London, UK, 24 August 2023
Edison issues review on Henderson Smaller Companies Investment Trust (HSL)
Henderson Smaller Companies Investment Trust (HSL) is managed by Neil Hermon, who has been at the helm for more than 20 years. While FY23, ending 31 May, was a difficult year as growth stocks derated in an environment of rising interest rates and bond yields, this should be put into context as the manager has outperformed the trust's benchmark in 16 of the last 20 years. Hermon believes that there is a disconnect between portfolio companies' valuations and the strength of their operations as, faced with higher input costs, businesses have adapted to protect their margins. The manager has taken the opportunity of share price weakness to add some new high-quality names to the portfolio, which would have previously been disregarded on valuation grounds. HSL is now one of just 20 funds designated as an AIC dividend hero.
Hermon and his team employ a solid, repeatable investment process based on four M's: a company's business model, the quality of its management team, its financial strength (money) and momentum in terms of a firm's recent and longer-term news flow. ESG considerations are an integral part of the thorough fundamental approach. The manager is closely supported by two colleagues, both of whom are also qualified accountants, which is a particular benefit in the analysis of a smaller company's financial strength. Hermon is also able to draw on the broad resources of Janus Henderson Investors' wider investment team, which has both UK and global specialists, including other small- and mid-cap focused managers.
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