Edison issues review on The Law Debenture Corporation (LWDB): One plus one equals three

London, UK, 29 Februar 2024

Edison issues review on The Law Debenture Corporation (LWDB): One plus one equals three

FY23 results for The Law Debenture Corporation (LWDB) show this well-proven, rare combination of a UK investment trust and the cash-generative professional services operating business (IPS) continuing to generate strong results. Performance was ahead of the broad UK equity market benchmark, within which IPS growth was just above the upper end of its mid- to high-single digit growth target and DPS was increased by 4.9%. The results build on LWDB’s long-term record of outperformance versus the benchmark and peers and above average DPS growth.

The portfolio is 88% invested in UK equities, of which c 50% is in larger companies and the balance in small- and mid-cap companies. UK equity valuations are very low in absolute and relative terms. The LWDB prospective P/E is less than 10x and the portfolio yield is the highest since 2008, with much better cover. The investment managers see strong opportunities across the market but particularly in heavily sold domestic earners, especially among smaller stocks. They expect the UK economy will continue to perform better than expected as interest rates begin to fall and real income rebuilds. Regardless, they are focused on companies rather than the economy and identify many good quality, well-managed businesses, with strong prospects or recovery potential that is far from reflected in their valuations. 

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