First graph showing dividends earned but not re-invested.

Second graph if the dividends were re-invested thru thick and thin, there will always be plenty of thin.

Note the yield on the FTSE100 is a variable 4%.

The snowball currently has £1,145 xd.

The next dividend payments aren’t until another 2 weeks.

The Snowball is still waiting for SOHO to declare their next dividend, after which the fcast and the target for 2025 can be announced.

GL

ANNOUNCEMENT OF NAV AND QUARTERLY DIVIDEND

Portfolio valuation increase and asset management initiatives underpin positive total return and fully covered dividend

Schroder European Real Estate Investment Trust plc, the company investing in European growth cities and regions, provides a business update and announces its unaudited quarterly dividend and net asset value (“NAV”) as at 30 June 2024.

–   Third quarterly interim dividend of 1.48 euro cps declared, fully covered by EPRA earnings, reflecting an annualised dividend yield of c.7.6% based on the current share price¹;

–   Underlying adjusted quarterly earnings from operational activities (“EPRA earnings”) of €2.0m (quarter ended 30 June 2023: €2.1 million)

–    Total interim dividends declared relating to the nine months of the current financial year of 4.44 euro cps, 106% covered by EPRA earnings;

–    The direct property portfolio was independently valued at €208.3 million², reflecting a marginal like-for-like increase over the quarter of 0.1% (31 March 2024: -1.0%), or €0.2 million, demonstrating valuation resilience and signalling improving sentiment as a result of falling interest rates;

–   Unaudited NAV of €164.0 million, or 122.6 euro cents per share (“cps”) as at 30 June 2024 (31 March 2024: €165.3 million, or 123.6 euro cps), driven primarily by a small property valuation increase, offset by capital expenditure and deferred taxes;

–     NAV total return of 0.4% for the quarter and -0.9% over the nine months of the current financial year;

–  The Company remains well positioned with a strong balance sheet, an available cash balance of approximately €26 million, and a loan to value ratio (“LTV”) of 25% net of cash and 33% gross of cash;

–    Two lease re-gears, totalling 2,242 sqm, completed at the Frankfurt grocery investment, securing long-term income from high profile tenants and increasing the unexpired lease term to break by over eight years:

o  a 1,641 sqm 15-year lease extension (from 2027 to 2042) with anchor tenant Lidl; and

o  an 8-year lease extension (from 2029 to 2037) with pet specialist, Fressnapf, for 601 sqm

Is renewable energy worth investing in ?

The net-zero transition using renewable energy is proving counterproductive for Britain. Is the sector still worth investing in?

(Image credit: Getty Images)

By Max King

last updated 10 September 2024

While the government seeks to accelerate Britain’s drive to “net zero” through the increased adoption of renewable energy, the private sector is going in the opposite direction. Since the middle of 2023, The Renewables Infrastructure Group (TRIG) has sold £210m of assets at an average premium to book value of 11%. 

Admittedly, most of these assets were in Ireland and Germany but it is notable that the proceeds are not being reinvested in the UK but used to reduce borrowings and initiate a £50m share buyback programme. With TRIG’s shares trading at a 21% discount to net asset value (NAV), this makes sense. 

Greencoat UK Wind, trading at a 9% discount, is also prioritising buybacks over investment. It launched a £100m buyback programme last autumn and expects to have £1bn of surplus cash flow in the next five years, based on its current power price forecasts. With borrowings of £2.3bn, it is likely to focus on debt reduction over buybacks.

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Foresight Solar, whose shares trade at a discount of 23%, is also buying back shares, though with borrowings equivalent to 65% of net assets, debt reduction is the priority. It has stopped making new investments and announced a disposal programme. Bluefield Solar, trading on a 19% discount, has also been selling assets to reduce debt and finance new projects.

With combined assets of more than £10bn, these are not small companies. The story in the rest of the sector is the same – shares trade at significant discounts to NAV, making the raising of new capital impossible. Share buybacks and the reduction of debt are a priority, as are asset sales to speed the strategy along.

Is the renewable energy push destined to fail?

No wonder the UK Offshore Wind auction last September failed, securing no bids at all – the previous government set an ambitious price cap of £44 per megawatt-hour (MWh). This was similar to the price set in the previous auction but, since then, inflation has increasedcosts significantly. Industry experts estimated a price of £60 per MWh would be necessary for any bid to be viable, and the government responded with an increase in the maximum price at the next auction to £73. 

That, though, is above the current wholesale price of electricity and takes no account of the cost of the intermittency of renewable generation. If the new government conducted an auction on this basis the cost of electricity would rise, yet the Labour Party is committed to “cutting household energy bills by up to £1,400 a year and saving businesses £53bn by 2030”. So where will “the clean and cheap power” it has promised come from? 

Not from onshore wind generation – the turbines are too small and onshore arrays lack the huge scale of offshore. The new National Wealth Fund and GB Energy, funded with borrowed money, are supposed to “unlock critical investment in key UK infrastructure” by “co-investing with the private sector in larger projects such as onshore wind and solar farms”. Presumably, the government is looking to the big pension funds for this investment but they are unlikely to find economies the listed funds can’t. And a liberal sprinkling of honours is unlikely to tempt them into investments with low returns.

Are the risks of renewables worth the reward?   

Even if the additional investment was forthcoming, whether from the private sector or the new public bodies, the result would be a glut of electricity when weather conditions were favourable – and hence very low prices – while shortages and very high prices would persist at other times. 

This would undermine existing providers of renewable energy, added to which the government’s wary tolerance of the private sector, while it is hoping for investment, could be replaced by hostility if, as is likely, investment is not forthcoming. 

On attractive discounts to NAV and with dividend yields above 7%, the investment funds specialising in renewables in the UK are superficially attractive, especially now they are focused on efficient operation, cash generation and enhancing shareholder value rather than expansion. Still, the political risks are significant, so investors should hold off.

Buying into brilliant companies.

by Christopher Ruane

I’d build passive income streams the same way Warren Buffett does.

Buffett looks for passive income in obvious places.

Most of his shareholdings are in large, well-known and long-established companies.

A lot of far less successful investors spend ages trying to find little-known firms they think could yet take the world by storm. Buffett, by contrast, is happy to buy shares in businesses that have already proven their business model and staying power over the course of decades.

Take his holding in Coca-Cola (NYSE: KO) as an example. Buffett started buying into the company back in 1987 and completed his stake-building in 1994.

When he started buying those shares, Coca-Cola had been listed on the New York Stock Exchange for 68 years. It had already raised its dividend annually for over two d (and has continued to do so ever since Buffett invested).

So the Sage of Omaha was not looking for ‘the next big thing’. He was buying into an existing big thing. Today his company, Berkshire Hathaway, earns over $700m annually in Coca-Cola dividends. That is over half of what it paid in total for the entire stake.

With a large customer base, proprietary brands and strong pricing power, Coca-Cola is a classic Buffett pick. It faces risks, such as increasing concern about sugary drinks leading many consumers to prefer healthier alternatives. But, for now at least, the sweetest thing about Buffett’s long-term Coca-Cola stake is its incredible financial rewards.

Investing for the long term

Is it an accident that those rewards have built over the course of decades? No.

Warren Buffett is the epitome of a long-term investor. He s that if someone would not be willing to own a share for 10 years, they should not even consider owning it for 10 minutes.

As the old saying goes, over the long term, “quality in, quality out”

Compounding dividends

Although Warren Buffett has not bought more Coca-Cola shares since 1994, he has not used the massive dividend streams to pay dividends to his own Berkshire shareholders.

Instead, like all of Berkshire’s earnings, he has retained them to use in other ways, from buying different shares to taking over whole businesses.

Reinvesting dividends is known as compounding.

From a passive income perspective, it has pros and cons. If I want passive income now, compounding my dividends might not be a good idea.

But if I am willing to forego some or all passive income from my portfolio now, compounding could be a smart way to try and build even bigger income streams in future – just like Warren Buffett!

QuotedData’s Real Estate Monthly Roundup – September 2024

September 2024

Winners and losers in August 2024

Best performing funds in price terms	(%)
PRS REIT	15.4
Triple Point Social Housing REIT	8.4
Safestore Holdings	7.2
Residential Secure Income	6.4
Capital & Regional	5.8
Primary Health Properties	4.8
CLS Holdings	4.5
Big Yellow Group	4.3
IWG	4.2
Sirius Real Estate	3.9

Source: Bloomberg, Marten & Co

Best performing funds

The customary summer lull in activity in the real estate sector was evident during August, with news flow at a trickle. This was mirrored in share prices, with the average movement over the month of +0.3%. Once again corporate activity was the main driver behind the largest share price outlier, this month PRS REIT. Its share price bounced at the end of the month as shareholders requisitioned the board calling for two directors, including the chairman, to be replaced (see page 3 for more details). The share price of Triple Point Social Housing REIT responded positively to its board’s announcement that it was making progress with its investment manager review and the news that the fund had replaced a struggling tenant in rental arrears. Residential Secure Income was perhaps boosted by the new Labour government’s ambitious house building target, which is set to provide a substantial tailwind for the affordable housing sector in which it operates. Capital & Regional continues to be the subject of takeover talks, with two parties running the numbers on the company. Meanwhile, Primary Health Properties saw an uptick in its share price perhaps on hopes that a new health secretary will ease the bottleneck in primary health centre development.

Worst performing funds in price terms	(%)
Grit Real Estate Income Group	(8.8)
NewRiver REIT	(5.4)
SEGRO	(4.9)
Ground Rent Income Fund	(4.5)
Great Portland Estates	(3.9)
Helical	(3.8)
Shaftesbury Capital	(3.5)
Urban Logistics REIT	(3.2)
Panther Securities	(3.2)
Real Estate Investors	(2.9)

Source: Bloomberg, Marten & Co

Worst performing funds

Some real estate heavyweights suffered share price losses in August despite the interest rate cut at the start of the month. The largest negative share price movers in the month, however, was led by pan-African investor and developer Grit Real Estate, with shareholders yet to get behind its renewed strategy focused on diplomatic housing development. With takeover negotiations for Capital & Regional seemingly progressing well, NewRiver REIT’s share price fell perhaps due to the effects of merger arbitrage trades. SEGRO, the largest UK listed real estate company by some margin with a market cap of around £12bn, saw its share price fall almost 5% and it is now negative in the year to date. London office developer
Great Portland Estates and West End landlord
Shaftesbury Capital – both stalwarts of the FTSE 250 index – also suffered share price erosion during the month as positive momentum over interest rate cuts was not maintained. Ground Rents Income Fund continued its run of share price losses as it stumbles towards a difficult wind down. The value of its portfolio continues to be negatively impacted by reforms in the leasehold sector. Another FTSE 250 constituent, Urban Logistics REIT, suffered a 3.2% fall as the market awaits positive updates on earnings growth.

Valuation moves

Company	Sector	NAV move (%)	Period	Comments
Target Healthcare REIT	Healthcare	1.6	Quarter to 30 June 24	Portfolio valued at £908.5m, up 0.8% like-for-like
Alternative Income REIT	Diversified	0.4	Quarter to 30 June 24	Property values increased 0.1% to £102.7m
Custodian Property Income REIT	Diversified	(0.3)	Quarter to 30 June 24	Portfolio value of £579.6m remained flat on a like-for-like basis
Residential Secure Income	Residential	(0.6)	Quarter to 30 June 24	0.4% decrease in like-for-like investment property values to £315m
abrdn Property Income Trust	Diversified	(4.1)	Quarter to 30 June 24	Portfolio value down 0.5% to £405.5m. NAV impacted by estimated costs of wind down
abrdn European Logistics Income	Europe	(4.3)	Quarter to 30 June 24	Portfolio valuation increased 0.2% to €607.4m. NAV impacted by cost of managed wind down
Impact Healthcare REIT	Healthcare	2.6	Half year to 30 June 24	Like-for-like property values increased 2.9% to £670.1m
Empiric Student Property	Student accommodation	1.7	Half year to 30 June 24	Portfolio valuation increased to £1,134.9m reflecting a 1.3% net like-for-like increase
Tritax Big Box REIT	Logistics	1.2	Half year to 30 June 24	Portfolio now valued at £6.4bn following M&A activity. Up 0.7% on like-for-like basis
Derwent London	Offices	(2.7)	Half year to 30 June 24	Portfolio valued at £4.8bn, an underlying decrease in value of 1.7%
Capital & Regional	Retail	(3.4)	Half year to 30 June 24	0.8% increase in like-for-like valuations over to £374.9 m
CLS Holdings	Offices	(10.1)	Half year to 30 June 24	Portfolio valuation down 4.1% to £1,910.4m

Source: Marten & C

US equity fund pairings for bull and bear markets

10 September 2024

Fund selectors pair up offensive and defensive managers investing in the US.

Emma Wallis

News editor, Trustnet

  

The US equity market has grown increasingly volatile, especially in the past couple of months. Questions have been raised over the likelihood of a recession and whether the ‘Magnificent Seven’ US stocks are coming off the boil, while the forthcoming presidential election augurs badly for investors who prefer certainty.

Yet the US has been the strongest regional equity market over the past decade, presenting investors with a conundrum: how can they hedge against downside risk without missing out on further potential gains?

One solution would be to choose a combination of strategies, pairing a defensively positioned fund with a growth-seeking strategy. To that end, Trustnet asked fund selectors to suggest pairs of US equity funds that complement each other and thrive in different market environments.

AB American Growth and Dodge & Cox US Stock

Invesco’s model portfolio service owns AB American Growth and the Dodge & Cox US Stock fund, said co-manager David Aujla. The former is a large-cap growth fund with significant positions in technology and durable growth companies, while the latter is a large-cap, value-oriented fund with “greater exposure to companies that could be described as more economically sensitive,” he said.

“Together this fund pair provides the portfolio with the potential ability to participate in US equity market performance whether it be a more momentum-led market or a valuation-led market. And we hope that over time the experience should be smoother as a result.”

Performance of funds over 5yrs

Source: FE Analytics

Alliance Bernstein Sustainable US and Neuberger Berman US Large Cap Value

Schroder Investment Solutions has changed its line-up of US funds to make its portfolios more conservative, adding funds that own attractively valued companies with good fundamentals.

Portfolio manager Rob Starkey said Schroders used Dodge & Cox as its US value manager until October 2022 but switched to NB US Large Cap Value, which has larger allocations to defensive sectors such as consumer staples.

“The intention was to allocate capital to a manager that would vary its exposure to higher quality stocks depending on the environment,” he explained. Schroders’ model portfolios now have “a value tilt in the American allocation to reflect the risk/reward opportunity set”.

On the growth side, Schroders rotated out of Brown Advisory US Sustainable

Growth into AllianceBernstein Sustainable US in the first quarter of last year.

“Brown Advisory, despite having similar metrics at the time in terms of quality long-term earnings growth, was a much higher valued strategy, so we wanted to shift to something that had less of a valuation risk while keeping those overall growth and quality metrics,” Starkey explained.

Performance of funds since NB US Large Cap Value’s inception

Source: FE Analytics

First Eagle US Small Cap Opportunity, Spyglass US Growth and Snyder US All Cap Equity

Downing has paired up two aggressive funds whose investment styles offset each other: First Eagle US Small Cap Opportunity and Spyglass US Growth.

Fund manager Simon Evan-Cook said these two strategies “might well be the most aggressive funds in the sector”.

Most US small-cap funds buy companies that would be considered mid-caps if they were listed in the UK, but First Eagle’s Bill Hench invests in minnows that would be considered small-caps on this side of the Atlantic as well.

“He is a proper deep value manager”, said Evan-Cook. Hench’s philosophy is that if 10% of his holdings don’t go bust in any given year, “he’s probably not taking enough risk”. On the flip side, three out of every 10 investments will probably multiply tenfold.

The fund is highly diversified and geared into the US economic cycle so if the economy performs well it should deliver outsized returns, Evan-Cook explained.

Jim Robillard, chief investment officer of Spyglass Capital Management in San Francisco, operates at the other extreme of the style spectrum. He is looking for small and mid-cap growth companies that are “in the right place at the right time with the right tech to become five times bigger over the next five years”, Evan-Cook said. Robillard is “valuation aware”, unlike some high-growth investors.

With fewer assets under management, Spyglass can invest in small, growing companies, while its proximity to San Francisco close to many start-ups is also advantageous.

Performance of funds since First Eagle US Small Cap Opportunity’s inception

Source: FE Analytics

For a more conservative play, Evan-Cook highlighted Snyder US All Cap Equity. It invests in the highest quality companies in the US with strong competitive advantages, balance sheets, brands and management teams, but the firm also has a tight valuation discipline.

Evan-Cook compared the strategy to a Venn diagram with two circles encompassing the best companies and the cheapest companies in the US. Snyder is “trying to find that tiny little spot where the two circles cross over,” he said.

GQG Partners US Equity and Invesco FTSE RAFI US 1000 UCITS ETF

GQG Partners US Equity is a best ideas portfolio of 28 stocks managed by three FE fundinfo Alpha Managers – Rajiv Jain, Brian Kersmanc and Sudarshan Murthy – and it features on Bestinvest’s Best Funds List.

Jason Hollands, managing director of Bestinvest, said: “The approach is highly flexible and the managers do not shy away from making significant calls, which means relatively high turnover.

“For example, the managers significantly reduced tech exposure in May 2023. Part of their research approach is to use people with backgrounds in investigative journalism, which had helped them notice that job openings in tech were slowing, which they saw as a warning sign.”

Although he picked this fund for investors who are bullish on US equities, “the managers are very focused on downside protection,” he pointed out.

By contrast, the Invesco FTSE RAFI US 1000 UCITS ETF might suit investors worried about “frothy tech valuations” who want to diversify away from the S&P 500.

This exchange-traded fund (ETF) differs from market capitalisation-weighted trackers because it allocates to the 1,000 largest US stocks based on four fundamental factors: sales, cash flow, book value and average total dividends over five years.

“The outcome is broad exposure to the US market but with a tilt towards companies with attractive valuations and lower exposure to more speculative businesses,” Hollands explained.

In 2021, when the NASDAQ index plunged 24% and the S&P 500 was down 7.8%, the fund eked out a 1.8% return.

Performance of funds since GQG Partners US Equity’s inception

Source: FE Analytics

Shore Capital Markets lifts Regional REIT to ‘hold’ from ‘sell’

GOLDMAN CUTS SUPERMARKET INCOME REIT PRICE TARGET TO 87 (91) PENCE – ‘BUY’

but as always best to DYOR

Watch List

Discount Watch

The discounts of nine investment companies hit 52-week highs last week, but which region contributed the most to the list?

Frank Buhagiar•09 Sep

We estimate there to be nine investment companies that saw their share prices trade at 52-week high discounts over the course of the week ended Friday 6 September 2024 – four more than the previous week’s five.

Four of this week’s nine appeared on the list last week: JPEL Private Equity from private equity; Ceiba Investments from property; Gore Street Energy Storage (GSF) from renewables; and Schroder Capital Global Innovation (INOV) from growth capital.

That leaves five new names, three of which come from one region: Japan. The funds in question – Fidelity Japan (FJV), JPMorgan Japanese (JFJ) and Schroder Japan (SJG). None of the three put out results but all were busy buying back their own shares during the week. The Japanese market found the going hard over the course of the week ended 6 September. The Nikkei 225 was off 5.8% while the broader TOPIX Index finished down 4.2%. A sell-off in semiconductor stocks in sympathy with the U.S.; a strengthening in the yen which makes life trickier for exporters; and concerns over further interest rate hikes – all weighing on sentiment. Just goes to show, sometimes you just can’t buck the market.

Or can you? Life Sciences REIT (LABS) certainly doing a good job of it, not in a good way though. For the share price has been bumping along the bottom of its 12-month discount range for some time, finally setting a new high (or low depending on your perspective) on 4 September 2024. This, however, is in stark contrast to the rest of the property sector (with the exception of Discount Watch regular CBA). For property sector share prices have, for the most part, bounced off their lows in anticipation of lower interest rates and in response to an uptick in corporate activity. And yet, LABS has failed to join in on the party. No news out this past week but on 12 August the company did announce that the latest half-year results are due to be published on 26 September 2024 – does the market know something the rest of us don’t?

The 52-week high discounters

Fund Discount Sector

Ceiba Investments CBA-69.64%

PropertyLife Science REIT LABS-59.99%Property

Schroders Capital Global Innovation INOV-53.63%

Growth Capital JPEL Private Equity JPEL-46.96%Private Equity Gore Street Energy Storage GSF-45.72%Renewables

The full list

Fund Discount Sector Schroders Capital Global Innovation INOV53.63%Growth Capital Fidelity Japan FJV15.12%

Japan JPMorgan Japanese JFJ13.26%JapanSchroder

Japan SJG14.95%Japan

JPEL Private Equity JPEL46.96%Private Equity Ceiba Investments CBA69.64%

PropertyLife Science REIT LABS59.99% Property

Gore Street Energy Storage GSF45.72%Renewables

Vietnam Enterprise VEIL23.09%Vietnam

Weekly Gainers

A new leader atop Winterflood’s list of highest monthly movers in the investment company space. But which fund’s appearance in the top five could well be down to it being viewed as something of a safe haven?

Frank Buhagiar•09 Sep

The Top Five

Doric Nimrod Air 3 (DNA3) soars to the top of Winterflood’s list of highest monthly movers in the investment company space after seeing its share price gain on the month increase to +16.7% from +14.8% previously. Last month’s news that sister fund Doric Nimrod Air 2 (DNA2) is selling its remaining five Airbus A380-861 aircraft to Emirates for more than expected still working its magic on DNA3’s share price. DNA2 too saw its monthly gain increase to +15.8% from +14.6%, enough to secure second place on the list. The two aircraft leasing funds still flying in tight formation then.

PRS REIT (PRSR) slips down to third. Shares up +15.1% on the month but that’s down on last week’s +18.2%. Where to begin with this one? At the beginning. 29 August 2024, the build-to-rent REIT announced it had received a letter from shareholders accounting for 17.3% of the company. The letter calls for a general meeting to be held at which shareholders can vote to replace two of the five existing independent Non-executive Directors, including Chairman, Stephen Smith, with Robert Naylor and Christopher Mills. At the time Winterflood noted “the requisitioning shareholders have particular concerns regarding the management contract extensions announced in July. The inability to terminate the manager until 2029 is considered problematic from a governance perspective.”

2 September 2024, PRSR issues a much longer press release. Key points include Rothschild appointed as a third advisor; formation of a Board sub-committee comprising the three directors not subject to calls to be replaced to engage with the requisitioning group; a defence of the discount at which the shares trade by referencing other REITs sitting on large discounts too; and a promise that further actions/considerations will be communicated with the results in early October.

The above prompted requisitioning shareholders Harwood Capital and CCLA to publish letters setting out their positions. These include concerns over the extra expense of appointing a third adviser, the Board’s inaction in tackling the discount and the lack of shareholder consultation ahead of the management contract extensions which the shareholders believe are a poison pill for any would be acquirer. As noted last week, all the hallmarks of a long-running saga here.

Balanced Commercial Property Trust (BCPT) came from nowhere to take fourth spot after announcing it has agreed to be acquired by private investment firm Starwood Capital Group in a recommended cash offer of 96p per BCPT share. That’s a 21.5% premium to the undisturbed share price of 79p and an 8.7% discount to BCPT’s last reported unaudited NAV per share of 105.1p as at 30 June 2024. News was good for a spike in the share price so that the shares are now up +12.7% on the month. With shareholders accounting for 25.83% of BCPT’s issued ordinary share capital backing the Starwood bid, seems less chance here of a long-running saga.

Majedie Investments (MAJE) completes the top five thanks to a +12.3% share price increase. No news out from the flexible investor this past week or so, but a look at the graph shows the share price started its move higher roundabout 30 August. That’s the same date equity markets embarked on their latest wobble – the start of the S&P 500 and Nasdaq’s move downwards can be traced back to 30 August exactly. What’s more, the spike in MAJE’s share price coincides with an uptick in trading volumes, suggesting investors may well view the fund as a safe haven.

Scottish Mortgage

Scottish Mortgage’s (SMT) share price finished the week ended Friday 6 September 2024 with a monthly loss of -2.5%, an improvement on the -4.2% deficit seen seven days earlier. NAV improved too, down -0.5% compared to -4.3% previously. The wider global sector finished the week flat on the month, it had been nursing a -1.5% loss. Once again, SMT, been busy buying back its own shares but this week, Non-executive Director Sharon Flood joined in on the act, acquiring £20,000 worth of stock. Combination of the company and Director buys, enough for a positive week for the shares it seems.