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Artemis invests in Home Retail Group

William Littlewood’s £910m Artemis Strategic Assets fund has initiated positions in battered retailers HomeServe and Home Retail Group in the belief their share price falls are overdone.

The position in Home Retail Group accounts for 0.8% of Strategic Assets' equity longs, with HomeServe accounting for 0.7%.

Littlewood initiated the position in the two retailers after both companies saw steep selloffs in their share prices this year following well-publicised trading difficulties.

HomeServe saw its shares plummet 28% on 31 October after an internal report from Deloitte suggested potential mis-selling.

The company, which is also held by Invesco Perpetual's Neil Woodford in his Income and High Income funds, announced this morning it would begin outsourcing complaints handling in the new year.

Home Retail Group saw its shares fall 17% on 19 October when its interim results showed a steep drop in profits at subsidiary Argos, prompting further concerns the catalogue chain would need to be restructured.

Littlewood said the fall seen at Home Retail Group did not take into account the underlying value of the business and its cash holdings.

"Home Retail Group shares had fallen by over 70% since May, leaving the company valued at a negative enterprise value. HomeServe fell by more than half following a profits warning and enforced changes to their business model. While both of these companies have issues, I think they have been harshly treated by the market," he said.

Shares in both Home Retail Group and HomeServe have since staged slight recoveries but remain down 54% and 35% on the year respectively. Artemis said Littlewood bought both companies at a "substantial discount" to current prices.

"Given investors are fearful and volatility is high, I would expect there to be more opportunities like these," Littlewood said.

Strategic Assets has lost 2.8% in the year to 25 November versus an average loss of 3.7% for the IMA Active Managed sector, according to Morningstar.

Source : Dan Jones – Investment Week  

14 December 2011
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