August £426.00

September £935.00

October £658.00

Quarter total £2,019.00

(All subject to change)

Additions to the Snowball, shares bought in SUPR after the xd date.

Cash to re-invest £8,348.35.

August dividends.

All baby steps.

GRS but GR.

£100k today or a £5k passive income?

I know which I’d prefer © Provided by The Motley Fool

by Ken Hall

These days it feels like everyone is hunting for a passive income stream. A rising cost of living, stagnating wages, and desire to do and see more are making life expensive for me.

One thing that really got me thinking is compound interest. I thought I’d dive in and see which would be better for me: £100k today (by some miracle!) or a £5k annual income.

Building a £5k passive income

First thing’s first, let’s think about where this money could come from. It could be from a side hustle, or in my case, I think some savvy FTSE 100 investments could do the trick.

The Footsie has an average 3.6% dividend yield right now. That means a £10,000 investment matching the large-cap index would give you £360 per year in dividends on average.

That’s pretty handy, given this would also be diversified amongst the largest 100 UK stocks. That includes well-known companies like Lloyds, J Sainsbury and BAE Systems.

By size it’s the largest at over £12bn. It is also one of the cheapest with a 0.07% ongoing charge and has proven to be popular with passive investors.

Assuming the money is available to invest, the question then becomes: would I prefer a £5k annual income or a £100k lump sum today?

The magic of compound interest

Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

Let’s say I had another 25 years until retirement. The magic of compound interest means that £5k annual income, if reinvested for 25 years at 3.6%, would be worth a lot more than £100k today. Plus, I’d be more likely to spend that lump sum in any case!

In fact, assuming annual reinvestment, that portfolio could grow from £139,000 to £349,000 by year 25. That represents £210,000 in gains just from reinvesting that annual yield.

By year 25, that portfolio would be throwing off over £12k per year in passive income. By then, I just might be ready to start spending on the finer things in life.

Is it possible?

Of course, this is a simplified example to show the power of compound interest and investing discipline. There’s no guarantee that the Footsie will continue to yield 3.6%, and the stock market will almost inevitably have its share of ups and downs in the next 25 years.

However, I think with some hard work and good investing, I can use dividend shares to build a passive income and set myself up for the future.

The post £100k today or a £5k passive income? I know which I’d prefer appeared first on The Motley Fool UK.

££££££££££££££££

7k compounded at 7% for 25 years would equal a yield of 43% and u retain your capital, better if u can add fuel to fire.

I’ve bought back the SDCL shares sold at a ‘profit’ 1581 shares for 1k

Things to consider, your plan will be different to my plan based on your risk reward profile.

One. With compound growth u should make more in your final few years than in all the early years, that’s why life-styling is such a bad idea.

Two. 7k of earned dividends doubles in ten years if u can reinvest the dividends at 7%. Usually there is one or two unloved Trusts to buy.

Three. Belt and braces, u can invest for growth (capital gain) but better with a dividend, just in case Mr. Market doesn’t agree with u at the time.

Four. With a dividend re-investment plan u can welcome falling markets because as the price falls the available yield rises.

Five. Your plan should include an element of Get Rich Slow.

Six. If u want ‘safer’ Trusts in your portfolio like CTY u can pair trade CTY with a higher yielder to earn 7%.

Seven. The longer u earn dividends the closer u will get to the Holy Grail of owning a Trust that pays u a regular dividend and sits in your account at zero, zilch, nothing.

Eight. Stick to your plan until sticks to u.

Nine. Mr. Market has given anyone a great starting point to start their journey.

Ten. GL

Kiplinger

Retirement Income Funds to Keep Cash Flowing In Your Golden Years

Story by Nellie S. Huang

Ah, retirement. No more snarled commutes, demanding bosses or tight deadlines. But after saving for decades, you now have to figure out how to turn your nest egg into a cash spigot. “It’s a big moment going from earning an income to not earning an income. There’s a lot of emotion and change,” says Jeffrey DeMaso, editor of The Independent Vanguard Adviser, a newsletter for Vanguard fund investors.

Re-engineering your portfolio from accumulation mode to decumulation mode can be daunting. You’ll have to get a handle on how much you need for essential expenses, and you’ll need a strategy to cover them for the rest of your life. “The biggest fear people have about retirement is running out of money,” says Anne Ackerley, head of retirement business at BlackRock.
Fortunately, a variety of products and services – some new, others new-ish – are designed to help people spend and invest their savings wisely in retirement. Some are available only in certain workplace retirement savings plans, so access depends on whether it’s offered in your plan. Other funds or services are available to all individual investors. We’ll walk you through some of the options. All data and returns are through November 30, unless otherwise noted.

Look for retirement income strategies in your 401(k)
The first place to look for help is your workplace retirement plan. The SECURE Act, a broad package of changes to rules governing retirement and retirement savings plans, eased the way for corporate retirement plans to include annuities, which are insurance products that pay fixed annual sums, typically for life. In response, some 401(k) plans are beginning to offer target-date strategies with an annuity component that offers a paycheck-like experience in retirement.

Like their conventional target-date-fund predecessors, target-date-plus-annuity strategies invest in multiple asset classes that shift over time to a more conservative mix as you age. The twist is, at a certain point along that glidepath some of your contributions are directed to an annuity. BlackRock’s LifePath Paycheck and Nuveen’s Lifecycle Income series are two examples. Both will be available in some retirement plans this year.

The way the annuity portion works varies. Nuveen’s funds invest a portion of the bond portfolio in an annuity at the start of the series’ glidepath, 45 years before retirement. The annuity allocation starts at 2.5% of the portfolio and increases to 40% at the end of the glidepath. Allocations to the annuity contract included in BlackRock’s LifePath Paycheck series, by contrast, start when investors hit age 55. The annuity makes up 8% of the overall portfolio to start and climbs to 30% over the next 10 years. In both series, the annuities have the risk-and-return profile of a broad-market bond fund.

Both the BlackRock LifePath Paycheck and the Nuveen Lifecycle Income series allow investors to choose when to turn on the income. At what age those payments can begin, however, depends on the strategy. Investors can also choose never to turn on the income feature if they don’t want or need it. Plus, the annuities are institutionally priced (read: less expensive). There’s no transaction fee or sales charge related to the annuity part of the target-date strategies, though there is a fee that the insurance company pockets. According to Nuveen, it is reflected in the annuity payout.

Expect more retirement funds with annuities to appear in workplace retirement plans. “Within 10 years, target-date funds with income are going to be the main thing in retirement plans,” says BlackRock’s Ackerley.

Not all retirement income strategies in 401(k) plans are tied to annuities. The Fidelity Managed Retirement target-date funds employ a cash-withdrawal strategy that starts at 4% of assets and gradually increases over time as you age. Choose the fund that aligns closest to the year you turn 70. Experts set the glidepath and do the ongoing asset allocation for these 401(k) offerings, as well as create a payout schedule for you. “The idea is to provide stable payments and still have a remaining balance,” says Sarah O’Toole, a Fidelity institutional portfolio manager.

T. Rowe Price has a 401(k) plan offering called Retirement Income 2020 that aims to deliver a 4%-to-5% payout a year in monthly distributions, but it depends on the fund’s return. There are only two vintages so far: 2020 and the soon-to-launch 2025. “When the portfolio does well, the payout goes up. When it doesn’t, the payout goes down a bit,” says fund comanager Andrew Jacobs van Merlen. These strategies are also available to retail investors as mutual funds (more on them later).

Retirement income funds for everyone
If your 401(k) plan doesn’t offer retirement income funds like the ones we just mentioned, or a defined-contribution plan isn’t available to you, you have a handful of mutual funds and financial services to consider. Unfortunately, none feature the guaranteed income of an annuity.

We should note that retirement income funds aren’t a new idea. Several firms, including Fidelity and Vanguard, launched managed-payout funds in 2007 and 2008 that promised to provide a steady income stream. The timing was terrible (around the arrival of the Global Financial Crisis). The funds didn’t catch on.

That said, the stars are aligning for retirement income funds today: More retirees are looking for help managing income, interest rates are higher, and the stock market is recovering.

We don’t expect you to put all your eggs in one basket – or one fund – to create a workable retirement income strategy. In most cases, retirees should consider generating cash flow from multiple strategies and sources. “You’ll need an array of tools and products,” says T. Rowe Price’s Jacobs van Merlen, taking into consideration the risks you’re willing to take, how long you’ll live, and how much you’ve already saved, among other things. Bear that in mind as you peruse the following options.

The aforementioned T. Rowe Price Retirement Income 2020 (symbol TRLAX, expense ratio 0.53%) is available as a mutual fund to individual investors. A 2025 version will launch this year. The minimum investment for either fund is $25,000.

The managers aim to generate a 4%-to-5% payout of the fund’s average net asset value over the past five years, but the monthly distribution will vary from year to year depending on the fund’s performance. (For its first five years, the Income 2025 fund will use the average net asset value of T. Rowe Price’s standard Retirement 2025 target-date fund to calculate the payout rate.) The goal is to “live off the income of the portfolio without dipping into the principal,” says Jacobs van Merlen, though there’s no guarantee on that front. So far, the 2020 fund’s annualized return since inception in mid 2017 is 5.9%, which falls in line with the fund’s annual target payout.

At last report, Retirement Income 2020 held roughly 50% in stocks and 50% in bonds, cash and other assets. The underlying funds include some of the firm’s longtime winners, such as T. Rowe Price Growth Stock, Value and Mid-Cap Growth.

Schwab Monthly Income funds – there are three – launched in March 2008 and have been tweaked over time. Their main objective is to provide a monthly income stream, although payouts can vary from year to year, and even from month to month.

Conservative investors who want to preserve principal should opt for the repetitively named Schwab Monthly Income Income Payout (SWLRX, 0.21%), which holds 30% in stocks and 70% in bonds. Monthly payouts are limited to interest and dividend payments from the portfolio’s underlying funds. In a normal interest rate environment, investors might get an annual payout rate of 3% to 5%; they’d get less in low-rate environments. Over the 12-month period ending in October, the fund’s payout rate was 4.15%. But in low-rate environments, the payout rate was lower (for the calendar year 2022, it was 2.42%).

Moderate-risk investors can choose between the Schwab Monthly Income Target Payout (SWJRX, 0.25%) and the Schwab Monthly Income Flexible Payout (SWKRX, 0.25%). Both hold exchange-traded funds, with 50% of assets in stock funds and 50% in bond funds.

Target Payout aims for a steady annual payout of roughly 5%, though it could be higher or lower. The fund’s payout rate was 3.08% in 2022, and for the 12-month period through October it was 5.39%.

Flexible Payout is designed for investors who can deal with more flexibility in their income stream. The fund aims for an annual payout between 4% and 6%, depending on fund performance and the market environment. In the tough stock and bond market of 2022, the fund paid out 2.96%. But for the year ending in October, the fund’s payout rate was 5.19%. Payments from both funds may include some return of capital.

The catch with these funds is that overall returns have been ho-hum. That may be an acceptable trade-off for investors who want a monthly income stream, but in lean years, you will probably get more capital returned to make that happen. Over the past five years, Flexible Payout’s annualized 2.6% return lags 91% of its peers (moderately conservative allocation funds). Income Payout’s five-year return, 1.9%, lags 78% of its peers (conservative allocation funds).

A trio of American Funds Retirement Income Portfolios are worth a look for investors who are less dependent on a regular check and seek a little more capital appreciation. These funds make quarterly distributions and have no payout target because they’re designed to be a resource for discretionary spending, not necessary expenses. But the experts behind the funds suggest ranges for annual withdrawal rates for each portfolio. In rough markets, for instance, investors should consider lowering their withdrawal rates.

Investors in the series’ most conservative portfolio, American Funds Retirement Income Portfolio – Conservative (FAFWX, 0.64%, yield 3.28%), might consider a suggested annual withdrawal rate of 2.75% to 3.50% of their assets in the fund. The portfolio holds almost 40% in stocks and 60% in bonds and cash. The ideal withdrawal rate for the moderate fund, American Funds Retirement Income Portfolio – Moderate (FBFWX, 0.68%, 3.02%), which holds roughly 50% in stocks and 50% in bonds, ranges between 3.00% and 3.75%. And the most aggressive strategy, the American Funds Retirement Income Portfolio – Enhanced (FCFWX, 0.69%, 2.79%), which holds 60% in stocks, has a suggested withdrawal range of 3.25% to 4.00%.

These portfolios, which hold some of American’s best mutual funds, including American Balanced, have annualized returns over the past five years that are middling at best. But they have experienced below-average risk relative to peer funds. In 2022, when stocks fell 18% and bonds declined 13%, the Conservative and Moderate funds both lost 10.1%; Enhanced lost 11.1%. Those returns ranked among the top 20% of their peers or better.

Finally, investors interested in a digital advisory service might consider Schwab Intelligent Portfolios. The service helps retirees generate a check from their investment portfolio through a feature called Intelligent Income. Based on the sum of money you invest with the robo service, Intelligent Income helps you figure out how much you need to withdraw and how to invest to stay on track, and it lets you set up automatic checks from your account, paid monthly, quarterly or once a year.

You can stop, start or adjust the payout at any time, says Kristina Turczyn, head of digital advice and wealth solutions at Charles Schwab. “We wanted to offer an easy way to automate the process and generate a paycheck from your own investment portfolio.” There’s no advisory fee for Intelligent Portfolios and no additional fee for Intelligent Income.

These 2 dividend stocks look like no-brainer buys despite challenges ahead.

by Sumayya Mansoor
The Motley Fool

Two dividend stocks I feel could be savvy buys for my holdings are Impact Healthcare REIT (LSE: IHR) and Diageo (LSE: DGE).

Here’s why I’d be willing to buy some shares when I next have some investable funds, despite credible challenges to the payouts. And it is always worth remembering that dividends are never guaranteed.

Healthcare properties
Impact Healthcare is set up as a real estate investment trust (REIT), meaning it must return 90% of profits to shareholders. The firm specialises in care homes, and ties its tenants down to long-term, inflation linked contracts.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
At present, Impact owns and operates 138 care homes across the UK. Its potential to grow earnings and returns is exciting for me as the UK population soars and will require care in the years to come.

From a fundamental view, the shares offer a dividend yield of 7.9%. For context, the FTSE 100 average is closer to 3.5%. Furthermore, the shares look good value for money on a forward price-to-earnings ratio of 8.5.

Moving to the bear case, issues in the commercial property sector have occurred due to higher interest rates. These have hurt net asset values (NAVs). However, the bigger challenge Impact faces is potential staff shortages in the care sector. It’s all well and good growing its portfolio and owning many care homes, but they can’t operate without qualified staff. I’ll keep an eye on this, but I believe it won’t be a deal breaker when it comes to shareholder value in the longer term.

Cheers to that.
Premium alcoholic drinks giant Diageo really doesn’t need much of an introduction, in my view at least. As the owner of some of the world’s favourite tipples, with a vast presence, immense brand power, and fantastic track record, I reckon the shares are a no-brainer buy for my portfolio.

Diageo has been coming to terms with economic turbulence in recent months, and this has been reflected in its share price fall, with performance being impacted too. High inflation and interest rates have left many consumers struggling with higher essential bills. Luxuries like premium alcohol aren’t atop the priority list of most, and sales have been falling, especially in the Caribbean and Latin America, two key growth markets.

I reckon these short-term challenges may distort the view of what looks to me like an excellent stock. Firstly, there’s no denying Diageo’s brand power, and there aren’t many firms in its industry that can boast a presence of selling products in 180 countries globally. Plus, as interest rates come down, I reckon spending will increase once more. This could help boost earnings and returns.

The beauty of the recent dip is it has allowed investors like me to gain a better entry point. At present, Diageo shares trade on a price-to-earnings ratio of 16. This is lower than its recent average.

Now for the cherry on top. A dividend yield of 3.8% may not sound mammoth. However, as a Foolish investor, I’m more concerned about consistent payouts. Well, Diageo is nothing if not consistent. The firm has paid a dividend for close to 40 years in a row. It has also increased it for many of those, giving it the deserved moniker of Dividend Aristocrat. However, I do understand that the past isn’t a guarantee of the future.

The post These 2 dividend stocks look like no-brainer buys despite challenges ahead appeared first on The Motley Fool UK.

££££££££££££

Mr. Market hasn’t presented any ‘bargains,’ yet so I might have to re-invest the Snowball funds, mostly in BSIF and collect the next dividend and then re-appraise.

by Mark David Hartley

I’m not going to sugarcoat it. 

Building a lifelong passive income strategy is not easy. If you really want to retire comfortably you’ll have to put in the work — and the money — to make it happen. 

Shortcuts and get-rich-quick schemes seldom work. 

With that said, this is my three-step strategy to building a passive income stream to retire in style.

Step 1: Open a Stocks and Shares ISA

I don’t need a Stocks and Shares ISA to begin investing but it’ll certainly make my money go further.

See, with a Stocks and Shares ISA, I can invest up to £20,000 a year tax-free.

Depending on my returns, the ISA fees are likely to pale in comparison to the amount the tax break saves me. There are several options available for UK citizens to open a Stocks and Shares ISA and start investing today.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Step 2: Invest in a portfolio of high-yield dividend shares

So what shares should I put in my ISA?

While it might seem attractive, it’s usually best to avoid ‘flavour of the month’ shares like booming tech stocks. These might bring short-term gains but usually lack resilience and seldom pay dividends.

Well-established companies that pay high-yield dividends offer more consistent returns even when markets are stagnant.

A good example that has served me well is Vodafone Group (LSE:VOD). The 40-year-old telecoms firm pays a huge 10% dividend yield with consistent semi-annual payments over the past 10 years.

In its latest 2023 results, the company reported an impressive net profit margin of 23.59%, with earnings per share (EPS) at 39p. Even though the share price has fallen 48% in the past five years, the dividend yield still makes Vodafone attractive. With the price now the lowest it’s been since the 90s, analysts estimate Vodafone shares are trading at almost 70% below fair value.

It’s important I create a diversified portfolio of shares, so I’d add some companies with lower dividends but a more stable share price. I could also add some ETFs to offset unexpected market volatility. 

Step 3: Reinvest dividends and contribute further

For the final step, it’s important to ensure I benefit from the magic of compound returns. Using a dividend reinvestment plan (DRIP), I would reinvest my dividends and maximise the value of my investment.

More importantly, I should continue to make some monthly contributions to my investment. Even just a few hundred pounds a month can make a real difference in the long term.

For example, a £10,000 portfolio with an average 5% dividend yield and 5% share price increase per year would grow to around £16,000 after 10 years.

The same investment with a DRIP and a £200 monthly contribution would net me almost £65,000 in the same period. In 30 years, it would be up to £580,000, paying me £26,770 a year in passive income.

In reality, dividend yields and share prices fluctuate regularly, so final amounts could differ vastly. However, these are conservative figures that an average investor like myself could typically expect to achieve.

The post My 3-step strategy to retire early with life-long passive income appeared first on The Motley Fool UK.

Three reasons why markets may be creaking – and three trends to watch

Russ Mould  Tuesday, August 6, 2024

AJ Bell

A market storm is emerging from a seemingly cloudless summer sky. The question now is whether this is just a tempest in a teapot, and the result of thin trading volumes as the big hitters head to the beach and leave deputies and juniors in charge, or whether it is the harbinger of a more serious – and bearish – shift in market sentiment.

Tracking the yen, the VIX index and the Dow Jones Transportation index might help investors to work out what is coming next, as the worries over the trajectory of the US economy, a rally in the yen and stretched valuations put stock markets to the test.

The NASDAQ is up 110% in the past five years and the S&P 500 by 82%, so investors are now facing the latest test of the old adage that ‘markets go up the escalator and come down in the elevator’. There are many possible reasons for why this squall has seemingly appeared from nowhere.

First, equity (and to some degree bond) markets have priced in the ‘perfect’ scenario of a cooling in inflation, a soft landing in Western economies (and thus corporate earnings) and rate cuts from the Fed, Bank of England and others. Any deviation from that path could therefore lead to trouble – either stickier inflation, economic and earnings disappointment or slower-than-expected rate cuts.

Deviations from that path can be found. Rate cuts have come more slowly than hoped (and the Fed has yet to deliver, after the market started 2024 looking for six, one-quarter point cuts from the US central bank). Inflation has proved stickier and there are signs that the US economy is slowing – unemployment is up, the housing market is a mess and the latest purchasing managers’ index for manufacturing showed weak orders and sticky prices. A US slowdown is not priced in at all – if anything markets were more concerned about it overheating earlier this year – and those with long memories will remember how frantic rate cuts in 2000-02 and 2007-08 failed to stave off a bear market in stocks, because the economy tipped over and corporate earnings fell far faster than the headline cost of money.

Second, the yen is rallying. The Japanese currency has been a major source of global liquidity, as major market players have shorted it, borrowed against it and used that money to go for long risk assets around the globe. The Bank of Japan’s belated efforts to raise rates and defend the yen may be turning off the tap, even if Western central banks are slowly cutting rates to keep liquidity flowing. The yen is rallying, as massive short positions against it are closed out, to drive the currency higher still and force yet more liquidation by the shorts, to create a circle every bit as vicious as it had previously been virtuous.

Source: LSEG Refinitiv data

Finally, US equities in particular have just gone up in a straight line, and done so much faster than GDP growth, or corporate earnings or cash flows. The result is that US equities look expensive. According to FactSet, the S&P 500 trades on 20.6 times forward earnings against a 10-year average of 17.9 and the S&P 500’s market’s capitalisation represents 160% of GDP, an all-time high. On top of that, according to Professor Robert Shiller, the US stock market trades on a cyclically adjusted price/earnings ratio (PE) of 35, a figure only exceeded in 2000 (and that did not end well).

As the old saying goes, valuation never tells you when there may be trouble (or an opportunity), but it will tell investors how far things can go (up or down) before something snaps back the other way. And those numbers suggest either prices must fall some way, or earnings must surge quickly for stock markets to regain their equilibrium – though UK equity prices are nowhere near as stretched as they are in the USA.

Ultimately, valuation will set a high and a floor and they are the best arbiters of prospective returns over the very long term. But to test near-term market sentiment, investors may like to watch three indicators.

The first is the VIX index, the so-called fear index, which measures expectation of US stock market volatility in the month ahead. The long-run average reading since 1994 is 19. It is usually a good counter-cyclical indicator. Sustained periods of low readings, down toward 12 or lower, speak of investor complacency and likely trouble ahead (because it won’t take much to frighten everyone). A sustained run above, say, 30 suggests there is panic around and there may be bargains appearing, but the shake-out in this case could be violent. (This simply distils Buffett’s maxim about being fearful when others are greedy and greedy when others are fearful).

Source: LSEG Refinitiv data

The second is again the yen, given its pivotal role in global market liquidity. If the Bank of Japan backtracks on its promise of more rate hikes that might help, although whether that stokes global inflation expectations is another challenge, and rapid cuts from the Fed and other central banks might stoke money supply and liquidity in the West, but they might fuel inflation fears too – which may be why gold is holding firm.

And for those looking for an indicator that looks at both US markets and the US economy (and we are focusing on those are they are the biggest in the world on both counts) then nothing is usually more helpful than the Dow Jones Transportation index. It has lagged the Dow Jones Industrials and lost momentum. That is usually a bad sign, as it speaks of economic weakness. That indicator needs to start trucking again, or a summer squall could turn more serious.

Source: LSEG Refinitiv data

These articles are for information purposes only and are not a personal recommendation or advice.

Mr. jp-dolls. I thankyou for taking the time to post your kind comments but with the best will in the world I cannot approve your comments for publication. Good luck with what u do as u clearly believe in your project.

The Results Round-Up – The Week’s Investment Trust Results

By Frank Buhagiar•02 Aug, 2024•

Among this week’s results

CT Global Managed Portfolio (CMPI/CMPG) waiting for sentiment to improve

CMPI/CMPG’s Annual Report presumably includes twice as many numbers as most other funds. That’s because the trust, which invests in other investment companies, is comprised of two share categories: Income (CMPI) and Growth (CMPG). NAV total return for CMPI came in at +7.0%; CMPG +12.7%. Neither could match the FTSE All-Share’s +15.4%. But over the longer term, CMPG has returned +271.5% over the 15 years to 31 May 2024 (+9.1% compound per year). That beats the FTSE All-Share’s +242.5% (+8.6% compound per year).

Alternative investment companies partly to blame for the underperformance over the latest full year. As Chairman, David Warnock, writes “Discounts remained wide and interest rates which stayed ‘higher for longer’ led to reduced NAVs and share prices.” Good job then, interest rates have peaked, although Warnock believes “It may require actual cuts to be delivered for sentiment to improve; however, it does appear a more favourable environment for equity markets is a distinct possibility.” Right on cue, CMPG’s share price rose on 01 August 2024, the day of the BoE’s first UK rate cut.

Winterflood: “Negative performance in both portfolios largely attributed to widened discounts over FY and the valuation impact from higher discount rates. Annual dividend +2.9% to 7.40p per share, representing 13th consecutive year of dividend growth.”

Smithson (SSON) painting a positive picture

SSON’s -1.8% NAV per share total return for the latest half year couldn’t match the MSCI World SMID Index’s +3.4%. Chair, Diana Dyer Bartlett, describes the performance as “frustrating”. The investment managers describe it as “like watching paint dry”. As the Chair explains “The performance of the MSCI World Index, which is driven by the performance of a small number of very large technology stocks, has been very strong. The MSCI SMID Index has returned 12.8% over that period, whilst the MSCI World Index has returned 31.6%.”

Bartlett still believes good returns can be delivered by investing in small and mid-cap stocks. And the numbers back this up: SSON’s +8.2% annualised NAV per share performance since inception nearly six years ago is 0.5 percentage points higher than the MSCI World SMID Index. As for the paint-watching, the investment managers add “While we may have to remain patient a little longer while the paint dries, we remain very optimistic that the picture will be worth it.” Seems the market agreed. Shares were in demand on the day of the results.

Numis: “We believe that the portfolio has sound fundamentals that place it in a strong position to outperform over the long run and that the shares offer value on a c.11% discount to NAV.”

Scottish American (SAIN), steady as she goes

SAIN posted a +5.5% NAV total return for the latest half year, a little off the benchmark’s +12.2%. Three reasons cited for the underperformance: “market sentiment”; “not owning certain non-yielding or deeply cyclical companies which have benefitted from the current environment”; and “SAINTS’ diversifying investments in property and other areas have underperformed equities”

The Interim Management Report puts the performance into context by drawing on the fable of the race between the hare and the tortoise – hare bounds ahead at the start but becomes so over-confident stops to take a nap. This allows the tortoise, who has maintained a steady pace, to overtake the hare and finish first. “We firmly believe that all is well: perseverance remains the name of the game. The underlying growth of the portfolio remains strong, if a little more ‘tortoise’ than the market’s ‘hare’. We remain staunch believers that focusing on companies which steadily compound their earnings and dividends ever-higher will stand SAINTS’ shareholders in good stead in the long-term.” Shares definitely a tortoise on results day, barely moved.

Winterflood: “A third of underperformance comes from cyclicals, and another third from not owning Nvidia. Infrastructure (-4.4%) and fixed income (-4.4%) portfolios showed negative returns while property (+3.1%) portfolio made a positive yet modest contribution through income generation.”

Pantheon International (PIN), busting myths

PIN reported a +6.1% increase in NAV per share for the full year. Growth was down to valuation gains but also from the private equity group’s £200 million buyback programme which added +4.7% to NAV. Over ten years, annualised NAV per share growth stands at +13.5%. The portfolio continues to perform well with underlying investments clocking up +17% EBITDA growth and +14% revenue growth. Growth just half the story. Avoiding losses the other and, here too, PIN has a strong track record. The fund’s realised and unrealised loss ratio for all its investments over the last 10 years is just 2.3%.

Chair, John Singer CBE, explains that, as well as the corporate objective to deliver an attractive risk-return over the long term, the fund is on a mission “to dispel the myths that have surrounded the private equity sector for so long”. So, PIN is increasing its marketing efforts to widen its appeal “And we will continue to do this in the spirit of transparency and communication”. That’s the spirit. Market liked what it heard too, share price ticked higher.

Numis: “PIN’s shares currently trade on a c.33% discount, which we believe offers significant value”.

JPMorgan: “Overall we like PIN’s approach to capital allocation and it remains one of our top picks among the diversified listed private equity companies. We remain Overweight.”

RIT Capital Partners (RCP), a fund built for the times

RCP Chairman, Sir James Leigh-Pemberton, described the flexible investor’s half-year investment performance as solid with the NAV per share increasing by 4.2% (including dividends). All three strategic investment pillars – Quoted Equities, Private Investments and Uncorrelated Strategies – performed positively. RCP’s objective is to grow shareholder wealth meaningfully over time, through a diversified and resilient global portfolio. And the numbers show the fund has delivered. “Since inception in 1988, our NAV has averaged an increase of 10.5% per annum (including dividends), with lower volatility than stock markets.”

Looking ahead, the investment managers are not worried about current geopolitical and economic uncertainty, as “Our portfolio is built for times like this – focused on capturing long-term growth opportunities while being resilient through diversification.” Shares showed resilience on results day, closing marginally higher.

Numis: “The discount remains wide at 26% and we believe this offers significant value given improved disclosure and communication, and evidence for progress with realisations in the private portfolio.”

JPMorgan: “We are Overweight RCP which is a constituent of our investment companies model portfolio.”

Henderson Smaller Companies’ (HSL) year of two halves

HSL reported above average NAV growth for the full year: +14.5% NAV total return compares favourably to the AIC UK Smaller Companies sector’s average of +14.1%. The full-year number does not tell the whole story, however. At the half-way stage, NAV total return was a negative 7.7%, meaning NAV put on +24.0% in the second half. Not enough to keep pace with the Deutsche Numis Smaller Companies Index (ex-investment companies). The 3.7% shortfall was put down to stock-specific issues, but fund manager Neil Hermon is not losing much sleep over it thanks to the robust operating performance of the portfolio companies, their sound finances and attractive valuations. Nor is the market it seems, shares only fractionally lower following the results.

Numis: “Henderson Smaller Companies remains one of our top picks within the UK smaller companies sector. We continue to rate the management team highly and believe that following a period of poor performance over the last 2-3 years, the manager is starting to reap the rewards of sticking to the Growth at a Reasonable Price investment approach.”

F&C Investment Trust (FCIT) maintaining balance

FCIT’s +13.2% NAV total return for the half year beat the FTSE All-World Index’s +12.0%. The Fund Manager’s Report highlights the performance of the Magnificent Seven tech giants – Alphabet +31.8%, Microsoft +20.4%, Amazon +28.4%, Apple +10.7%, Nvidia +151.9%, Meta +44.1% and Tesla -20.4% – not just because they have been driving markets, but because FCIT holds every single one of them with all but Tesla featuring in the global fund’s top-ten holdings.

Not that FCIT is putting all its eggs in the technology basket. For “the Company is well positioned to benefit from a broadening of the rally driven by improving economic momentum outside of the US. Our balanced approach within our portfolio across recognised styles, including value, growth/quality and momentum, provides our shareholders with a well-diversified, global equity investment portfolio”. Shares finished the day marginally lower.

Numis: “The fund has a reasonable track record, with NAV total returns broadly in line with the index over one, three and five years.”

JPMorgan: “FCIT also benefits from low fees and is one of the highest quality large cap global investment trusts. We are Overweight FCIT.”