September update – a recovery of sorts – and a marked divergence between value and growth stocks

4th October 2019

We participated in five primary opportunities – Primary Health Properties raised new capital whilst there were secondary sell downs in Network International, Motorpoint, Trainline and IP Group, the latter being our third purchase from Woodford Investment Management in the past few months. We also took advantage of the sharp rebound in sterling and bond yields to modestly add to our holdings in Diageo and RELX, following weakness in their shares as a result of their overseas earnings weighting.

In September, the MFM UK Primary Opportunities Fund returned +3.11% compared with +2.95% for the FTSE All Share and +2.71% for the IA UK All Companies Sector.

September proved a relatively volatile month, albeit a positive one for the UK and global equity markets. Oil prices spiked higher on a drone attack on Saudi oil plants which temporarily reduced supply, whilst the US cut interest rates in a bid to boost a slowing economy. Sterling hit its lowest level against the dollar since 1985 on fears that Prime Minister Johnson would take the UK out of the EU without a deal. A swift recovery followed as these fears receded somewhat once the Supreme Court ruled that the government’s prorogation of parliament for such a long period was unlawful.

So, with a political situation that is unprecedented and increasingly uncertain – how do we as investment managers respond? The truth is we carry on doing what we always do, having a well diversified portfolio spread across different sectors and market capitalisations. This means that the portfolio has plenty of earnings diversification both in terms of sector and international exposure – so when sterling is weak, our larger FTSE international names tend to perform well at the expense of our more domestic UK mid and small cap names. When sterling strengthens, the opposite holds. Above all, we aim to invest in good quality companies that will perform well over the longer term. We do not profess to know what the outcome of the Brexit saga will be and we would not wish to take a significant position either way with what is after all both our clients’ and our own money. (R.C.Brown and its directors own more than 6% of the Fund). The past month has seen an acute divergence between growth and value stocks with the former underperforming markedly – a rarity in the past decade where we have seen growth and defensive bond proxy stocks consistently outperform. We are asked regularly if we are growth or value investors, to which our answer is always the same – ‘neither- we are primary market investors.’ The reality is we see opportunities to invest in both ‘growth’ and ‘value’ stocks via our primary opportunities process. We like companies that grow and often companies are raising money for this purpose. But we are of the view that currently the UK market, and particularly UK domestics, such as banks and property, do offer significant value, particularly when compared with other major markets. Clearly the political situation is putting investors off allocating new monies to the UK and it may be sometime before the political situation becomes clearer. However we consider this compelling value hard to ignore and has led us to increase our exposure to UK domestics in recent months – Morses Club, Brickability, Motorpoint and Regional REIT as examples. It may take some time for their lowly ratings to recover, but in the meantime, all pay us for waiting by offering an attractive dividend yield. The yield on our Fund has also increased from c2% to over 2.5% over the past 12 months, reflecting the increase in ‘value’ stocks and adding a little extra income in these challenging times.

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



Network International

Network International is a fast growing payment processing services company in the Middle East and Africa. It services vendors by facilitating them to accept payment from customers and also provides debit, credit and prepaid cards to customers. We acquired the shares as part of a secondary sell down by private equity at an attractive 9% discount to the previous night’s closing price.


Motorpoint is the UK’s largest independent used car retailer offering customers a wide selection of nearly new cars at attractive prices. We acquired the shares as part of a placing from the founder who was reducing his holding due to a divorce. Due to the large sale of the sell down we acquired the shares at an unusually large discount of 17% to the previous night’s closing price – compelling value in our view.


The Trainline is the market leading website and app for booking train tickets in the UK. It also provides its software for other train operators and has recently commenced operations in Europe, a substantially larger market than the UK. Having first acquired the shares at IPO in June, and with the shares trading over 20% above their IPO price, we took the opportunity of a sell down by private equity to add to our holding in this growth company with a leading market position.

Primary Health Properties

PHP is an investment property company specialising in the rental of GP surgeries, pharmacies and dentists. A company that regularly raises money for expansion, hence well known to us, we acquired the shares as part of its latest £75m placing to fund further medical centres.

IP Group

IP is an investment company comprising of holdings in early stage companies, providing seed capital and resources in return for equity in companies spun off as a result of research. It has partnerships with UK universities including Oxford, Cambridge and King’s College London. We acquired the shares as part of a sell down of Woodford Investment Management’s 20% stake as it looks to raise money for its gated Woodford Equity Income Fund. Due to the large nature of the overhang and the market’s knowledge that Woodford needs to raise money, we bought at a 13% discount to the prevailing price. The shares have moved higher since and continue to trade at a significant discount to net asset value.




We sold the remainder of our holding in this real estate company for profits to fund the new primary opportunities available to us in the property sector.

TI Fluid Systems

We took advantage of a recovery in cyclical, value type stocks to sell our remaining modest holding. Ultimately the shares have been a disappointing performer and whilst they remain modestly valued, will continue to be buffeted around by global trade tensions.

Blue Prism

We sold our remaining modest holding in this artificial intelligence company, using the funds to invest in what we consider better value opportunities, albeit we will continue to follow the company closely as is likely to raise further funds for expansion in the future.

Savannah Petroleum

The shares of this Niger based company have recovered sharply following ministerial consent of the assets they are acquiring in Nigeria. We took advantage of the sharp gains to reduce our holding.


Cumulative Performance (Total Return %)– September 2019

Fund/Benchmark Name Year to 30/09/2019 3 Years to 30/09/2019
5 years to 30/09/2019
Since Inception (28/05/1997)
MFM UK Primary Opportunities P Acc -1.07 30.20 52.47 406.12
Quartile Ranking – IA UK All Cos 3 1 1 1
IA UK All Companies -0.02 19.92 36.58 264.52
FTSE All Share 2.68 21.69 38.89 283.67


Discrete Annual Performance (Total Return %)– September 2019

Fund/Benchmark Name Year to 30/09/2019 Year to 30/09/2018 Year to 30/09/2017 Year to 30/09/2016 Year to 30/09/2015
MFM UK Primary Opportunities P Acc -1.07 7.56 22.36 15.81 1.12
Quartile Ranking – IA UK All Cos 3 1 1 2 3
IA UK All Companies -0.02 5.54 13.65 11.74 1.93
FTSE All Share 2.68 5.87 11.94 16.82 -2.30

Source: FE 2019


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 or by request at: