The UK banks shares I've been buying

TL;DR

Lowland Investment Company co-manager Laura Fall discusses their investment strategy, focusing on growth potential, valuation, and diversification.

Transcript

hello today i'm joined by laura fall who is the co-manager of the lowland investment company lowland invests in market leasing businesses that are out of favor so laura how do you ensure that you are not investing in a potential value trap what sorts of qualities do you look for in addition to the valuation it's a great first question and there are... Read More

Key Insights

• 💗 Lowland Investment Company prioritizes investing in growing companies with potential sales and earnings growth, rather than solely focusing on valuation.
• 🫰 The trust has a current overweight position in larger companies, but this is driven by bottom-up opportunities rather than intentional index weighting.
• 🏦 Adding to bank holdings provides diversification and potential benefit from economic recovery, as banks trade at a discount to book value and have excess capital.
• 🧘 Inflation is a significant risk, and the ability to pass on cost pressures varies across companies. Specialist companies with unique products or services may be better positioned to manage inflationary pressures.

Questions & Answers

Q: How does Lowland Investment Company determine if a company is not a potential value trap?

The company focuses on whether the company is experiencing growth in sales and earnings or has a clear path to future growth, in addition to considering valuation factors.

Q: What is the current allocation of the investment trust to large-cap, mid-cap, and small-cap companies?

The trust historically holds a third of its portfolio in each category, but currently has a slightly higher allocation to larger companies. The allocation is determined by bottom-up opportunities rather than targeting specific index weights.

Q: Why has the trust been adding to its holdings in banks?

Lowland Investment Company believes that banks, such as NatWest and Lloyds, offer attractive valuations and are well-positioned to benefit from the economic recovery. These banks are trading at a discount to book value and have excess capital, which could lead to potential capital returns.

Q: What is the main risk that investors should watch out for in 2022?

Inflation is identified as one of the main risks, as some companies are struggling to pass on cost pressures. Rising commodity prices and input costs, as well as volatile commodity prices, could lead to margin pressures. However, companies specializing in unique products or services may have more pricing power and be better able to manage inflationary pressures.

Summary & Key Takeaways

• Lowland Investment Company looks for companies that are growing in terms of sales and earnings, or have the potential for future growth, in addition to considering valuation.

• The investment trust currently has a higher allocation to larger companies, but their target is determined by bottom-up opportunities rather than index weights.

• The trust has been adding to their holdings in banks, such as NatWest and Lloyds, due to attractive valuations and the expectation of economic growth benefiting the banking sector.