How we invest

A classic approach to value investing

The portfolio managers Nick Purves and Ian Lance aim to rotate the Trust’s investment portfolio into those companies which they believe are available at a significant discount to intrinsic value. This involves buying the shares of attractively valued, out-of-favour companies and holding them for the long term until their share prices more appropriately reflect their true value, or until even more attractive ideas present themselves. Typically, the portfolio can be broken down into three distinct categories:

New idea

Fundamentally sound but out of favour businesses trading below intrinsic value

Core ideas

Previously out of favour but fundamentals improving. Still below intrinsic value


Share prices performed well and are now above intrinsic value

Identifying quality and avoiding value traps

Some value strategies simply apply mechanistic measures to identify undervalued stocks but the problem with that is that it can lead an investor towards businesses that are in structural decline. These may be cheap for a reason, with limited potential for value to be realised.

In order to avoid these ‘value traps’, we aim to identify good quality companies that are undervalued. We place great emphasis on financial strength – strong cash flows and robust balance sheets – because it gives us the confidence that a company can survive through a prolonged period of lower profitability caused by company specific issues or an unexpected downturn in the economy.

We aim to avoid lower quality stocks or so called ‘value traps’ by monitoring companies against three different types of risk:


We are careful not to overpay for an asset and conservative in our approach to assessing intrinsic value


We focus on the sustainability of a company’s profitability, which helps us to avoid situations where a business may be vulnerable to cyclical or secular decline


We avoid businesses with weak balance sheets because debt can overwhelm equity holders whose interests can be substantially diluted

Past performance should not be taken as a guide to the future and dividend growth is not guaranteed. The value of your shares in Temple Bar and the income from them can fall as well as rise and you may lose money.

This Trust may not be appropriate for investors who plan to withdraw their money within the short to medium term. A portion (60%) of the Trust’s management and financing expenses are charged to its capital account rather than to its income, which has the effect of increasing the Trust’s income (which may be taxable) whilst reducing its capital to an equivalent extent. This could constrain future capital and income growth. The effect of borrowings to finance the Trust’s investments is to magnify the volatility of its price and potential capital gains and losses. We recommend that you seek independent financial advice to ensure this Trust is suitable for your investment needs.