At 16, the number of investment companies trading at 52-week high discounts to net assets continues to be relatively stable. Most fall into one of three categories: alternatives and UK-focused trusts feeling the effect of elevated bond yields and emerging markets funds worried about what a Trump Presidency means for them. Not all belong to a theme. At least one had its own very specific reason.
By Frank Buhagiar
We estimate there to be 16 investment companies that saw their share prices trade at 52-week high discounts to net assets over the course of the week ended Friday 06 December 2024 – one less than last week’s 17.
In line with previous weeks, the majority of names on the latest Discount Watch loosely fall into three categories. Alternatives are still the dominant group with seven names – four renewables, two property companies and one debt fund – concerns higher bond yields will lead to higher discount rates, which would impact valuations, could be at play here. Emerging markets, such as Vietnam, could be hit hard if Donald Trump goes through with his threat of higher tariffs on imports. And UK-focused funds, a higher-for-longer interest rate narrative following the high spending/high borrowing Budget appears to be weighing on sentiment.
One new name on the list which doesn’t require much digging to explain its appearance – Weiss Korea Opportunity (WKOF). Tuesday 3 December’s surprise announcement by South Korean president, Yoon Suk Yeol, that he was imposing martial law (later rescinded) has triggered a wave of uncertainty across the country. What that means for WKOF’s ongoing strategic review remains to be seen. This was launched after its investment manager, Weiss Asset Management LP, admitted that it believes the “opportunity set and strategy for the fund continuing in its current form is less attractive than it has been in the past” and that “it does not think this change in circumstances is likely to improve in the foreseeable future.” Presumably, the investment managers have not changed their view.
The top five
Fund Discount Sector
HydrogenOne Capital Growth HGEN-78.0%Renewables
Ceiba Investments CBA-74.9%Property
VPC Specialty Lending Investments VSL-50.0%Debt
Aquila Energy Efficiency AEET-46.1%Renewables
Care REIT CRT-31.0%Property
The full list
Fund Discount Sector
Golden Prospect GPM-26.50%Commodities & Nat. Resources
VPC Specialty Lending Investments VSL-50.00% Debt
JPMorgan Global Emerging Markets Inc JEMI-14.40%Emerging Market
The Results Round-Up: The week’s investment trust results
Another bumper round up. Of the 14 funds covered, eight clocked up double-digit returns: Barings Emerging EMEA Opps BEMO, Fidelity China Special Situations FCSS, Polar Capital Technology PCT, GCP Infrastructure Investments GCP, Henderson European HET, TwentyFour Select Monthly Income SMIF, JPMorgan Asia Growth & Income JAGI and JPMorgan Indian JII. But which fund is up +1,884.44% since 1995?
By Frank Buhagiar
Barings Emerging EMEA Opportunities (BEMO), beats benchmark by 8.8%
BEMO had a strong year: +17.3% net asset value (NAV) total return beat the benchmark by +8.8%, making it one of the top performing investment trusts in its sector this year. Chair Frances Daley provided an update on the discount and performance targets that are due to be tested in September 2025. “While the portfolio’s outperformance since 2022 puts the performance target within realistic reach, the Board sees a strong likelihood of the discount management target being missed.” If that’s the case, “the Board will consider the case for a tender offer alongside other strategic options, taking account of the Company’s remaining Russian assets.”
Winterflood: “Emerging Europe (Poland, Greece) was key geographic contributor to relative performance, as was South Africa.”
JPMorgan European Discovery’s (JEDT) looking for ‘hidden gems’
JEDT -0.5% NAV total return for the half year fell short of the benchmark’s +1%. While the investment managers acknowledge that “political uncertainty is escalating”, they don’t sound unduly concerned “we cannot second guess the impact of political events on financial markets. The Company’s investment strategy remains focused instead on identifying Europe’s ‘hidden gems’ – great companies with strong fundamentals that have escaped the attention of most investors.”
Winterflood: “During the year, tender offer executed with 21.2m shares tendered. Interim dividend increased to 3.0p per share (2023: 2.5p).”
Fidelity China Special Situations (FCSS) an ‘attractive way to access the market’
FCSS posted a +16.1% NAV total return for the half year compared to the MSCI China Index’s +24.5% (sterling). Finger of blame pointed at the stimulus measures unleashed by the authorities in September. According to Portfolio Manager Dale Nicholls, this led to money flowing “into sectors that were seen as the direct beneficiaries or had been sold off the most.” Nicholls not going to be distracted though “With so much focus on the macro considerations, it can be easy for investors to forget that what really drives superior returns are great companies executing well in growing industries where they have strong competitive advantages.”
Numis: “we believe that Fidelity China is an attractive way to access the market, should investors be comfortable with the risk profile of a leveraged fund with a focus on mid/small caps in a single Emerging Market.”
Oryx International Growth (OIG) discount narrowing
OIG notched up a +6.5% NAV increase over the half year. According to Chairman Nigel Cayzer, NAV is now up +1,884.44% since inception in 1995, a testament to the investment philosophy “to nimbly invest in companies that have good ideas, strong balance sheets and where necessary, augmented management skills to unlock value and generate exceptional returns.” Would have been a good idea to invest in OIG all those years ago!
Winterflood: “Share price TR +20.2% as discount narrowed from 29.1% to 20.0%.”
Templeton Emerging Markets (TEM) suffered due to volatility
TEM’s +7.2% NAV total return for the half year, almost in line with the benchmark’s +7.5%. The investment managers note “it was not all plain sailing and a bout of volatility marked the period.” Despite this “our investment approach, which is anchored in a bottom-up process to finding companies that our analysis indicates have sustainable earnings power and whose shares trade at a discount relative to their intrinsic worth and to other investment opportunities in the market, has managed to steer the performance of TEMIT.”
Winterflood: “Share price TR +12.0%; 46.2m shares (4.1% of share capital) repurchased for £74.3m, providing +0.6% uplift to NAV.”
JPMorgan China Growth & Income (JCGI) rallied in the second half of the year
JCGI’s focus on quality and growth stocks worked against it over the full year (+3.6% NAV total return compared to the MSCI China Index’s +12.7%) as value stocks drove the market higher. It’s a different story over 10 years: NAV total return of +90.0% easily ahead of the benchmark’s +69.0%.
Winterflood: “Absolute performance was ‘year of two halves’, with NAV TR of -13.1% in H1 (amidst continued concerns over Chinese economy and geopolitics) and +19.3% in H2 (with reduced volatility and government stimulus announcement in September providing significant boost)”.
Polar Capital Technology (PCT), AI maximalists
PCT’s +11.7% NAV per share return for the first half, a little shy of the benchmark’s +14.1% sterling-adjusted return. According to the investment managers, “This largely reflected the remarkable performance of a select group of US mega-cap technology stocks” – PCT is “structurally underweight in mega-caps”. Looking ahead, the managers “remain firmly AI ‘maximalists’. As AI begins to more obviously substitute labour, its addressable market will expand far beyond IT spending alone.”
Numis: “The shares currently trade on a c.12% discount to NAV, broadly in line with its closest peer Allianz Technology, both of which we believe offer value.”
Gore Street Energy Storage (GSF) well-positioned
GSF’s -3% NAV total return for the half year brings NAV total return since the 2018 IPO to +42.7%. Updated third-party revenue curves blamed for the value decline during the period, but progress continues to be made on the ground with energised capacity across the portfolio expected to reach over 750 MW by February.
Liberum: “we see its growing US exposure and strong build out in 2024 as positives for the fund. The diversification of geographic markets remains a positive for the GSF portfolio.”
GCP Infrastructure Investments (GCP) recovers lost ground
GCP’s +28.4% total shareholder return for the full year goes some way towards offsetting last year’s -25.2%. The company puts the improved outcome down to “improvements in market factors and the implementation of the capital allocation policy.” NAV total return was up a more sedate +2.2%.
Jefferies: “there is a clear path to repaying the remaining RCF borrowings and potentially further returns of capital beyond the outlined £50m.”
Montanaro European Smaller Companies (MTE) and a new multi-cycle of outperformance
MTE’s +0.7% NAV per share total return for the half year couldn’t match the benchmark’s +1% but over five and 10 years, NAV per share total returns of +55.8% and +243.4% respectively are well above the benchmark’s +17.7% and +94.6%. Chairman R M Curling thinks it’s “too early to say whether the recent underperformance of smaller companies has ended” but “If SmallCap is entering a new, multi-year cycle of outperformance, MESCT stands to benefit” thanks to holding companies that “continue to deliver high returns on equity”.
Winterflood: “Small caps outperformed larger peers in Europe by 2% over the period, while small-cap valuations (12.3x forward P/E) remain at a ‘record’ 13% discount to the wider European market.”
Henderson European’s (HET) ahead of the benchmark
HET had an eventful year. It combined with Henderson EuroTrust, gained promotion to the FTSE 250 and still managed to post a +16.6% NAV per share total return for the year, +1.3% ahead of the benchmark. Both NAV and share price have now outperformed over 1, 3, 5, and 10 years – a full house.
Numis: “Henderson European is differentiated from its peer group with a slight ‘value’ tilt relative to its peers which are more ‘growth’ focussed.”
TwentyFour Select Monthly Income (SMIF), benefits from expertise in credit markets
SMIF’s Chair Ashley Paxton puts the +22.56% NAV total return per share for the year down to “TwentyFour’s expertise in credit markets”. The strong performance meant SMIF was able to issue 18,310,813 new shares “to meet shareholder demand, making the Company one of the most prolific issuers in the investment company sector.”
Numis: “We believe SMIF is an attractive option for income-seeking investors and expect the yield to remain high given exposure to sectors that have benefited from rising rates and continue to offer an attractive return outlook from a diversified portfolio of holdings in less liquid parts of credit markets.”
JPMorgan Asia Growth & Income’s (JAGI) looks to enhanced dividend
JAGI underperformed over the full year (+14.8% NAV total return compared to the MSCI AC Asia ex Japan Index benchmark’s +17.3%). But this is very much an outlier, for in seven of the last ten calendar years the fund has beaten the benchmark. That’s not the only outlier. Chairman Sir Richard Stagg thinks Asia is an outlier too “The global landscape is unpredictable and uncertain. However, the prospects for Asian economies remain positive – particularly when compared to the relatively lacklustre growth projections of developed markets.”
Winterflood: “The Board is recommending an increase in the fund’s enhanced dividend from 1.0% to 1.5% per quarter in order to differentiate JAGI further from its peers and lead to additional demand for its shares.”
JPMorgan Indian (JII) up nearly a fifth
JII clocked up an impressive +18.1% NAV total return for the year. The MSCI India Index posted an even more impressive +27.7%. Chairman Jeremy Whitley notes “Nearly all of this underperformance occurred in the first half of the financial year, and is mainly attributable to the Portfolio Managers’ bias towards higher quality corporate names, at a time when lower quality sectors of the market did well.”
Numis: “we believe there is limited downside given share buybacks and a performance triggered tender for 25% of share capital at NAV less costs.”
QuotedData’s Real Estate Monthly Roundup – December 2024
Richard Williams
Winners and losers in November 2024
Best performing funds in price terms
(%)
Alpha Real Trust
9.5
Globalworth Real Estate
8.5
Residential Secure Income
5.3
IWG
4.5
Custodian Property Income REIT
3.2
Grainger
3.1
Value & Indexed Property Income Trust
1.9
Hammerson
1.8
Workspace Group
1.8
Supermarket Income REIT
1.3
Source: Bloomberg, Marten & Co
Worst performing funds in price terms
(%)
Grit Real Estate Income Group
(17.6)
CLS Holdings
(12.3)
Life Science REIT
(12.2)
Conygar Investment Company
(11.5)
Big Yellow Group
(11.3)
Real Estate Investors
(8.8)
Safestore
(8.0)
Ground Rents Income Fund
(7.6)
Target Healthcare REIT
(7.4)
Urban Logistics REIT
(7.3)
Source: Bloomberg, Marten & Co
Best performing funds
Real estate share prices settled somewhat in November but were still down 1.4% on average having declined almost 5% in October, as the impact of the budget raised the potential for a higher-for-longer interest rates environment. There was an eclectic mix of positive share price movers in the month, led by real estate debt specialist Alpha Real Trust. month end, the company announced that it would seek to delist, offering minority shareholders a tender offer at Residential Secure Income saw its share price trend upwards for a second consecutive month after announcing a proposed managed wind-down in October. Custodian Property Income REIT’s quarterly valuation update shows that values may have turned a corner (see the valuation moves section below), highlighting that its shares may be too cheap. Hammerson’s c operational and balance sheet strengthening, including the launch of a £140m share buyback programme, seems to be gaining traction with investors. The reaction to the proposed change in the basis of Supermarket Income REIT’s management fee (from NAV to share price – see corporate news section) has been surprisingly muted.
Worst performing funds
Potentially higher-for-longer interest rates resulted in many of the highly leveraged or rate sensitive companies suffer once again. Grit Real Estate Income Group, which has a high cost of borrowing, contin ued to lose value as its share price plummeted another 17.6% over the month, and it has halved in size over the 11 months of 2024. The African real estate developer and investor now has an astonishingly low market cap of around £50m, despite owning a freshly capitalised development partner with lucrative US Embassy-backed diplomatic housing projects in the pipeline. Fellow perennial 2024 share price victims CLS Holdings and Life Science REIT also recorded double-digit declines in November. Office landlord CLS faces a tricky few months with several loans due to mature in 2025. Meanwhile, interest rate hedges in place on debt that Life Science REIT is using to develop its flagship scheme expire next year. The two self-storage operators, Big Yellow and Safestore, both suffered as fears for subdued economic growth and a floundering housing market grew. Ground Rents Income Fund made significant progress in its strategy to sell down assets with the sale of its largest holding (see the news section).
Valuation moves
Company
Sector
NAV move (%)
Period
Comments
Care REIT
Healthcare
0.6
Quarter to 30 Sept 24
1.0% like-for-like increase in property portfolio valuation to £672.1m
Custodian Property Income REIT
Diversified
0.4
Quarter to 30 Sept 24
Value of the company’s portfolio was £582.4m, an increase of 0.5% on a like-for-like basis
abrdn European Logistics Income
Europe
(0.3)
Quarter to 30 Sept 24
Portfolio valuation remained stable at €607.5m
Triple Point Social Housing REIT
Residential
(1.4)
Quarter to 30 Sept 24
0.9% decrease in the valuation of the company’s property portfolio
abrdn Property Income Trust
Diversified
(11.3)
Quarter to 30 Sept 24
Reduction reflects price agreed on sale of company’s portfolio
AEW UK REIT
Diversified
6.2
Half-year to 30 Sept 24
Value of portfolio up 2.3% to £215.6m
Warehouse REIT
Industrial
2.5
Half-year to 30 Sept 24
Like-for-like portfolio valuation up 2.3% to £811.3m
LondonMetric Property
Logistics
2.1
Half-year to 30 Sept 24
0.7% property valuation increase to £6.2bn
Land Securities
Diversified
1.4
Half-year to 30 Sept 24
Portfolio valuation up 0.9% to £9,957m
Sirius Real Estate
Europe
1.2
Half-year to 30 Sept 24
Marginal valuation uplift to €2,349.0m
Schroder REIT
Diversified
1.0
Half-year to 30 Sept 24
Portfolio valuation increased by 0.9% to £465.5m
British Land
Diversified
0.9
Half-year to 30 Sept 24
Values up 0.2% to £8,867m
Alpha Real Trust
Debt
0.7
Half-year to 30 Sept 24
Uplift in earnings from high return debt
Picton Property
Diversified
0.3
Half-year to 30 Sept 24
Like-for-like portfolio valuation increase of 0.8% to £721m
Assura Group
Healthcare
0.2
Half-year to 30 Sept 24
Portfolio valued at £3.1bn following private hospital portfolio buy. Remainder of portfolio flat
Helical
Offices
0.0
Half-year to 30 Sept 24
Valuation uplift of 1.3% to £371.9m
Urban Logistics REIT
Logistics
(1.4)
Half-year to 30 Sept 24
Value of portfolio up 0.2% on like-for-like basis to £1.14bn
Hey there would you mind sharing which blog platform you’re working with? I’m planning to start my own blog soon but I’m having a tough time deciding between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your layout seems different then most blogs and I’m looking for something unique. P.S. My apologies for being off-topic but I had to ask!
If instead of starting the Snowball with Investment Trusts the cash was used to buy VWRP, an accumulation world tracker, today the 100k would be valued at 132k and would buy an annuity of around 9.2k.
The Snowball’s fcast for 2025 is £9,120.00 similar to VWRP but with a lot less risk, also you would retain your cash to pass on to your nearest and dearest. I’ll use VWRP as the control share and update as next year unwinds.
Remember, when you want to enter your de-accumulation stage annuities may have fallen.
Canada Life figures show the 65-year-old with a £100,000 pension pot could buy an annuity linked to the retail price index (RPI) that would generate a starting annual income of £3,896. That’s up from £2,195 in the New Year following a 77% spike in rates this year. Oct 22
The Nasdaq’s almost doubled in the past 2 years! Here’s what I think happens next.
Jon Smith explains why the Nasdaq’s done so well recently and flags up a specific stock he thinks could keep rallying.
Posted by
Jon Smith
Image source: Getty Images
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
On Wednesday (11 December), the Nasdaq index closed above 20,000 points for the first time ever. Of course, investors will likely be aware that US stocks have done much better than on this side of the pond in 2024.
Yet it’s interesting to note that thanks to the gains from yesterday, the index is close to being up 100% in two years. That’s some insane growth and I’m keen to dig deeper to see if the party can keep going.
Putting the jigsaw together
First let’s drill down into the numbers. On 28 December 2022, the index closed at 10,213 points. At the moment, it’s at 20,034 points. Yesterday, it gained 347 points, so if it was to replicate that again today, it would be up almost 100% since 2022.
To understand why this is so impressive, it’s key to understand the make up of the Nasdaq composite index. It’s an index that measures the performance of over 3,000 securities listed, with a heavy focus on technology shares. It has a market-cap weighting, meaning that larger companies have a larger impact on the movement of the index. It’s no real surprise that companies like Nvidia, Apple and Microsoft are some of the largest constituents.
From that understanding, I can piece together why the index has produced such large gains. Over the past two years, tech has been the standout sector in the market. The rise of artificial intelligence (AI) has been a key theme for 2024, alongside chipmaking and cloud computing. Vast investor money has poured into these stocks.
Direction from here
I think it’s only natural that at some point in the coming months there will be a likely correction in the Nasdaq. This is healthy and would see investors book some profits. The average price-to-earnings ratio for the index is 47.7. This is far above the benchmark figure of 10 that I use for a fair value. So the stretched value could see some investors a little spooked in the short term.
Yet after any potential pullback, I still see the long-term trend being higher for some key members, which should act to push the overall index up as well. For example, I hold shares in Tesla (NASDAQ:TSLA). The stock’s up 79% in the past year.
Despite the surge, I feel it has fundamental drivers that should help it grow in the next couple of years. This includes the benefits from the new US President, who’s likely to champion domestic firms like Tesla over international rivals. Plans on easing corporate red tape and deregulation should also help the business.
Add into the mix the fact that key progress is being made with autonomous driving and robotics at the firm. As Tesla keeps adapting to the future, I feel investors get more confident in buying more.
Of course, Tesla’s facing much greater competition in the electric vehicle (EV) space than ever before. This will make it harder to keep profit margins as high as they are going forward.
So although I would be cautious about buying Nasdaq index trackers right now, I do feel that any dip can be used to buy selective index members. For example, if Tesla shares moved lower, I’d look to buy more.
£20,000 in the FTSE All-Share at the start of 2024 ? Here’s what an investor would have now
Our writer looks at whether tracking the FTSE All-Share index has been a great investment this year. Spoiler: there’s good and bad news.
Posted by Paul Summers
Image source: Getty Images
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.
As starter portfolios go, I think UK investors could do worse than consider buying a fund that tracks the return of the FTSE All-Share index. In addition to getting exposure to our biggest companies, a fund like this also gives access to smaller firms that have the potential to grow at a faster clip.
Let’s take a closer look at how this index has performed so far this year.
A solid year
As I type (12 December), the All-Share is up 7.7%. This is almost identical to the FTSE 100 and very slightly more than the FTSE 250. Put another way, a £20,000 investment — the maximum one could make into a Stocks and Shares ISA — would now be worth £21,540.
Actually, the result would be even better than that because I haven’t taken into account the impact of dividends. Right now, the yield sits around 3.6%.
For simplicity’s sake, let’s assume that it was the same value in January. This would amount to an extra £720 on that original £20,000 investment.
Of course, there’s always a temptation to spend that money.But reinvesting it would increase the amount that compounds over time. Over many years, that could make an enormous difference to our investor’s wealth.
But here, we hit a snag.
Better buy
As respectable as a 7.7% gain is, it pales in comparison to what the main index in the US market — the S&P 500 — has managed to achieve over the same period.
An investor putting that £20,000 to work ‘across the pond’ will have seen their money grow by an astonishing 28% in 2024 so far. Instead of having £21,540, they’d have somewhere in the region £25,600. Yikes!
Given this, how can it make sense to keep holding an All-Share tracker?
What goes up…
Well, an awful lot of the S&P 500’s outperformance is down to small band of tech titans like Nvidia, Apple and Tesla.
Elon Musk’s electric car company, in particular, has done brilliantly. Its shares have climbed over 70% year-to-date. This is despite the firm missing analyst expectations on revenue earlier in the year and seeing margins squeezed as competition with Chinese rivals stepped up a gear down to the CEO’s burgeoning friendship with Donald Trump. Investors clearly believe that the latter will do everything he can to protect and boost business for the EV-maker. Think tax cuts and de-regulation for self-driving vehicles.
The question, however, is whether this performance will continue into 2025. Personally, I’m not sure it can. Tesla’s valuation can only go so high before even the most bullish investors can’t stomach buying. And that’s before we’ve even considered how geopolitical events may impact sentiment.
Buy British?
In such a scenario, we might see more investors wanting to spread risk and get exposure to parts of the world that look cheap in comparison. That surely includes our very own UK stock market!
With this in mind, considering an All-Share tracker makes sense to me.
Sure, the value of this fund can always fall in tandem with the S&P 500. But diversifying away from the US might offer investors a slightly stronger safety net in the event of 2025 being a horrible year for markets (and Tesla shares).
