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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
Aberforth Smaller Companies Trust is starting to recover

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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
We said to invest in Aberforth Smaller Companies Trust (ASL) on 22 July 2022 because of its value-focused credentials and the fact you could effectively buy its portfolio for 12.5% less than the market value of its holdings.
With a lot of the macroeconomic bad news already priced into markets we could see the potential upside for a skilled stock picker focused on small caps.
WHAT’S HAPPENED SINCE WE SAID TO BUY?
Value stocks have continued to benefit from the tailwind of rising interest rates and investors are slowly regaining interest in a select number of smaller companies. The shares have risen 13.8% over the last three months.
Meanwhile, the trust’s discount to NAV has narrowed to 10.9%. Although it is not deemed an income fund, it has a 2.7% trailing yield and potential to achieve real growth in dividend income.
Research group Kepler believes the board will be able to increase the pay-out again this year, adding to ‘already substantial’ reserves. Investment trusts can dip into revenue reserves during hard times to maintain dividend payments.
In addition, the board has been actively buying back shares at a discount to NAV. So far in the current financial year the company has bought £32 million worth of shares at an average discount of 14% according to Kepler.
WHAT SHOULD INVESTORS DO NOW?
With inflation proving sticky, interest rates seem unlikely to fall anytime time soon, providing a continued tailwind for value managers.
Analysis completed by Aberforth’s managers show current share prices in the portfolio already discount a UK recession. While there is always room for sentiment to fall further the chances of absolute and relative outperformance remain favourable. Continued narrowing of the trust’s discount to NAV provides further support for the shares, which continue to look attractive.
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
The value of your investments can go down as well as up and you may get back less than you originally invested. We don't offer advice, so it's important you understand the risks, if you're unsure please consult a suitably qualified financial adviser. Tax treatment depends on your individual circumstances and rules may change. Past performance is not a guide to future performance and some investments need to be held for the long term.
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