Alliance Trust beats benchmark in first annual results since completing simplification process

Alliance Trust - ATST

The global sector company, Alliance Trust (ATST), has published annual results to 31 December 2019. Total NAV and shareholder returns were 23.1% and 24.3%, ahead of the benchmark’s (MSCI ACWI) 21.7% and the median global sector peer group’s 22.4%. ATST also noted that it increased its dividend for the 53rd consecutive year.

On the corporate side, one of the main developments was the completion of the trust’s simplification process. It is now fully focused on global equities after selling the Alliance Trust Savings subsidiary and all other remaining non-core assets.

Financial highlights

As at 31 Dec 2019

As at 31 Dec 2018

Year-on-year change

Share price




NAV per share




Total dividend




Stock specific drivers and detractors of performance 

The manager’s report included the following notes on stock selection:

“The company’s strongest driver of relative performance in 2019 was Qorvo, a US-based semiconductor company that is one of the three major players that make radio frequency and power amplification systems for mobile devices including mobile phones, tablets and, increasingly, devices included in the Internet of Things. There is a meaningful tailwind to this industry and business as the transition from 4G to 5G occurs across the globe. Qorvo’s share price increased strongly in the fourth quarter after the company posted quarterly results that topped analysts’ expectations.

New Oriental Education (EDU), a leading provider of tutoring services in China, was the second-best contributor to performance. It posted impressive growth over the past year, benefiting from classroom expansions and strong increases in student enrolment. An area of recent strength has been its Overseas Testing segment, which has benefited from reforms that management made to its offering catering to younger students. Greater classroom utilisation and lower outlays for sales and marketing have also provided a lift to its margins.

Among the stocks in the portfolio, the main detractor during the year was Qurate, which was down 58% for the year. Qurate is a leader in TV-based retail shopping, and one of the largest e-commerce retailers in the US. Qurate’s first two earnings reports were disappointments, missing estimates by 17% and 9% as the company experienced changes in product mix that impacted profitability, as well as increases in customer acquisition costs. There have been similar challenges in the past at the company, and these have proven temporary. During the year, the company’s multiple compressed from 10x to 6x forward earnings, making it very attractive from a valuation perspective.”

Manager’s outlook 

The manager discussed the coronavirus in the outlook section:

“The coronavirus has dominated news flow in early 2020. Undoubtedly, the Chinese and global economy will suffer some short-term cyclical impacts. However, whilst there are a wide number of potential outcomes, we believe that most scenarios lead to modestly improving level of global growth by 2021 and beyond. Despite these comments, risks remain skewed to the downside in areas such as the feeble manufacturing sector straining from the onslaught of the trade war impacts. Central banks now have little ammunition left to prevent potential recessionary pressures. This, as well as headwinds from the continued geopolitical risks, the initial shock of the coronavirus, and with US elections and further Brexit trade deal negotiation uncertainty still ahead, may result in subdued equity returns.

Performance momentum in 2019 was yet again dominated by a continuation of the US large cap technology theme although, as we progressed through the year, we saw glimpses of a turnaround towards other parts of the market. The jury is still out on whether we are seeing a blip in the market or whether this is a true rotation back towards value stocks that will be sustained going forward. If the global economy starts to pick up, these stocks may indeed come back in favour; many of them are currently priced at very attractive levels, well positioned for a strong rebound.

Because economic policy and political uncertainty are elevated globally, it is increasingly difficult to predict economic outcomes. In such uncertain markets, diversification and robust risk management is critical.”

ATST: Alliance Trust beats benchmark in first annual results since completing simplification process

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