2008 has been characterised by a pattern of economic and company earnings disappointments, with many shares making new lows. However, this has been punctuated by sharp rallies as the market becomes more encouraged by official intervention. This happened in late January, in March and again in July. Despite little improvement in the economic background, and indeed a deterioration in credit markets, banks and consumer cyclicals rallied strongly in the second-half of the month, continuing into early August. The Fund did not share in this and gave back some of its June relative performance. In July, the FTSE All-Share Index fell 3.6% (total return) and the Fund was down 7.4% (NAV, total return). This took its 2008 to date performance to a fall of 11.1% (NAV, total return) against a benchmark fall of 14.4% (total return).
During the month, Randgold Resources was up 12%, and Imperial Energy gained 22% following a bid approach. British Energy continued with bid discussions. Hedging positions also helped in the month. However, some smaller mining businesses were disappointing, and further sales were made. In the oil and gas, the portfolio emphasises businesses with strong drilling programmes and the potential to grow reserves.
New investments in the Fund include British Airways, HSBC, Firstgroup and Tesco. Overall, the Fund continues with a defensive stance.
Source; SVM TR basis to 31.07.08.
Mining
Despite a slowing global economy, demand for commodities remains high and is only exacerbated by restricted supply. In this environment, mining stocks are well placed. We continue to find value in smaller companies about to start production and larger companies where merger and acquisition activity is on the ascendancy.