Artemis SmartGARP UK Equity Fund update

Philip Wolstencroft, manager of the Artemis SmartGARP UK Equity Fund, reports on the fund over the quarter to 30 June 2024.

Philip Wolstencroft

Source for all information: Artemis as at 30 June 2024, unless otherwise stated. 

Fund objective 

The fund’s objective is to grow capital over a five-year period.

Performance

The fund made 0.3% in the second quarter, underperforming its benchmarks the FTSE All-Share index1, which returned 3.7%, and the Investment Association IA UK All Companies2 sector, where the average return was 3.9%. 

In the year to date, the fund is up 10.5%, compared with gains of 7.4% and 6.9% from the FTSE All-Share and its sector respectively.  

For full five-year discrete performance, please see below. Please remember that past performance is not a guide to the future.

This means the shares we own are delivering good returns and are outperforming the market so far this year, but our lead shrank a bit in the last quarter. There is a tendency for commentators to focus on month-to-month or quarter-to-quarter outcomes. The reality is that if we stick to doing simple things well and grind out small excess returns, we end up well ahead of the competition. 

Our investment process has evolved (glacially) over the past two decades and it would appear to be effective. We try to buy shares that are cheap, growing and delivering pleasant surprises. The result is that they end up with a better combination of growth and income than the market and our competitors. While it can sometimes feel uncomfortable to ‘be different’, we end up with a bunch of shares that bear little resemblance to either the stockmarket or our competitors.  

Three months ago, our top five holdings consisted of GSK (GlaxoSmithKline), Barclays, Bank of Georgia, Imperial Brands (Tobacco) and Marks & Spencer. They are still all in our top six, with Shell bumping out Marks & Spencer. Nevertheless, Bank of Georgia (as the name suggests, the main commercial bank in the country of Georgia) went from 5.1% to 3.7%, partially because we started to take profits, but mostly because the shares fell sharply on concerns over politics (Georgia’s, not the UK’s). 

Politics notwithstanding, Bank of Georgia’s underlying business has actually improved of late, with profitability and technology that the UK banks can only dream of. Fortunately, it is listed on the FTSE All-Share, so our clients have easy access to its world-class returns. It is also much cheaper than the market, even though its profits are going quicker.  

It is a similar story for the fund in total. The prospective P/E (price-to-earnings multiple – a key valuation metric) is 7.1x compared with 11.4x for the FTSE All-Share. This ought to mean that we have poor-quality companies. In reality, they are growing in line with their competitors and seeing upgrades to profit forecasts (up 3% in the past quarter). Ultimately, these fundamentals are what drive share prices.  

1FTSE All-Share Index TR: A widely-used indicator of the performance of the UK stockmarket, in which the fund invests. It acts as a ‘comparator benchmark’ against which the fund’s performance can be compared. Management of the fund is not restricted by this benchmark.
2IA UK All Companies NR: A group of other asset managers’ funds that invest in similar asset types as this fund, collated by the Investment Association. Management of the fund is not restricted by this benchmark.

 

Discrete performance, 12 months to 30 June 2024 2023 2022 2021 2020
Artemis SmartGARP UK Equity Fund 15.7% 9.2% 5.2% 39.8% -12.5%
FTSE All-Share TR 13.0% 7.9% 1.6% 21.5% -13.0%
IA UK All Companies NR 12.5% 5.9% -8.7% 27.6% -11.2%
Past performance is not a guide to the future. Source: Artemis/ Lipper Limited, class I accumulation units to 30 June 2024. All figures show total returns with dividends and/or income reinvested, net of all charges. Performance does not take account of any costs incurred when investors buy or sell the fund. Returns may vary as a result of currency fluctuations if the investor's currency is different to that of the class.

Philip Wolstencroft

Manages:

UK and European equity strategies

Philip is a partner and the creator of an investment process (SmartGARP™) which Artemis uses to help choose stocks for five of its funds.

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