February update – equities plummet on corona virus global pandemic fears

10th March 2020

We participated in four primary opportunities in the month – Midwich raised new money for acquisition purposes, whilst there were secondary sell downs in Wizz Air, Hargreaves Lansdown and Gateley.

In February, the MFM UK Primary Opportunities fund returned -8.68% compared with –8.89% for the FTSE All Share and -9.30% for the IA UK All Companies sector.

Equity markets suffered some of their worst falls since the great financial crisis in 2008 as the Coronavirus outbreak spread into Europe. These are unchartered waters so the market’s reaction is understandable in many ways. Nevertheless it pays to listen to what companies are telling us rather than be whipsawed around by the drip feed of 24 hour headlines. Airlines, travel operators and hotel groups are seeing cancellations whilst manufacturers are seeing disruption to global supply lines. It is not so much the disease that the economy fears, but the effects of large parts of the population being quarantined and therefore both trade and productivity being severely restricted for an unknown period of time. Global growth will certainly be lower than was forecast at the start of the year with parts of the world possibly being tipped into recession.

The first rule of investment is to keep calm and stay invested for the longer term. Good quality companies may face short term challenges as a result of the outbreak, but their businesses will be of sufficient quality to weather this.

We have continued to see companies press ahead with raising money in order to fund growth. The IPO market is alive and we are considering a number of IPO opportunities.

History has taught us that with the FTSE yielding over 4%, we are paid to wait and as the extent of the Coronavirus becomes clearer, markets, aided by further central bank stimulus, should re-rate.

Please be advised that the past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested

*Source: London Stock Exchange


***Stock in focus***


Diaceutics is a data analytics business helping pharmaceutical clients commercialise drug treatments using its vast data lake of testing data from over 2500 labatories globally, increasing the success rate market potential of the drug. The shares were purchased at IPO in March 2019 and have risen over 80%. A recent positive update from the Company sent the shares sharply higher as the company expects to deliver revenue and earnings ahead of market expectations.



Wizz Air

Wizz Air is a low cost European airline with particularly strong links to Eastern Europe. We acquired the shares as part of a £500m placing by private equity. After a strong initial double digit rise, the shares are currently under pressure as the Coronavirus outbreak has led to fewer bookings and flight cancellations. In the short term the shares are likely to remain under pressure until the full financial impact of the outbreak is known. Neverthless, Wizz is a high quality, low cost airline that in the long run we expect to benefit from weaker competitors going out of business.

Hargreaves Lansdown

HL is the largest direct to consumer investment platform allowing retail investors to access share dealing, fund management and financial planning. We acquired the shares at a 7% discount to the previous night’s closing price as part of a £500m placing by founder Peter Hargreaves, who sold his first shares in the company since IPO in 2007.


Midwich is a specialist audio visual equipment distributor with a growing global presence. We added to our holding as part of a £40m placing to fund the acquisition of a US company that will give it access to the world’s largest audio visual market. We first purchased the shares at IPO in 2016 since when they have risen by 140%.


Gateley is a full service law firm and the first to IPO in London (in 2015). We added to our holding at a 9% discount to the previous night’s closing price, as part of a placing of partners’ stock.




We trimmed our holding in this sofa and flooring retailer, taking profits following a good trading update.

Tritax Eurobox

We sold this owner of European logistics warehouses as they had held up relatively well in the sharp market downturn and providing cash to invest in this month’s new primary opportunities.


We trimmed one of our largest holdings, a fire safety and water testing company, as it had held up well in the market sell off.

Primary Health Properties

PHP owns and rents primary healthcare facilities such as GP surgeries. Trading at a significant premium to asset value, we decided to take profits with the shares trading at record levels, also mindful that greater value has emerged since the market downturn.

3i Infrastructure

A closed end infrastructure fund – we took profits as the shares had materially outperformed during the market downturn. With the shares trading at a premium to NAV, we consider there to be greater value elsewhere.

Angling Direct

The UK’s largest fishing equipment retailer has been a disappointing performer, albeit the company continues to grow revenues stongly. Following a somewhat disappointing trading update, we took the opportunity to dispose of one of our smallest holdings.


Cumulative Performance (Total Return %)– February 2020

Fund/Benchmark Name Year to 29/02/2020 3 Years to 29/02/2020
5 years to 29/02/2020
Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc 1.93 13.79 38.62 385.84
Quartile Ranking – IA UK All Cos 2 1 1 1
IA UK All Companies 1.03 6.25 19.77 245.03
FTSE All Share -1.43 4.66 19.12 252.26


Discrete Annual Performance (Total Return %)– February 2020

Fund/Benchmark Name Year to 29/02/2020 Year to 28/02/2019 Year to 28/02/2018 Year to 28/02/2017 Year to 29/02/2016
MFM UK Primary Opportunities P Acc 1.93 0.05 11.58 25.22 -2.71
Quartile Ranking – IA UK All Cos 2 2 1 1 2
IA UK All Companies 1.03 -1.33 6.59 18.93 -5.22
FTSE All Share -1.43 1.70 4.40 22.81 -7.32

Source: FE 2020


The past is not necessarily a guide to future performance. Investments and the income derived from them can fall as well as rise and the investor may not get back the amount originally invested. R.C. Brown and Marlborough are authorised and regulated by the FCA. Marlborough Fund Manager are the ACD. The Key Investor Information Document and the Full Prospectus can be obtained via www.marlboroughfunds.com or by request at: info@rcbpo.co.uk