Specialist value-seeking trust Temple Bar (LON:TMPL) lagged the FTSE All-Share Index in the six months to June 2026. However, this marginal underperformance must be viewed in the context of the stellar returns delivered by the trust in recent years.
Since the half-year end, Temple Bar has resumed its outperformance of the benchmark. And manager Redwheel believes the portfolio continues to look undervalued, which bodes well for future returns.
About Temple Bar
Managed by Ian Lance and Nick Purves, Temple Bar’s investment approach focuses on companies whose market value is at a significant discount to the fair or intrinsic value of the business.
| AIC Sector – UK Equity Income | 5-year share price total return | 10-year share price total return |
| Temple Bar | 150.1% | 188.9% |
| Law Debenture | 90.9% | 266.6% |
| City of London | 87% | 130.5% |
| Aberdeen Equity Income | 85.4% | 98.1% |
| Lowland | 73.4% | 125.9% |
Source: The AIC/Morningstar
Recent returns have been strong as the undervaluation of many UK shares has been realised through corporate takeovers or companies buying back their own shares.
Temporary blip
In H1, Temple Bar delivered a net asset value (NAV) total return of 5.4% and a share price total return of 5.2% as the premium to NAV narrowed slightly from 1.4% to 1.2%. By comparison, the FTSE All-Share Index generated a total return of 7.2%.
The key factor behind the relative underperformance was the fact Temple Bar did not hold HSBC (LON:HSBA) or Rolls-Royce (LON:RR), which together added more than 3% to the FTSE All Share’s return.
Within the portfolio, oil stocks BP (LON:BP), Shell (LON:SHEL) and Total Energies (EPA:TTE) performed strongly. This was in response to the sharp increase in Brent crude prices following the Strait of Hormuz crisis.
Several financials also outperformed, notably Aberdeen (LON:ABDN), Standard Chartered (LON:STAN) and NN Group (AMS:NN). The largest detractors from performance in absolute terms were advertising agency WPP (LON:WPP) and auto maker Stellantis (NYSE:STLA).
Seven new picks
The managers initiated seven new positions in H1. These included FTSE 100 commercial property developer Land Securities (LON:LAND), US food colossus Kraft Heinz (NASDAQ:KHC) and discount retailer B&M (LON:BME).
The other four new buys were French pharma group Sanofi (EPA:SAN), Asian conglomerate Swire Pacific (FRA:SWI), media group Comcast (NASDAQ:CMCSA) and US consumer foods company JM Smucker (NYSE:SJM).
JM Smucker, which has leading brands in coffee, spreads and pet foods, was purchased at a price-to-earnings multiple of approximately 10 times. Its share price has fallen by around one third in the last three or so years.
According to Lance and Purves, this reflects ‘sluggish operating performance and the overpriced acquisition of the Hostess brand in 2023’. However, they believe that ‘operational improvements currently underway and some re-rating of the shares can result in attractive investment returns from today’s level.’
We are fans of Temple Bar, the best performing UK equity income trust over five years. Since Redwheel took over as manager in October 2020 to 30 June 2026, the trust has generated an NAV total return of 216% compared with a total return of 118% for the All-Share Index.
The H1 underperformance was largely down to Temple Bar not owning HSBC and Rolls-Royce rather than any issues with the underlying portfolio. And judging by the seven new positions purchased in H1, the managers continue to find plenty of opportunities.
Furthermore, there is still plenty of re-rating potential in the portfolio, which is valued at around 11 times earnings. That is ‘a meaningful discount to the wider UK market, and around half the valuation accorded to the wider global equity indices’, according to Lance and Purves.
‘Accordingly, the company’s holdings are priced to deliver excess returns over time, and shareholders can look forward to the future with some optimism.’
