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Small is supposed to be beautiful. Not only does historical evidence show that smaller companies tend to outperform their larger peers over the long term, but in the present Brexit climate

more compact operators are widely regarded as better able to weather the economic challenges that lie ahead. Perhaps all this will play to the strengths of the Aberforth Smaller Companies

Trust. This £959 million investment vehicle is packed full of British businesses of modest market value, typically below £1.3 billion. True, it has underperformed its benchmark over one,

three and five years since its launch in 1990 and its shares have fallen by more than 28 per cent this year, also lagging its reference — but its performance over the three months to the end

of October has been considerably stronger and its investment approach seems to be coming back into fashion. Aberforth Smaller Companies Trust is managed by the Edinburgh-based Aberforth

Partners. Its stated aim is to outperform the Numis Smaller Companies Index over time and it tries to do this by buying value stocks, or businesses whose worth it thinks is not yet

recognised. It’s certainly taken some bold positions. While it is less weighted towards the financial sector than its reference, it has sizeable holdings in Brewin Dolphin, the wealth

manager, and Provident Financial, the specialist lender to borrowers with inconsistent credit histories. Elsewhere, it has placed a big bet on Reach, which owns the _Daily Mirror_ newspaper,

among others, and has holdings in Wincanton, the logistics provider, and DFS Furniture, the retailer. Top of the pile is a £34.5 million stake in SDL, the technology group known for its

translation software. Advertisement There’s lots to go at here. Brewin Dolphin is in the thick of a sector busily consolidating; indeed, it has shown its willingness to take part, recently

buying the Irish wealth management division of Investec, the financial group. Likewise, logistics is booming, particularly thanks to the rise of ecommerce, but disruptions to the supply

chain during the pandemic have made life difficult for Wincanton recently. Reach, Britain’s largest regional news publisher, has enjoyed a strong recovery in its digital advertising

revenues, DFS has benefited from its improved online operations and fans of Provident Financial believe that it is well placed to capitalise on new (if probably riskier) business during the

economic downturn. Yet part of the problem with value investing is that your choices are likely to come good only once the rest of the market shares your view and prices rise. It is

encouraging for the trust’s investors that, as of the end of October, it had trounced its benchmark over one month and was narrowly ahead over three. It should have been further boosted by

last week’s market rally and the apparent wholesale move among institutions from “growth” to “value” shares, although it remains to be seen how sustained this switch is. Yet the

uncertainties are extensive, not least among them Brexit and the growth of the economy, irrespective of whether there is a UK-EU trade deal agreed this week. The longer-term track record of

Aberforth Smaller Companies is also offputting, albeit diluted somewhat by the attractive dividend yield of 3.7 per cent, helped by a special payout in early March. The shares, up 20p, or

1.8 per cent to £11, trade at a discount of just under 5.4 per cent to last Friday’s net asset value. This column has avoided it at the last two times of looking and there isn’t enough of an

improvement so far for a change of view. ADVICE Avoid WHY Interesting portfolio, but poor long-term performance and Brexit worries are, on balance, too offputting Advertisement AO WORLD

When this column last looked at AO World in January, the shares were stuck in a damaging spin cycle. The market value of the loss-making online electrical goods retailer was shrinking fast,

hovering at just above £400 million at the time, and the shares, at just under 17p, were trading at near-giveaway values. What a difference ten months and a global pandemic can make. Having

risen by just under 350 per cent since the beginning of the year, those shares value the group at £1.9 billion, higher than at its much-hyped flotation in 2014. Some might argue that they

have become expensive. AO World was founded in 2000 as Appliances Online by John Roberts, 47, who is the company’s chief executive. Having initially specialised in the sale of white goods

online exclusively in the UK, it has begun to sell smaller items such as hairdryers and has a mobile phones business. It is profitable in Britain but remains loss-making in Germany, its sole

international operation. The onset of Covid-19 has accelerated the willingness among people to buy larger-ticket items, such as washing machines and fridges, online, no doubt to AO’s

delight. The retailer, which reports its first-half results next week, has briefed shareholders to expect an increase of 57 per cent or so in revenues over the six months to the end of

September to about £715 million, which is some going. Also reassuring, the positive trading momentum seems to have continued even after the high street reopened and Germany has been trading

well alongside the UK. While there was a minor setback in the form of contracting margins in the mobiles division, the group is likely to record a profit this year, about £40 million before

tax, according to Numis. While it is clear that AO World is a much-improved company and has the trading wind behind it, it’s not obvious that this justifies its stock market rating. The

group’s shares — down 7p, or 1.79 per cent, at 395p — carry no dividend, so there is no yield, nor is there likely to be in the near future. Trading for 48 times Numis’s earnings forecast

for next year, these two things make them look far from compelling. Advertisement ADVICE Avoid WHY Improvements to the business don’t justify rating