London, UK, 1 November 2021

Edison issues review on Lowland Investment Company (LWI)

Lowland Investment Company (LWI) co-manager James Henderson argues that the current environment of higher inflation and interest rate expectations and supply squeezes should favour industrial stocks that have pricing power and direct access to their end-markets. The trust currently has an industrials weighting roughly twice that of the UK large-cap index, underlining its credentials as an all-cap investor with a bias to value over all-out growth. Henderson and co-manager Laura Foll have turned in a good year of performance for the trust's FY21 (ended 30 September), with NAV and share price total returns in excess of 50%, well ahead of UK large-cap, mid-cap and high-yield equity indices. Despite this, and LWI's near-5% dividend yield, the trust currently trades at a discount to NAV of c 8%, wider than both short- and longer-term averages.

At 28 October 2021, LWI's shares traded at a 7.7% discount to cum-income NAV. This is appreciably wider than the one-, three-, five- and 10-year average discounts of 5.9%, 6.1%, 6.1% and 4.1%, respectively. While in part this does reflect a general widening of investment company discounts amid increased market volatility, only two of the 17 largest trusts in the AIC's UK Equity Income sector traded at a wider discount in late October. This is despite LWI's 4.6% dividend yield being among the highest in the group, backed up by a significant post-COVID income recovery and representing a solid real yield versus the CPI inflation forecast at 4%.

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