Another new name at the top of Winterflood’s list of monthly movers in London’s investment company space. We reveal which fund is having its moment in the sun as well as the names of the three investment companies that have muscled their way onto the broker’s latest list.

ByFrank Buhagiar•15 Jul, 2024•

The Top Five

Castelnau Group (CGL) storms to the top of Winterflood’s list of investment company monthly movers. Shares in the flexible investor are up +27.5% on the month, an increase on the previous week’s +17.2% gain. The lion’s share of the increase was made over the last few trading days of the week ended Friday 5 July 2024 after a Net Asset Value update issued on 4 July showed net assets stood at £317.5m as at 28 June 2024. The near one-third increase on the £236m reported as at 31 May 2024 largely down to a +45.7% jump in the value of Dignity – the funeral operator accounts for over 70% of CGL’s total assets.

Downing Strategic Micro-cap (DSM) finds itself back on the list, again. Shares in the micro-cap investor, which are up +20.1% on the month, appear to have reacted positively to the company’s press release of 8 July 2024 CIRCULAR & NOTICE OF REQUISITIONED GENERAL MEETING. Shareholders requisitioning a general meeting doesn’t sound like an obvious cause of a share price spike, especially when the fund in question is in the process of winding up and returning funds to shareholders.

The shareholders who requisitioned the meeting are named as Milkwood Capital whom the Board suspects is looking to gain control of the Board and ‘acquire the Company’s assets on the cheap by avoiding making an offer for the entire Company’. Among the resolutions put forward by Milkwood is one that aims to prevent the Board from declaring any dividend, return of capital or other distribution on or prior to the Requisitioned General Meeting. The Board goes on to point out, however, that the Special Dividends already declared on 3 April 2024, 28 May 2024 and 17 June 2024 will not be affected by the outcome of the general meeting. The general meeting is due to be held on 5 August, so won’t have to wait too long for the next instalment of this long-running saga.

Tritax EuroBox (BOXE), another new name to make it onto the list courtesy of a +15.2% gain on the month. Shares have been in demand ever since news broke out that Brookfield Asset Management was thinking of making a cash offer for the logistics real estate investor. Brookfield better get their skates on though for, as per BOXE’s 1 July announcement, the Board revealed that, following the announcement of Brookfield’s possible cash offer on 3 June 2024, it is in discussions with a number of parties from whom it has received and/or solicited expressions of interest regarding a possible offer for the Company.

Augmentum Fintech (AUGM) drops from first to fourth on the list after the fintech investor’s shares saw their gain on the month shrink to +14.1% from +18.8% previously. The shares have benefited from decent news flow in recent weeks including the latest full-year results and news that the South Yorkshire Pensions Authority has acquired a 3.99% stake in the fund. The shares though may need another positive update to make it onto next week’s list.

The Schiehallion Fund (MNTN)completes the top five – shares are up +14%. No material news out from the growth capital investor over the past month but the share price rise can be traced back to 24 June. That’s around the time speculation broke out that SpaceX is planning to sell shares at a valuation of $210bn – as at 30/04/24 SpaceX accounted for 7.3% of MNTN’s NAV. Enough there to give MNTN’s shares lift off it seems.

Scottish Mortgage

Scottish Mortgage’s (SMT) share price finished the week ended Friday 12 July 2024 flat on the month, an improvement on the previous week’s 1% loss. NAV fared worse with a monthly loss of -0.9% compared to a +0.1% gain previously. The wider global investment trust sector finished the week up +3.4% having previously boasted a +2.3% gain on the month. SMT’s ongoing share buyback programme still working its magic it seems.

The Tip Sheet

The Telegraph thinks Aurora Investment Trust is a buy, while This is Money offers up a possible solution for those investors wanting to jump on the Nvidia bandwagon but fear they have missed the boat – investment trusts that hold Nvidia but trade at discounts to net assets.

ByFrank Buhagiar

Questor: Believe in this FTSE 100-beating hidden gem as Gary Channon has

The strapline accompanying the above article is ‘Investment trust bargain: this fund has had a phoenix-like recovery’. The phoenix analogy is appropriate for two Firstly, the fund in question is Aurora Investment Trust (ARR) which back in January 2016 was the UK’s worst-performing fund. January 2016 was the month when value investor, Gary Channon, took over the management of the fund and since then ARR has generated a share price tota return of +80.7%. That’s a little off the FTSE All Share’s +86.2% but, as The Telegraph’s tipster explains, this reflects the discount to net assets at which the share price has been trading at on account of UK stocks falling out of favour. Still, enough there to warrant the phoenix-like recovery tag. If that wasn’t enough, the investment management firm run by Channon is called Phoenix Asset Management Partners!

Questor points the finger at Channon’s value approach for the turnaround in fortunes – a focus on investing in a small number of intensively researched stocks he believed to be trading well below their intrinsic value. The fund holds the likes of sports retailer Frasers Group, housebuilder Barratt Developments and investment broker Hargreaves Lansdown which recently found itself the subject of a £5.4bn bid from private equity.  ARR also has a holding in another Channon-run fund, Castelnau (CGL), the shares of which recently jumped +30% on the back of a +46% increase in the value of Dignity – the funeral services group accounts for over 70% of CGL’s assets.

Questor sees Castelnau’s revaluation as ‘an endorsement of Mr Channon’s approach and reiterate our belief in Aurora, which is 13.5pc invested in the sister fund, giving it a decent exposure to Dignity amid a more balanced portfolio that the manager believes could grow a further 130pc before being fairly valued. Questor says: buy.’

This is Money: The investment trusts to back Nvidia and the AI revolution at a discount

Earlier this year, Nvidia became the world’s most valuable company. The shares have since fallen back but as at the date of the above article had still put on +161% since January 2024 and were up a near +3000% over the past five years. All well and good for holders of shares in the US semiconductor giant who are sitting on spectacular gains. But what about those investors who’d like to jump on the AI bandwagon – Nvidia controls 90% of the market for ‘accelerator’ microchips that power generative AI – but fear Nvidia could be a bubble waiting to burst?

This is Money offers up a solution: ‘It is possible to acquire a stake in Nvidia and the other Silicon Valley names through investment trusts whose shares are at a discount to their net asset values (NAVs).’ The article goes on to highlight well-known names such as Baillie Gifford US Growth, F&C IT, JPMorgan Global Growth & Income, Monks and the soon-to-be combined Alliance and Witan. But “some lesser-known names are also backing the Nvidia supernova’ too. These include:

Allianz Technology – Nvidia 9% of assets; shares trading at 6% discount. Fund also holds the likes of Apple, Meta and Microsoft.

Canadian General Investments – Nvidia 8.5% of assets; shares trading at a 41% discount. Fund holds a diverse range of investments including railway companies.

Manchester & London– Nvidia 32% of assets; shares trading at a 15.5% discount to net assets. This is Money notes fund manager Mark Sheppard holds 57% of the shares, offering ‘considerable incentive to shrink the discount.’

Martin Currie Global Portfolio – Nvidia 9% of assets; shares trading at a relatively small 2.85% discount. The fund holds a number of non-tech investments such as L’Oreal. ‘This may be an option if you feel that your portfolio contains too much tech.’

Polar Capital Technology – Nvidia 10% of assets; shares trading at a 6.72% discount.

Scottish Mortgage – Nvidia 9% of ‘this £11.5billion FTSE 100-member trust whose discount has reduced from 20 per cent last summer to 9 per cent.’

I’m taking a step closer to financial freedom with dividend shares

by Charlie Keough

The Motley Fool

I’m buying dividend shares today so that when I retire, I can live off the passive income. The end goal is to be financially free.

Financial freedom will have a different meaning for everyone. For me, I want to be able to enjoy my later life and use the nest egg I’ve built over the years to supplement that.

Around 75% of my portfolio consists of shares that have a dividend yield of 4%, or higher.

The longer u have for accumulation, the more u will have to spend when u are in de-accumulation. It’s all about the yield, the yield and nothing but the yield.

I’ve bought back into JLEN where the current profit for the Snowball is £1,888.21

8800 shares for 8k yielding 8% and trading at a discount to NAV 18.4%

TENT

Is winding down so I’ve sold at a loss of £1,084.00

TENT has earned £1,301 in dividends which has been re-invested in the portfolio.

RT toghrr@ntlworld.com 82.1.178.93

Given your recent LBOW loss, would it be a good idea to use Stop Losses ? Perhaps a new rule ?

The ultimate aim of the Snowball is to own a portfolio of shares that earn dividends and sit in the account at zero cost.

7% compounded doubles in ten years

7% dividends only fourteen years

Holding the portfolio shares thru thick and thin and there will be plenty of thin.

With reference to LBOW the share should have been sold after the first cash return at 47p, when the dividend policy changed. The lesson is to follow the rules and invest only for dividends and never chase a capital gain.

The LBOW sale doesn’t change the fcast or the target as no income was included in the fcast/target.

The big money is not in the buying or the selling, but in the waiting.
One major advantage of taking the long view is you can afford to ignore the short-term volatility of the stock market.

C Munger

Thursday 18 July

Downing Strategic Micro-Cap Investment Trust PLC special div payment date
Invesco Global Equity Income Trust PLC ex-dividend payment date
JPMorgan China Growth & Income PLC ex-dividend payment date
Montanaro UK Smaller Cos Investment Trust PLC ex-dividend payment date
Schroder Oriental Income Fund Ltd ex-dividend payment date
TwentyFour Income Fund Ltd ex-dividend payment date

Superior SEO with Guest Posts & Edits for multibaggerstocks.org on Uplinke.com
multibaggerstocks.org
lisette_larose@gmail.com
78.46.108.24
Hmm is anyone else having problems with the images on this blog loading ?

I’m trying to determine if its a problem on my end or if it’s the blog.
Any responses would be greatly appreciated.

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by SDCL Energy Efficiency Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

• SDCL Energy Efficiency Income’s (SEIT) annual results to 31/03/2024 show a NAV total return of -4.7%. SEIT paid total dividends of 6.24p (2023: 6.0p) and the NAV decreased to 90.5p (2023:101.5p).
• At the current share price, SEIT yields c. 9.4%. Dividends were covered 1.1x by cash and based on current projections the board announced dividend guidance for the year ending 31/03/25 of 6.32p and reaffirmed the goal of a progressive dividend thereafter.
• The main driver of the NAV decline was a 90bp increase in the weighted average discount rate (WADR) to 9.4%, with this increase taken in the first half of the year to 30/09/2024. Of the 11.7p decrease in NAV per share, 10.8p was due to movements in discount rates.
• During the year, £161m of investment into mainly existing assets was made, with these expected to be value accretive.
• Cash inflow from investments increased 8% to £92m.
• Post-year end, UU Solar was sold for c. £90m, a 4.5% premium to its valuation at 30/09/2023, which, along with external valuations of some assets, helps to provide ‘proof’ of c. one third of the portfolio, the valuation policy and hence the NAV. The proceeds were used to reduce short-term debt.
• Adjusting for this sale, and on a consolidated basis, considering debt both at the trust level and debt within individual investments, SEIT is c. 32% geared on an LTV basis (or c. 43% as a percentage of net asset value).
• SEIT’s portfolio’s Scope 4 emissions were 972k tCO2. Scope 4 emissions in this context are defined as emissions that have been avoided through greater efficiency.
• SEIT currently trades at a c. 26% discount to net asset value (12 month average 31%).
• Tony Roper, chair, said “As the world seeks to address the practical challenges of the energy transition and efforts to decarbonise, energy markets and their supply chains face scarcities and price volatility. In this context, investing in more efficient supply, demand and distribution of energy, which is SEEIT’s focus, becomes increasingly important and valuable. We believe that SEEIT remains well positioned to benefit from this opportunity.”

Kepler View

The increase in the weighted average discount rate (WADR) identified above as the single biggest factor in the overall outcome for SEIT to 31/03/2024 is, it’s important to note, principally a market factor rather than an increase driven by a change in the risk profile or mix of SEIT’s portfolio. And, it represents an unrealised loss. It’s interesting then that this increase, and the consequent decrease in NAV, was taken in the first half of the year, with the second half being flat, and here we are nearly nine months later at the time of writing with actual rate cuts from the ECB, Switzerland, and Canada hinting that the same might be over the horizon for the US and the UK. It seems unlikely that there will be a simple one for one relationship between rate cuts and discount rates, or the discount to net asset value for that matter, but if SEIT and its peers’ wide discounts are principally explained by higher interest rates, then one can reasonably see the reverse as a catalyst for the discount to narrow in the medium term.

Meanwhile, at an operational level, the trust has continued to make progress, seeing earnings growth and making value enhancing investments in its existing portfolio. And if we step back briefly from the specifics of SEIT, our regular readers will know that there is an inexorable trend among real estate investment trusts (REITs) in the UK and elsewhere emphasizing the performance of buildings, notably relating to energy costs. SEIT’s portfolio isn’t, of course, just about buildings, but the fundamental principle of energy efficiency is the same. The annual Scope 4 emissions noted in the summary above are approximately equivalent to average emissions from over 850,000 cars and while on the one hand an investor with specific ESG goals can add this to their tally, the figure is also one way of measuring real world financial savings for the businesses and public bodies that are SEIT’s counterparties.

SEIT isn’t of course alone in trading on a very wide discount and the reasons behind that have been well-explored over the course of the last two years, but briefly boil down to higher interest rates leading investors to take a very cautious view on valuations on private assets, particularly where risk-free rates are an explicit input into the valuation, combined with more attractive valuations for traditional government and corporate bonds as a result of those higher rates.

The SEIT team notes that the underlying portfolio return, if it was left to run off to maturity, would be c. 9.4% p.a. if current gearing just ran off on schedule and 11% levered if gearing was maintained at current levels. Factoring in the discount, the share price return could, if the price converged with NAV, and taking off ongoing charges of c. 1.1%, could result in returns of 13-14% p.a.. Clearly this relies on all investments performing as forecasted, but is a good indication of what the discount could actually mean for returns.

SEIT sold one of its largest assets post-year end for a premium to its last valuation, which is the kind of proof of valuation that investors across SEIT’s peer group have been asking to see for the last two years. This, combined with the point we are in the rate cycle referred to above, means that pieces are beginning to fall into place for first, a stabilisation in asset value and second an improvement in SEIT’s c. 26% discount, which means that its covered dividend is equivalent to a c. 9.4% yield measured at the share price. As the chair notes, the underlying trends behind SEIT are only getting stronger, and this discount and yield seem like a very good point for a long-term investor to initiate a position.

Dividends

In line with previous guidance, in June 2024 the Company announced its fourth interim dividend for the year ended 31 March 2024 of 1.56 pence per share. This provided an aggregate dividend of 6.24 pence per share declared for the year ended 31 March 2024, which was fully covered 1.1 times by cash flow from the portfolio.

Based on our assessment of current cash flow projections, the Company is announcing new dividend guidance of 6.32 pence per share for the year to 31 March 2025, an increase of c.1%, and as before is targeting progressive dividend growth thereafter. The dividend guidance balances growing the dividend with the ability to generate higher levels of surplus cash available for repayment of debt and reinvestment in investment opportunities.

27/06/24