ISSUE 60 - DECEMBER 2019 WWW.HINDESIGHTLETTERS.COM

OVERVIEW TOP NEWS FEED

irstly, apologies, for the very late arrival of the F‘November’ newsletter. We might have to move 1 OVERVIEW smartly on to the New Year and short change you on your regular insomnia aid. Hopefully, our 2019 stock 4 OUR MAIN INVESTMENT IDEA selections, with 13 winners to 6 losers, will be some 1. Synthomer plc consolation for the festive season. 7 INVESTMENT INSIGHTS The December UK election is upon us. If my publisher is on his usual pre-Xmas drinks schedule, one of these 9 WHAT HAPPENED? unlikely characters may well already be installed in Market & Sector Analysis 10 Downing Street as Prime Minister by the time you are reading this. Guilty as charged of regurgitating old 13 HINDESIGHT DIVIDEND UK material, as you can see from the extract below from Portfolio # 1 (December 2019) the last general elections. 14 APPENDIX I: THE WAY WE THINK 16 APPENDIX II: HOW WE THINK HindeSight Publishing CONTRIBUTORS 'None of the above' was the slogan from respect from the population and your own the classic film Brewster's Millions who party members, which are guaranteed to fought his campaign on the unworthiness be at an all-time low on both counts. of all the other candidates. Can we really talk about Clement Attlee – Had it not been for the fact that the the war veteran, longest-serving Labour polling station was next to the local pub, leader, and the Prime Minister who I wouldn't have bothered to vote, despite oversaw the development of the welfare Mark Mahaffey CO-FOUNDER & CFO OF my wife's best efforts to get us registered state and the NHS after the Second World HINDE CAPITAL at our new address and her insistence War – and Jeremy Corbyn in the same that I do my democratic duty. Even then, I breath, without choking. Corbyn, who stood in the booth thinking aloud. I would ‘rules’ over a divided, anti-Semitic party, rather have my pub landlord running the shows support for terrorists and thinks country than any of the current potential the Queen’s speech is on TV on Christmas political leaders. morning! Whose party spouts extreme socialist/communist views that would Benjamin Disraeli, the great 19th-century be so destructive to business that the UK Ben Davies British Prime Minister, "Statesmen think of would go bankrupt in months. They rant CO-FOUNDER & CEO OF the next generation, politicians think only of about the inequality of wealth to appeal HINDE CAPITAL the next election. Unfortunately, I don't see to the naïve, inexperienced youth but the many statesmen from where I am sitting only result would be an equality of wealth, today as our current line-up of Downing where everyone would be poor, with no Street hopefuls offer new promises to the incentive or ability to ever be better off. UK electorate on an almost daily basis. Not only is it difficult to determine who is Jo Swinson’s election manifesto is “Stop going to be the least worst leader come Brexit, build a better future”, with the May 8th, it is also difficult for most people to presence of a new sixth-former on a daily Aalok Sathe understand the platforms upon which these chat show, pales into such minuscule FUND MANAGER disappointing figureheads are marketing relevance compared to almost any speech their election manifestos. and action in the era of the greatest Liberal THE COMPANY leader in history, David Lloyd-George. If HindeSight Publishing which This excerpt was written in one of my Clement Attlee is credited with overseeing runs HindeSight Letters is 2015 blogs, and staggeringly enough, the development of the welfare state, it a unique blend of financial market professionals – the quality of politicians has declined was in fact, Lloyd-George’s radical social investment managers, dramatically even from that low level. reforms that changed life dramatically for analysts and a financial the masses. His Old Age Pension Act and editorial team of notable National Insurance Act provided workers pedigree. The co-founders of Hinde Capital, Ben with insurance and unemployment, as Davies and Mark Mahaffey, well as a pension to the old. I can’t imagine a successful alternative Jo Swinson being known in the annals of investment management company joined forces with history two weeks Friday, let alone in 100 the financial journalist David years’ time. Stevenson best known for his regular columns in the FT Weekend, Money Week Of course, Winston Churchill had the and numerous other global As the UK Gross Domestic Product drops benefit of a being a war-time leader – media titles to deliver away, heading us into the next recession, always helpful to unite the country – but something different in the quality of politicians must surely have it was his courage in the years leading the financial newsletters segment – simply put it’s a hit an all-time low, but hey, I thought that up to WW2, when appeasement was not reliable newsletter version of a few years ago too. While I’m sure many the filthy word history has given it, that a managed fund. of the voters, especially the youth, don’t earned him that right to lead the country Our writers actually run recognise the statesmen from another era in their darkest hours. His speeches are money, not just write about pictured above, rest assured, they will be the stuff of legends. I have listened to all it, so they are the right turning in their proverbial graves at their of those he gave during the war, and rather mix of book smarts and current party leaders. The immense cliff more often than Boris Johnson’s by a wide street smarts. Truly a team of individuals that make drop, across the whole spectrum, from margin! The YouGov poll hardly inspires up a formidable pool of some of the leaders of the past to today’s us – strong, likeable but untrustworthy, knowledge, wherever the is difficult to measure in scale. Maybe dishonest and out of touch. Just perfect investing landscape shifts to. the most important being the amount of for leading the country?

2 HINDESIGHT Dividend UK Letter held up well for now. As such, and for all the value of the ‘cheap’ non-US equity markets, I fear the worst is ahead of us. Believe it or not, these last years will be seen as the good times, of low unemployment and property prosperity. Unfortunately, as we can see, our choice of political leaders at this time – potentially soon to be a very challenging time – is not just limited but a lost cause. Boris, Jezza or Jo… none of the above, as Richard Pryor would say.

We can’t blame everything on Brexit. Of course, David Cameron was poorly advised to have a referendum with no hurdle of a majority popular vote. (Only 37% of the UK population actually voted to leave) for such an immense change in policy, which has split the country. But we have to get on with it. Our inability to leave Europe has meant we have become a mockery to the rest of the world, but it is much more than that. They all talk of a broken and divided country but will not take ownership of the fact that it is their combined divisive views and broken promises that are responsible for this outcome.

Finally, if we take a quick glance at the last few years of Brexit machinations, we’ll find that the FTSE 100 is going nowhere fast. I suppose with GDP YoY growth falling away, we should be very pleased that the market has

ISSUE 60 - DECEMBER 2019 3 INVESTMENT IDEA #1 SYNTHOMER PLC

SYNTHOMER PLC

Price (£GBp) 303.00 Turnover (£mm) 1,618.9 Net Income (£mm) 99.8 Market Cap (£mm) 1,293.2463 Fwd P/E Ratio 11.0 Dividend Yield (%) 4.2% Payout Ratio (%) - Total Debt to Total Equity (%) 73.6% By Aalok Sathe FCF to Market Cap (%) - ROIC (%) 10.4% FUND MANAGER AT HINDE CAPITAL

Synthomer plc is a UK-based specialist chemicals business that traces its roots back to 1863 and the trading house known as Andrew Yule & Co in Calcutta, India.

he business was sold to J.P Morgan & Co in 1919. Synthomer specialises in aqueous polymers and TAs time went on and through the acquisition was a huge growth candidate over the decade, of Revertex Chemicals in 1980, Synthomer has leading up to December 2018. The company hit a been transformed into a diversified chemicals high in August 2018 but there has been a major business that focuses on specialist polymers. Its slowdown in its earnings growth since then. core business specialises in three active areas: As a result, it has suffered from a growth stock polymer chemicals, pharma chemicals and impact deflationary correction that has seen its share price chemicals. The company has a market capitalisation trade lower by over (40%) at a time when the UK of over £1.2bn, employing almost 3000 people and chemicals industry has also fallen out of favour, as is a member of the FTSE250. cyclicals have underperformed in the region.

4 HINDESIGHT Dividend UK Letter As of mid-November 2019, the top 20 constituents in the model were: Name Ticker Equity Score Trend Index Signal INTERNATIONAL MCRO LN EQUITY 64.21 42.71 IMPERIAL BRANDS PLC IMB LN EQUITY 63.37 50.64 MARKS & SPENCER GROUP PLC MKS LN EQUITY 59.23 55.33 BRITISH AMERICAN TOBACCO PLC BATS LN EQUITY 57.51 48.58 PETROFAC LTD PFC LN EQUITY 57.15 35.14 trend ready & rsi oversold SYNTHOMER PLC SYNT LN EQUITY 56.80 45.99 GROUP PLC CINE LN EQUITY 56.31 58.99 BT GROUP PLC BT/A LN EQUITY 56.18 53.40 WPP PLC WPP LN EQUITY 56.04 57.55 PLC DRX LN EQUITY 55.49 44.58 ITV PLC ITV LN EQUITY 53.80 50.21 IMI PLC IMI LN EQUITY 52.14 50.26 PAGEGROUP PLC PAGE LN EQUITY 51.83 41.73 ASSOCIATED BRITISH FOODS PLC ABF LN EQUITY 51.77 44.23 BABCOCK INTL GROUP PLC BAB LN EQUITY 51.70 51.15 PLC VCT LN EQUITY 51.50 44.88 PLC PTEC LN EQUITY 51.45 46.37 BUNZL PLC BNZL LN EQUITY 51.07 45.12 EASYJET PLC EZJ LN EQUITY 50.94 51.08 RECKITT BENCKISER GROUP PLC RB/ LN EQUITY 50.53 58.23

iven Synthomer’s share price decline over the past reversion to the mean that will see the likes of Synthomer G18 months, we believe the stock offers a good value being carried higher as part of this trend. opportunity, which will provide investors with a solid 4.2% dividend that is well protected and trading at a forward P/E 11x.

This chemical specialist recently warned that its negative performance was due to: • Depressed European Industrial Activity/Cyclical Underperformance • Increased political and economic uncertainty

Cyclical Underperformance The cyclical sector within Europe has significantly underperformed defensive names with global trade Synthomer has seen its earnings growth slow down headwinds intensifying. The specialist chemicals industry slightly but we feel the reaction to this news has been as a whole, including Synthomer and its closest peer far too negative and believe this well-run company will Croda, have been trading negatively since the summer reinstate this growth over the coming year. Currently, of 2018. Synthomer’s forward P/E trades at one of its lowest levels, Across Europe, consumer conditions appear to be mixed which we believe is temporary. with sentiment weakening. However, with UK growth Being a specialist chemicals producer, the company has a expectations pointing to a rise in sales growth over the significant barrier to entry and any allocation to the sector next 12 months and cyclicals being at a trough in their will benefit all ships. relationship with defensives, we believe we will see a

ISSUE 60 - DECEMBER 2019 5 Summary

Synthomer has come under significant pressure since summer 2018, as its share price has suffered due to global economic and political worries, and it is also being impacted by the negative trend in European cyclical names. With the chemical operator trading at 11x its forward earnings and offering a dividend yield of 4.2%, we believe Synthomer will surprise to Seasonality the upside and offer investors significant value compared to the broader market. Given that Seasonality plays a major role in Synthomer’s share price European cyclicals are at a long-term low and and the chemical specialist is entering into a positive Synthomer is a highly specialised business, period. As you can see in the chart below, Synthomer’s we believe the company is ready to reverse its performance tends to ramp up in December and this trend current downward trajectory. carries on until the following May. As a result, this positive momentum may certainly see Synthomer’s share price rise higher.

Brexit and growth worries We can’t go far without using Brexit as an excuse in any sector. Growth profiles across Europe and the UK are hardly uplifting, despite the free money of zero interest rates. We can argue as well that the huge divergence between the US and the rest of the world’s stock markets makes UK stocks look cheap in general. Our model will highlight stocks like Synthomer, a cheap stock, in a cheap sector in a cheaper country which gives the investor some comfort that the margin of safety is much better than average.

Analysts’ Corner Synthomer plc is a leading specialist chemical producer with a high barrier to entry. It has been attributed with an average target price of 390p, which would present an upside of over 28%.

6 HINDESIGHT Dividend UK Letter INVESTMENT INSIGHTS

As we end yet another year, many can be excused for being bored by more of the same. Whether it is the actual pathetic state of the UK’s Brexit inability, Trump’s continued bizarre presidency or just a plain déjà vu feeling, the US stock market and USD dollar continue to defy all again in 2019. While most of the world’s stock markets amble along, the US stock market powers forward, and has outpaced the rest by the best part of 30% over the last five years.

rade wars and tariffs, impeachment hearings and Every chart you dig up continues to highlight the bullet- Tnose-bleed valuations only seem to increase the gap. proof nature of the US stock market. Moneyweek’s chart ‘America First’, really does seem to be the theme tune. of the week shows that you don’t need company profits Despite American firms crying out that tariffs will ruin any more for your stock price to soar, just ongoing Price/ them and China believing they can export anywhere, the Earnings expansion. And Soc Gen’s most depressing chart divergence between Chinese and US industrial stocks is of all shows us that it is not worth bothering investing in there for all to see. the rest of the world’s 16,000 companies because as little as 20% of them beat the S&P over time. FOR NOW.

ISSUE 60 - DECEMBER 2019 7 it will stop.” The problem is not just when that will happen, but also the catastrophic consequences of when it does occur.

The strength of the USD currency compared to the rest of the world is very visible when you observe the gold price in multiple currencies. Gold, like oil is typically reported and discussed in USD, but it has barely risen in the last five years. Compare that to many of the other world currencies. The USD is the reserve currency, but nothing lasts forever.

It’s hard to summarise the motley collection of charts. Trend followers will gladly say that being invested in huge corporates is the only game in town and why shouldn’t it continue? Why does the longest economic expansion in history have to end anytime soon? Global interest rates are negligible. If Trump doesn’t get impeached, maybe he can force the Fed to cut US interest rates to negative to keep the party going? A famous US economist, Hebert Stein, once remarked, “If something cannot go on forever,

8 HINDESIGHT Dividend UK Letter PORTFOLIO UPDATE - WHAT HAPPENED? MARKET & SECTOR ANALYSIS

UK MARKET VALUATIONS

UK INDICES PRICE/EARNINGS RATIO PRICE/BOOK RATIO DIVIDEND YIELD(%)

FTSE 100 INDEX 17.45 1.73 4.93% FTSE 250 INDEX 23.13 1.70 3.81%

ISSUE 60 - DECEMBER 2019 9 HINDESIGHT DIVIDEND UK PORTFOLIO # 1 PORTFOLIO UPDATE AND CONSTRUCTION (DECEMBER 2019)

NO DIVIDENDS UPDATE PORTFOLIO PORTFOLIO

10 HINDESIGHT Dividend UK Letter CURRENT EQUITY FACTOR MODEL

Name Ticker Equity Score Trend Index Signal MICRO FOCUS INTERNATIONAL MCRO LN EQUITY 64.21 42.71 IMPERIAL BRANDS PLC IMB LN EQUITY 63.37 50.64 MARKS & SPENCER GROUP PLC MKS LN EQUITY 59.23 55.33 BRITISH AMERICAN TOBACCO PLC BATS LN EQUITY 57.51 48.58 PETROFAC LTD PFC LN EQUITY 57.15 35.14 trend ready & rsi oversold SYNTHOMER PLC SYNT LN EQUITY 56.80 45.99 CINEWORLD GROUP PLC CINE LN EQUITY 56.31 58.99 BT GROUP PLC BT/A LN EQUITY 56.18 53.40 WPP PLC WPP LN EQUITY 56.04 57.55 DRAX GROUP PLC DRX LN EQUITY 55.49 44.58 ITV PLC ITV LN EQUITY 53.80 50.21 IMI PLC IMI LN EQUITY 52.14 50.26 PAGEGROUP PLC PAGE LN EQUITY 51.83 41.73 ASSOCIATED BRITISH FOODS PLC ABF LN EQUITY 51.77 44.23 BABCOCK INTL GROUP PLC BAB LN EQUITY 51.70 51.15 VICTREX PLC VCT LN EQUITY 51.50 44.88 PLAYTECH PLC PTEC LN EQUITY 51.45 46.37 BUNZL PLC BNZL LN EQUITY 51.07 45.12 EASYJET PLC EZJ LN EQUITY 50.94 51.08 RECKITT BENCKISER GROUP PLC RB/ LN EQUITY 50.53 58.23 Highest ranked (‘cheapest’) stocks selected from the FTSE350 universe (as 31st of December 2019).

ISSUE 60 - DECEMBER 2019 11 APPENDIX I

THE WAY WE THINK

e passionately believe that dividends really,really must be liquid,well-capitalised with a strong free cash Wmatter. William Thorndike in his fascinating book flow and a progressive dividend policy. 'The Outsiders - Eight Unconventional CEOs and Their Radically Rational Our System Blueprint for Success' examined one of the most impor­ tant aspects of running a business a CEO must undertake: • Every month we will provide a write up of 3 to 4 stocks Capital Allocation. He summarised how a CEO deploys untilwe create a portfolio of 25 UK dividend stocks. capitalin order to best utilise cash flow generated from This will be the HindeSight UK Dividend Portfolio #1 his or her business operations. Essentially,CEOs have 5 • You wiII bealerted by subscriber email intra-month ways of deploying capital: when these stocks become a buy. Timing is critical to the strategy, not only buying quality stocks but buying • Investing in existing operations them at the right time • Acquiring other businesses • Theentry points willthen be recorded in the next • Repaying debt month­ ly in the HindeSight UK Dividend Portfolio • Repurchasing their own stock (buybacks) section and the stock(s) wr itten up in full • Paying dividends • We will run our winners but tend to rotate every 6 Dividend payments are a crucial operation in creating months depending on specific criteria which would stakeholder wealth. It is this aspect of a business that elevate cheaper companies into the portfolio relative we are so fixated by - the propensity for a company to to stocks that had performed produce and continue to grow dividends so that we may • The basis for stock and portfolio selection is derived accrue wealth over a generation. But as readers will know from our quantitative systematic methodology which we can't just grab stocks with the highest yield for fear screens these companies using the Hinde Dividend that this signals some cash flow or even solvency issues Value Matrix, (HDVMdl), a proprietary stock-rating for the firm. So it is with this very real threat in mind we system explore only well-capitalised FTSE 350 companies. • In the section on ETPs we will highlight our invest­ ment philosophy and the investment process behind This letter's purpose is to help inform readers on dividend our stock selections. This is the b*is of our dynamic investing so that they can construct a portfolio of sound risk and money management in our portfolio con­ UK dividend stocks based on our recommendations. struction for you. You can also read the stand-alone Hinde Dividend Value Strategy document to see the Our prerequisite is that any stocks selected for this let ­ter methodology behind our stock selection.

12 HINDESIGHT Dividend UK Letter APPENDIX II

HOW WE THINK

“We have met the enemy, and he is us.” Walt Kelly Hedge version of the strategy would then be subject to a strategic Beta Hedge*, which is designed to cover 50% of ur key to long-term performance investing is premised the value of the UK stock basket at all times. Oon the following: The 50% hedge is maintained using UK equity benchmark • Systematic rule-based strategy indices to reduce exposure to overall market volatility, but • Systematic risk and money management without reducing overall total returns to the market over • Occam’s razor, aka ‘K.I.S.S.’, Keep It Simple Stupid the long run. The Hinde Dividend Value Strategy (100% • Consistency Hedge) would deploy a full beta hedge at all times. • Discipline Hinde Dividend Value Matrix ® All our investment ideas are rule-based methodologies driven by systematic and quantitative models. The strategy employs a quantitative, systematic methodology, whereby FTSE 100 and FTSE 250 constituent Hinde Dividend Value Strategy stocks are screened using the Hinde Dividend Value Matrix®, a proprietary stock-rating system. We use the Hinde Dividend Value Strategy seeks to generate a total same system to select stocks for any of our strategies, return from an actively managed basket of UK dividend- long-only, 50% Hedge or 100% Hedge. The only difference paying stocks. The strategy selects 20 highly liquid, mid- is clearly the extent of the hedge on the exposure to the to-large capitalised stocks on an equally-weighted basis, overall market. which offer the highest total return potential. The 50%

ISSUE 60 - DECEMBER 2019 13 The basic premise of the strategy is to accelerate returns 2. Performance Screen by selecting relatively high yielding stocks that offer the highest potential for capital revaluation. The dynamic The top ranking stocks have the poorest relative rotation of stocks each quarter enables us to sell stocks performance to their index over multiple time horizons. where the capital revaluation and dividend has been captured, and use this additional capital to invest in A composite rank of the following criteria provides the more undervalued quality companies. If successful, this Performance Rank: cycle of capture and re-investment offers the chance to significantly improve the total return generated by the • Stock relative performance ranked over multiple time Dynamic Portfolio. periods • Average of time periods taken to select rank of stocks The basis of the stock selection process is the Hinde Dividend Value Matrix®, which is a derived process that looks at 3 crucial variables: 3. Value Screen

* Beta is the stock’s sensitivity to market movements, e.g. The top ranking stocks by key fundamental criteria show if a share has a beta of 1.5 its price tends to move by 1.5% stable fundamentals and exhibit upside momentum for each 1% move in the index growth potential. The following are some of the criteria that provide the Value Rank:

1. Dividend Screen • Value - Price to Book (intangible book adjustment), Free Cash Flow metrics The top ranking stocks will be those offering a relatively • Quality - Return on Investment and Earnings metrics high dividend. A composite of the following criteria comprises the Dividend Rank: • Financial Stability - Debt levels, Coverage and Payout ratios • Relative Dividend Yield • Volatility - Stock variance, Dividend variance • Dividend Capture • Momentum - Sales Growth, Cash flow metrics • Payout ratios • Liquidity - Minimum market capitalisation relative to The Relative Dividend Yield assesses if a company pays a index, Shares outstanding higher dividend than the Index it derives from (the FTSE 100 or FTSE 250). The Dividend Capture criteria explain Implementing the Hinde Dividend Value Matrix ® how quickly and how much of the dividend is paid at any point in time. The Payout Ratio gives a snapshot of The FTSE 100 and FTSE 250 stocks are ranked using the whether a company will be able to maintain and grow its Dividend, Performance and Value screens. An equally- dividend. It helps us to assess how much of a company’s weighted composite rank is then taken of these 3 ranks, revenue, profit or cash flow is paid out in dividends. which provides a final ranking from which a selection of 20 stocks is made for the portfolio. The lower the amount of dividends paid out as a percentage of profits, the healthier future dividend The stocks with the highest ranking are compiled for the potential will be. History is for once a good guide as to FTSE 100 and the FTSE 250. The top 10 from each index are whether companies will continue to pay and grow their then taken, subject to diversification rules, which entail dividends. A stock with an excessively high yield relative to that normally only 1 stock per sector per index can be its sector or the overall market is invariably showing signs invested in. For example, if the top 10 stocks are all mining of heightened risk to its dividend sustainability and often companies, the selection process would take the first of the viability of the company itself. The screen incorporates these and then move on to select the next top stock from a limit on yield dispersions from the overall market. another sector. As long as a stock has the highest score in its sector, the fact that it has appeared in the final ranking The strategy is emphatically not a yield chaser. It is the means it is already eligible for investment. In exceptional Performance and Value screens that are used to assess circumstances, it may be that more than one stock has to the total return potential of a stock by analysis of how be selected from an individual sector. undervalued it is relative to its fundamentals, sector and overall market index.

14 HINDESIGHT Dividend UK Letter EXTERNAL ANALYST SCORE (EAS)

This score is derived from 3 inputs that have been obtained price in relation to current price. from all the external analysts at leading institutions who 3. A stock with the highest score of 70 shows the majority are covering the stock: of analysts not only have a full buy/overweight recommendation, but also a high 12-month target 1. The 12 month target price in relation to current price price in relation to current price. 2. The number of analysts covering the stock 3. The recommendation analysis, e.g. STRONG SELL, Note: SELL, UNDERPERFORM or HOLD On a standalone basis, the EAS score must be viewed in the following context: This score is used to observe the other analysts’ view of the stock and is helpful when understanding the methodology • Equity analysts issue far more positive that other analysts use to determine their 12-month target recommendations than negative price. We ultimately get a blend of price targets that is based on different valuation metrics. • If all analysts are overwhelmingly bearish or bullish, then this can signal a contrarian position be held, but EAS Score Output: this is determinate on the where the stock is valued.

1. The combined score will vary from 30-70 However, in conjunction with the HDVM ®, we have found 2. A stock with a lowest score of 30 shows the majority the score to be useful when it is high or momentum is of analysts not only have a full sell/underweight turning higher, as this suggests that the stock offers deep recommendation, but also a low 12-month target value.

DISCLAIMER

This newsletter is intended to give general advice only on the importance of dividends within the equity space. The investments mentioned are not necessarily suitable for any individual, and you should use this information in conjunction with other advice and research to determine its suitability for your own circumstances and risk preferences. The value of all securities and investments, and the income from them, can fall as well as rise. Your investments may be subject to sudden and large falls in value and you may get back nothing at all. You should not buy any of the securities or other investments mentioned with money you cannot afford to lose. In some cases there may be significant charges which may reduce the value of your investment. You run an extra risk of losing money when you buy shares in certain securities where there is a big difference between the buying price and the selling price. If you have to sell them immediately, you may get back much less than you paid for them. The price may change quickly, particularly if the securities have an element of gearing. In the case of investment trusts and certain other funds, they may use or propose to use the borrowing of money to increase holdings of investments or invest in other securities with a similar strategy and as a result movements in the price of the securities may be more volatile than the movements in the price of underlying investments. Some investments may involve a high degree of ‘gearing’ or ‘leverage’. This means that a small movement in the price of the underlying asset may have a disproportionately dramatic effect on your investment. A relatively small adverse movement in the price of the underlying asset can result in the loss of the whole of your original investment. Changes in rates of exchange may have an adverse effect on the value or price of the investment in sterling terms, and you should be aware they may be additional dealing, transaction and custody charges for certain instruments traded in a currency other than sterling. Some investments may not be quoted on a recognised investment exchange and as a result you may find them to be ‘illiquid’. You may not be able to trade your illiquid investments, and in certain circumstances it may be difficult or impossible to sell or realise the investment. Investment in any of the assets mentioned may have tax consequences and on these you should consult your tax adviser. The opinions of the authors and/or interviewees of/in each article are their own, and are not necessarily those of the publisher. We have taken all reasonable care to ensure that all statements of fact and opinion contained in this publication are fair and accurate in all material respects. All data is from sources we consider reliable but its accuracy cannot be guaranteed. Investors should seek appropriate professional advice if any points are unclear. Ben Davies and Mark Mahaffey the editors of this newsletter, are responsible for the research ideas contained within. They or any of the contributors or other associates of the publisher may have a beneficial interest in any of the investments mentioned in this newsletter.

Disclosures of holdings: None relevant to any content discussed withinISSUE this 60 issue - of the DECEMBER newsletter 2019 15