line:84% But the rating-- the amount you're paying for UK share-- 00:24:36.800 --> 00:24:40.760 align:middle line:84% is very similar to those very bleak times of the mid 70s 00:24:40.760 --> 00:24:43.490 align:middle line:84% when inflation was 24% and Denis Healey 00:24:43.490 --> 00:24:45.350 align:middle line:84% was going to the IMF for a bailout. 00:24:45.350 --> 00:24:49.340 align:middle line:84% So as ever, investors have to try and work out firstly 00:24:49.340 --> 00:24:51.980 align:middle line:84% what's happening in the world, but secondly, how much of that 00:24:51.980 --> 00:24:55.100 align:middle line:84% is known and how much is in prices already. 00:24:55.100 --> 00:24:57.395 align:middle line:84% And very often you make money in the stock market 00:24:57.395 --> 00:24:59.270 align:middle line:84% your best money when things are really bleak, 00:24:59.270 --> 00:25:02.300 align:middle line:84% because the bad news has been over discounted. 00:25:02.300 --> 00:25:04.280 align:middle line:84% So in terms of plain probabilities, 00:25:04.280 --> 00:25:08.420 align:middle line:84% by being in the UK, in terms of the price you're paying, 00:25:08.420 --> 00:25:10.880 align:middle line:84% it looks like the probabilities-- 00:25:10.880 --> 00:25:12.680 align:middle line:84% the odds are on your side at the moment. 00:25:12.680 --> 00:25:15.710 align:middle line:84% I give you three just big stocks here, all 00:25:15.710 --> 00:25:17.240 align:middle line:84% FTSE stocks-- three stocks, which 00:25:17.240 --> 00:25:20.000 align:middle line:84% play the house owns in size, and it's just 00:25:20.000 --> 00:25:23.630 align:middle line:84% comparing their rating, how expensive or cheap they are. 00:25:23.630 --> 00:25:25.640 align:middle line:84% The UK ones are the blue ones compared 00:25:25.640 --> 00:25:28.475 align:middle line:84% to a very similar company of theirs in their peer 00:25:28.475 --> 00:25:29.600 align:middle line:90% group in the United States. 00:25:29.600 --> 00:25:33.140 align:middle line:84% So on the left hand side, Shell, an oil company, 00:25:33.140 --> 00:25:36.050 align:middle line:84% very similar to ExxonMobil in the States. 00:25:36.050 --> 00:25:37.850 align:middle line:84% Oil companies do pretty similar things. 00:25:37.850 --> 00:25:39.105 align:middle line:90% They drill for oil. 00:25:39.105 --> 00:25:41.480 align:middle line:84% They hopefully get it, they bring it out, they refine it, 00:25:41.480 --> 00:25:44.460 align:middle line:84% and they sell it at the global market price. 00:25:44.460 --> 00:25:47.930 align:middle line:84% Now I don't know ExxonMobil as well as I know Shell, 00:25:47.930 --> 00:25:50.780 align:middle line:84% but I'd be surprised if it was 40 odd better at what 00:25:50.780 --> 00:25:52.820 align:middle line:90% it does than Shell is. 00:25:52.820 --> 00:25:58.070 align:middle line:84% Diageo Brown-Forman-- Diageo, purveyor of-- 00:25:58.070 --> 00:26:00.830 align:middle line:84% perhaps some of you know Johnnie Walker whiskey, Guinness, 00:26:00.830 --> 00:26:05.090 align:middle line:84% which is good for you, as against Brown-Forman, 00:26:05.090 --> 00:26:05.810 align:middle line:90% Jack Daniel's. 00:26:05.810 --> 00:26:07.697 align:middle line:84% Now Jack Daniel's Johnnie Walker. 00:26:07.697 --> 00:26:08.780 align:middle line:90% I'm not a whiskey drinker. 00:26:08.780 --> 00:26:11.420 align:middle line:84% There maybe not-- there may be a lot to choose between them. 00:26:11.420 --> 00:26:14.600 align:middle line:84% But the stock market is saying that Diageo 00:26:14.600 --> 00:26:18.710 align:middle line:90% deserves a 24% discount. 00:26:18.710 --> 00:26:22.190 align:middle line:84% Tobacco companies-- British tobacco versus Philip Morris. 00:26:22.190 --> 00:26:24.530 align:middle line:84% Tobacco companies really are very similar, 00:26:24.530 --> 00:26:27.210 align:middle line:84% and yet look at the discount-- more than 50%, 00:26:27.210 --> 00:26:30.020 align:middle line:84% which British American Tobacco is trade to Philip Morris. 00:26:30.020 --> 00:26:32.270 align:middle line:84% Now of course, we can talk about this over questions-- 00:26:32.270 --> 00:26:35.390 align:middle line:84% this is why some UK companies are saying we're 00:26:35.390 --> 00:26:36.660 align:middle line:90% a bit fed up with our rating. 00:26:36.660 --> 00:26:38.118 align:middle line:84% We're going to go invest in the US. 00:26:38.118 --> 00:26:40.340 align:middle line:84% And that is a very live issue which 00:26:40.340 --> 00:26:42.140 align:middle line:90% we can perhaps discuss later. 00:26:42.140 --> 00:26:46.130 align:middle line:84% But it is demonstrable or more evidence 00:26:46.130 --> 00:26:49.700 align:middle line:84% how cheap the UK stock market is. 00:26:49.700 --> 00:26:51.388 align:middle line:84% Another reason to be in the UK stock 00:26:51.388 --> 00:26:53.930 align:middle line:84% market-- you remember it's one of those three exciting things 00:26:53.930 --> 00:26:54.740 align:middle line:90% about Claverhouse. 00:26:54.740 --> 00:26:57.200 align:middle line:84% We're just invested, unlike most of our competitors, 00:26:57.200 --> 00:27:00.350 align:middle line:84% in the income sector in the UK market, 00:27:00.350 --> 00:27:02.420 align:middle line:90% solely in the UK market. 00:27:02.420 --> 00:27:05.090 align:middle line:84% And value is coming back into fashion. 00:27:05.090 --> 00:27:06.650 align:middle line:84% Now we're talking about value growth. 00:27:06.650 --> 00:27:09.170 align:middle line:84% This is style investing, so simplistically, a growth 00:27:09.170 --> 00:27:11.690 align:middle line:84% company is one that's growing very, very fast. 00:27:11.690 --> 00:27:13.400 align:middle line:84% They tend to be on a very high rating 00:27:13.400 --> 00:27:15.710 align:middle line:84% because the stock market is optimistic about them. 00:27:15.710 --> 00:27:17.420 align:middle line:84% But history tells you the stock market 00:27:17.420 --> 00:27:20.390 align:middle line:84% tends to overrate those shares, and it's quite dangerous, 00:27:20.390 --> 00:27:23.450 align:middle line:84% because it's all in the price and more 00:27:23.450 --> 00:27:24.575 align:middle line:90% when you buy growth share. 00:27:24.575 --> 00:27:27.290 align:middle line:84% But you've got to be really sure that those growth 00:27:27.290 --> 00:27:28.790 align:middle line:90% expectations can be met. 00:27:28.790 --> 00:27:32.030 align:middle line:84% Now post the Ukraine invasion of February last year, 00:27:32.030 --> 00:27:35.900 align:middle line:84% the stock market has gone away from those growth companies, 00:27:35.900 --> 00:27:39.350 align:middle line:84% NASDAQ being the prime example of that-- full of tech 00:27:39.350 --> 00:27:41.930 align:middle line:84% companies, some of them still not making any money. 00:27:41.930 --> 00:27:45.260 align:middle line:84% Massively de rated, lost a lot of money if you've been there, 00:27:45.260 --> 00:27:47.150 align:middle line:84% and they've come to what they believe 00:27:47.150 --> 00:27:51.590 align:middle line:84% to be the safer shores of the UK where you have VAT, 00:27:51.590 --> 00:27:53.150 align:middle line:84% you have Glaxo, you have AstraZeneca, 00:27:53.150 --> 00:27:55.190 align:middle line:84% you have Shell, which run really low ratings. 00:27:55.190 --> 00:27:57.530 align:middle line:84% So value has come back into fashion-- 00:27:57.530 --> 00:28:01.580 align:middle line:84% that blue line-- and it's correlated almost one to one 00:28:01.580 --> 00:28:03.200 align:middle line:90% with the UK stock market. 00:28:03.200 --> 00:28:05.363 align:middle line:84% And you saw earlier on how well the UK stock 00:28:05.363 --> 00:28:06.280 align:middle line:90% market did relatively. 00:28:06.280 --> 00:28:08.540 align:middle line:84% You didn't lose any money in the UK stock market. 00:28:08.540 --> 00:28:09.950 align:middle line:84% You lost a lot of money overseas. 00:28:09.950 --> 00:28:14.420 align:middle line:84% Now, is that a turning point, or is it the start of a trend? 00:28:14.420 --> 00:28:16.342 align:middle line:84% Well, we think it's the start of a trend, 00:28:16.342 --> 00:28:18.800 align:middle line:84% but what this is telling you, if you haven't got much money 00:28:18.800 --> 00:28:20.840 align:middle line:84% in UK equities, which a lot of investors 00:28:20.840 --> 00:28:24.690 align:middle line:84% happened because they seem to be much more excitement elsewhere, 00:28:24.690 --> 00:28:27.260 align:middle line:84% now is probably the time to start shifting your portfolio 00:28:27.260 --> 00:28:31.990 align:middle line:90% a bit more back to the UK. 00:28:31.990 --> 00:28:35.310 align:middle line:84% So to conclude, what does-- and it 00:28:35.310 --> 00:28:39.060 align:middle line:84% is-- a new investment landscape post Ukraine look like? 00:28:39.060 --> 00:28:43.870 align:middle line:84% And the world has changed both in reality and for investors. 00:28:43.870 --> 00:28:49.050 align:middle line:84% And I put together what we think are four key takeaways for you 00:28:49.050 --> 00:28:51.320 align:middle line:90% to bear in mind. 00:28:51.320 --> 00:28:55.030 align:middle line:84% The first is that the what I call the rich quick era 00:28:55.030 --> 00:28:56.170 align:middle line:90% is well and truly over. 00:28:56.170 --> 00:28:58.658 align:middle line:84% That is the era of just buying something 00:28:58.658 --> 00:28:59.575 align:middle line:90% because it's exciting. 00:28:59.575 --> 00:29:01.005 align:middle line:84% You don't really know what it does 00:29:01.005 --> 00:29:02.380 align:middle line:84% but you think it's going to go up 00:29:02.380 --> 00:29:05.327 align:middle line:84% and you sell it to someone else for a higher price 00:29:05.327 --> 00:29:06.910 align:middle line:84% and you make money very, very quickly, 00:29:06.910 --> 00:29:09.760 align:middle line:84% and we've all been able to do that a bit 00:29:09.760 --> 00:29:12.440 align:middle line:84% to a greater or lesser extent in the last 10 years. 00:29:12.440 --> 00:29:14.890 align:middle line:90% That is well and truly over. 00:29:14.890 --> 00:29:16.760 align:middle line:84% Fundamentals are back in fashion. 00:29:16.760 --> 00:29:19.390 align:middle line:84% There's renewed focus on those and cash flow and balance 00:29:19.390 --> 00:29:21.550 align:middle line:84% sheets on experienced management or products 00:29:21.550 --> 00:29:22.900 align:middle line:90% on barriers to entry-- 00:29:22.900 --> 00:29:25.930 align:middle line:84% all the things investors used to be interested in until you get 00:29:25.930 --> 00:29:27.430 align:middle line:84% sucked into the bubble like the one 00:29:27.430 --> 00:29:28.960 align:middle line:90% we've had the last few years. 00:29:28.960 --> 00:29:33.520 align:middle line:84% You need to take a long term view of your investments, 00:29:33.520 --> 00:29:38.080 align:middle line:84% because as I said at the outset of this outlook, prediction-- 00:29:38.080 --> 00:29:40.960 align:middle line:84% predicting anything with any high degree of certainty 00:29:40.960 --> 00:29:44.030 align:middle line:84% is really, really difficult at the moment. 00:29:44.030 --> 00:29:45.490 align:middle line:90% So take a long term view. 00:29:45.490 --> 00:29:47.480 align:middle line:84% Buy something that you're comfortable with 00:29:47.480 --> 00:29:50.000 align:middle line:90% and hold it would be my advice. 00:29:50.000 --> 00:29:53.260 align:middle line:84% The second takeaway of the last 12 months 00:29:53.260 --> 00:29:55.300 align:middle line:90% is that valuation matters. 00:29:55.300 --> 00:29:58.330 align:middle line:84% What you pay when you first buy security, 00:29:58.330 --> 00:30:01.060 align:middle line:84% how much you pay for it, is the key determinant 00:30:01.060 --> 00:30:04.310 align:middle line:84% of what your returns will look like over the next few years. 00:30:04.310 --> 00:30:06.610 align:middle line:84% If you buy a really expensive share, 00:30:06.610 --> 00:30:09.293 align:middle line:84% you're not putting your odds on your side 00:30:09.293 --> 00:30:10.960 align:middle line:84% that you will make good money from that. 00:30:10.960 --> 00:30:13.210 align:middle line:84% If you buy a cheap share, provided 00:30:13.210 --> 00:30:16.473 align:middle line:84% it's a reasonable quality, and some shares are, of course, not 00:30:16.473 --> 00:30:18.890 align:middle line:84% a reasonable quality and they're cheap for a good reason-- 00:30:18.890 --> 00:30:22.420 align:middle line:84% but if you can buy a portfolio, I would say this, 00:30:22.420 --> 00:30:24.460 align:middle line:84% wouldn't I, of Claverhouse-- full of blue chip 00:30:24.460 --> 00:30:28.090 align:middle line:84% largely FTSE companies, proven management, proven products, 00:30:28.090 --> 00:30:30.640 align:middle line:84% global companies invested around the world, 00:30:30.640 --> 00:30:34.000 align:middle line:84% and you can buy them cheaply as they are at the moment, 00:30:34.000 --> 00:30:35.920 align:middle line:84% it doesn't guarantee you a good return, 00:30:35.920 --> 00:30:39.260 align:middle line:84% but it's putting the odds on your side. 00:30:39.260 --> 00:30:42.350 align:middle line:84% The third point is, in a world, which 00:30:42.350 --> 00:30:45.200 align:middle line:84% I think is going to be of fairly low returns 00:30:45.200 --> 00:30:47.330 align:middle line:84% until the investment sky is clear, 00:30:47.330 --> 00:30:50.180 align:middle line:84% secure income is really important. 00:30:50.180 --> 00:30:53.330 align:middle line:84% None of us know for sure what the capital of your investments 00:30:53.330 --> 00:30:55.010 align:middle line:84% is going to do, whether it's in the UK, 00:30:55.010 --> 00:30:57.177 align:middle line:84% overseas, whether it's bonds, whether it's property, 00:30:57.177 --> 00:30:59.007 align:middle line:84% the world is a really uncertain event-- 00:30:59.007 --> 00:30:59.840 align:middle line:90% place at the moment. 00:30:59.840 --> 00:31:01.298 align:middle line:84% Or when events take place they tend 00:31:01.298 --> 00:31:04.110 align:middle line:90% to take place quite quickly. 00:31:04.110 --> 00:31:06.450 align:middle line:84% But if you're looking, as most people are, for 7%, 00:31:06.450 --> 00:31:10.230 align:middle line:84% 8% absolute return over the medium term, 00:31:10.230 --> 00:31:12.480 align:middle line:84% and you can invest in an instrument that is yielding 00:31:12.480 --> 00:31:16.145 align:middle line:84% you, as Claverhouse is, approximately 5%, 00:31:16.145 --> 00:31:17.520 align:middle line:84% you're off to quite a good start. 00:31:17.520 --> 00:31:19.728 align:middle line:84% You haven't got to make quite so much on your capital 00:31:19.728 --> 00:31:21.690 align:middle line:90% to get that 8% return. 00:31:21.690 --> 00:31:24.630 align:middle line:84% And the final point is that I'm afraid we all 00:31:24.630 --> 00:31:28.080 align:middle line:84% have to brace ourselves to expect the unexpected to happen 00:31:28.080 --> 00:31:29.693 align:middle line:90% much more often. 00:31:29.693 --> 00:31:31.860 align:middle line:84% We looked back over what's happened over the last 50 00:31:31.860 --> 00:31:35.470 align:middle line:84% years, and of course, events do happen all the time. 00:31:35.470 --> 00:31:37.920 align:middle line:84% But the world is a much more interconnected place now. 00:31:37.920 --> 00:31:39.840 align:middle line:84% Economies are more interconnected, much more 00:31:39.840 --> 00:31:40.530 align:middle line:90% global. 00:31:40.530 --> 00:31:42.930 align:middle line:84% Stock markets are much more interconnected, 00:31:42.930 --> 00:31:45.570 align:middle line:84% and when things happen, a bit like some of the runs 00:31:45.570 --> 00:31:47.010 align:middle line:90% you've seen on US banks. 00:31:47.010 --> 00:31:50.143 align:middle line:84% In the regional US banks, apps, technology, 00:31:50.143 --> 00:31:52.560 align:middle line:84% means you can take your money out to the push of a button. 00:31:52.560 --> 00:31:54.753 align:middle line:90% It happens so much more quickly. 00:31:54.753 --> 00:31:56.670 align:middle line:84% And that's the nature of the world we live in, 00:31:56.670 --> 00:31:59.400 align:middle line:84% and it's an opportunity and it's a threat, 00:31:59.400 --> 00:32:01.380 align:middle line:84% but we have to brace ourselves and have 00:32:01.380 --> 00:32:06.415 align:middle line:90% to prepare ourselves for that. 00:32:06.415 --> 00:32:07.790 align:middle line:84% I've given you this quote before, 00:32:07.790 --> 00:32:11.240 align:middle line:84% and I shamelessly give it to you again, 00:32:11.240 --> 00:32:13.730 align:middle line:84% because when he died at the end of the 19th century, 00:32:13.730 --> 00:32:16.370 align:middle line:84% Rockefeller was the richest man in the world. 00:32:16.370 --> 00:32:19.940 align:middle line:84% And he, even then before living through the events 00:32:19.940 --> 00:32:22.100 align:middle line:90% that we've just discussed-- 00:32:22.100 --> 00:32:26.120 align:middle line:84% he knew the best thing the thing that 00:32:26.120 --> 00:32:30.110 align:middle line:84% really routes your investment is the income that investment pays 00:32:30.110 --> 00:32:34.950 align:middle line:84% to you, and the more secure that income stream is, 00:32:34.950 --> 00:32:37.670 align:middle line:84% the better your investment over the long term will be. 00:32:37.670 --> 00:32:39.500 align:middle line:84% And in an uncertain world if you can 00:32:39.500 --> 00:32:42.260 align:middle line:84% get that security of income, it should give you 00:32:42.260 --> 00:32:44.270 align:middle line:84% the pleasure that it gave to gave 00:32:44.270 --> 00:32:48.610 align:middle line:90% to Rockefeller in his lifetime. 00:32:48.610 --> 00:32:51.920 align:middle line:90% So I conclude on that. 00:32:51.920 --> 00:33:07.000 align:middle line:90%