The current 2024 target for the blog portfolio is a snowball of 9k, only a target not the fcast.

If u compound 9k at 7% for 9 years that would equal ‘a pension’ of £16.5k

If u compound 9k at 8 % for 9 years that would equal ‘a pension’ of £19.8k

As Buffett once said: “The rich invest for income, the poor invest for capital gains“.  As such, investors may be better off following his lead and letting compounding work its magic.

Instead of buying an annuity, I forgot to mention u keep all your capital.

The dividend hero investment trusts yielding more than 5%

 Writer, Laith Khalaf
 Thursday, March 14, 2024

AJ Bell

It’s not just cash savers and bond investors who are enjoying income yields above the rate of inflation, so are those buying investment trusts with exceptionally long records of increasing dividends.

Five UK Equity Income trusts are currently yielding above 5%, together providing an average yield of 5.8%. That compares to the best variable Cash ISA yielding 5.11% and the best fixed term cash ISA yielding 5.25%, according to Moneyfacts.

Of course, unlike cash, capital and income is not guaranteed when holding shares. However these trusts have increased their dividend each year for at least 23 years, through the dotcom crash, the global financial crisis, and the Covid pandemic. City of London investment trust has an unbroken dividend record stretching back to 1966, the year in which England won the football World Cup and number one records in the UK included songs from the Beatles, the Kinks and Elvis Presley.

There’s no guarantee of a rising income going forward, but the resilience shown by these dividend heroes over such a long time should provide investors with some comfort. Investment trusts can hold back income in the bad years to pay out dividends in the good years, a mechanism which has allowed some to continually raise their dividends for decades. This doesn’t increase the overall dividend yield produced by the underlying portfolio of shares, but it does offer investors a smoother ride, something which is especially prized by those relying on their investment portfolio to deliver a retirement income.

	Yield	5-year annual dividend growth	Discount	Years of dividend increase
City of London	5.1%	2.6%	(2.1%)	57
JP Morgan Claverhouse	5.2%	4.6%	(5.4%)	51
Merchants Trust	5.2%	2.2%	(1.2%)	41
Schroder Income Growth	5.2%	3.2%	(10.8%)	28
Abrdn Equity Income	8.4%	3.5%	(8.3%)	23
Average	5.8%	3.2%	(5.5%)	40

Source: Association of Investment Companies, data as at 8 March 2024

An 8% yield tomorrow from investing today

Based on the historic dividend growth achieved by these trusts, after 10 years they could be yielding 8% a year on an investment made today (based on a 5.8% current yield rising by 3.2% per annum). This also makes them an attractive segue for investors approaching retirement and looking to beef up their future income. Until the income taps are turned on investors can reinvest dividends, further bolstering their eventual income when they come to draw on it.

These are of course not the only investment trusts available to investors, and others may offer a more appealing combination of income and growth prospects to some investors. However, these trusts do showcase the high income stream that can be generated by investing in UK stocks, alongside the prospects for a growing income stream too.

The prospect for both dividend and capital growth are key attractions provided by the stock market to income investors. This is in marked contrast to cash where over time the interest generated is dictated by interest rate changes in both directions, and where there is no long run upward trend that can be relied on.

In the near term it looks like cash rates are likely to fall, with the market pricing in three interest rate cuts from the Bank of England this year. Further falls are then anticipated until the base rate reaches a stable level of around 3.25% in two years’ time (source: OBR). So while headline cash rates look appealing right now, those who are saving money for the longer term face a declining return picture in coming years.

The ISA protection for income stocks

As the tax burden rises as a result of frozen income tax thresholds, so does the value of holding income-producing assets in an ISA. The dividend allowance is being cut to £500 from 6 April, and 2.7 million people are forecast by the OBR to be brought into paying higher rate tax over the next five years, with a further 600,000 more taxpayers tipped into the additional rate tax bracket.

The chancellor’s recent National Insurance cuts don’t alter this picture, and nor do they reduce the tax payable on dividends. A higher rate taxpayer investing £20,000 in a portfolio paying 5.8% with dividend growth of 3.2% per annum would save £2,842 over 10 years by using an ISA. A higher rate taxpaying couple using their ISA allowance at the end of this tax year and the beginning of next, so £80,000 in total, would save £14,744.

Dividend tax saving by using an ISA after 10 years
Taxpayer	£20,000 single ISA contribution	£80,000 couple’s ISA contribution across two tax years
Basic rate	£737	£3,822
Higher rate	£2,842	£14,744
Additional rate	£3,314	£17,190

Source: AJ Bell, based on 5.8% portfolio yield with 3.2% annual dividend growth

Funds on the Watch List this week include: SMT, SEIT, GRID, GSEO, DGI9, TENT, FGT, FCIT, AAIF, MUT, ATST, SONG Welcome to this week’s Watch List where you’ll find golden nuggets on trust discounts, dividends, tips and lots more…

By Frank Buhagiar 11 Mar

Min Read BARGAIN BASEMENT Discount Watch: 25 Our estimate of the number of investment companies whose discounts hit 12-month highs (or lows depending on how you look at them) over the course of the week ended Friday 08 March 2024 – five more than the previous week’s 20. 11 of the 25 were on the list last week:

Aquila Energy Efficiency (AEET) and Downing Renewables & Infrastructure (DORE) from renewable energy infrastructure;

LMS Capital (LMS) from private equity;

BlackRock Sustainable American Income (BRSA) from North America equity income;

Jupiter Green (JGC) from environmental;

Pacific Assets (PAC) from Asia Pacific;

Templeton Emerging Markets (TEM) from emerging markets;

City of London (CTY) and Shires Income (SHRS) from UK equity income;

Schroder European Real Estate (SERE) from property; and Hipgnosis Songs (SONG) from music royalties.

That leaves 14 new names: Schroder Income Growth (SCF), Merchants (MRCH), abrdn Equity Income (AEI) and Murray Income (MUT) from UK equity income; Global Opportunities Trust (GOT) from flexible;

BH Macro (BHMG) from hedge funds;

Utilico Emerging Markets (UEM) from emerging markets; BlackRock Throgmorton (THRG) and Montanaro UK Smallers (MTU) from UK smaller cos.; Asian Energy Impact (AEIT) from renewable energy infrastructure;

BlackRock World Mining (BRWM) and CQS Natural Resources Growth and Income (CYN) from natural resources & commodities; and Ceiba Investments (CBA) and Regional REIT (RGL) from property.

ON THE MOVE Monthly Mover Watch: Finally… A good week for Digital 9 Infrastructure (DGI9) – the share price stormed to the summit of Winterflood’s list of top-five monthly movers in the investment company space. Shares in the digital infrastructure investor are up 28.2% on the month on the back of the company’s 6 March announcement that “all closing conditions related to the Verne Transaction (the sale of the Verne Global asset) have now been satisfied…Closing of the Verne Transaction is now expected to take place before the end of Q1 2024.” Gresham House Energy Storage (GRID) held on to second spot after extending its monthly gain to 25.7% compared to +22.3% seven days earlier. Shares in the renewable energy infrastructure fund still benefiting from a series of director purchases and buybacks over the last month or so. In third, VH Global Sustainable Energy Opportunities (GSEO) courtesy of a 21% gain on the month. GSEO, another renewbie benefiting from share buybacks and director purchases – a whiff of a theme here. Yet another renewable in fourth, last-week’s top performer SDCL Energy Efficiency Income Trust (SEIT) – that 5 February update confirming the renewal of a long-term energy supply contract, in line cashflows and receipt of “a number of credible proposals” that could lead to the sale of some of the company’s assets still working its magic. That makes it one infrastructure fund and three renewables infrastructure companies in the top-four. Question is, could infrastructure names make it a full house? Step up Triple Point Energy Transition (TENT) to complete the clean sweep. Shares up 17.9% after the company published “a shareholder circular… regarding the proposed managed wind-down of the Company.”

Scottish Mortgage Watch: -0.3% How much Scottish Mortgage’s (SMT) share price is down on the month – some way off last week’s +5.9% monthly gain. NAV lost ground too – a +6.4% gain on the month shrunk to +2.8%. The wider global IT sector meanwhile finished the week up +2.8% compared to +4.8% seven days earlier.

CORPORATE BOX Insider Watch: 25,000 The number of Finsbury Growth & Income (FGT) shares acquired by fund manager Nick Train. According to the Company’s 5 March press release: “…Nick Train purchased 25,000 Ordinary Shares of £0.25 each in the Company (‘Ordinary Shares’) at an average price of 861.50 pence per share. As a result of the transaction, Mr Train now holds interests in a total of 5,362,243 Ordinary Shares, representing an aggregate 2.8% of the Company’s issued share capital.”

Fee Watch #1: 0.49% The ongoing charges ratio at F&C Investment Trust (FCIT): “Our Ongoing Charges figure declined to 0.49%, down from 0.54% in 2022. Management fees declined by 9.5%, reflecting the benefits of firstly our revised fee arrangement with Columbia Threadneedle Investments (0.3% on our market capitalisation up to £4 billion and at 0.25% thereafter), secondly a lower level of equity assets managed by third party managers and thirdly a lower fee arrangement with JPMorgan, our newly appointed US large cap growth manager.” (F&C Investment Trust Annual Report.)

Fee Watch #2: 17% The estimated reduction in abrdn Asian Income’s (AAIF) overall ongoing charges for 2024. As the Company’s press release of 05 March 2024 states: “The Company’s Board of Directors is delighted to announce…a reduction of the management fee the Company pays to abrdn…The new fee structure will be determined by the lower of the Company’s market capitalisation or net asset value, a change aimed at better aligning the fee with shareholders’ interests. The fee will be calculated monthly at a rate of 0.75% per annum on market capitalisation (or net assets, whichever is lower) up to £300 million, and 0.60% for amounts exceeding this threshold. This adjustment is anticipated to decrease the Company’s overall ongoing charges for the financial year ending December 31, 2024, by approximately 17% compared to the previous year.” Investment Manager Buy Watch: abrdn Asian Income (AAIF) Also announced on 05 March 2023 that “…abrdn has initiated its reinvestment of management fees program by subscribing to 190,000 shares of the Company as of today’s date, equivalent to approximately three months’ worth of management fees.” Chairman Ian Cadby had this to say: “We…commend our manager for demonstrating its support for the Company through the reinvestment of management fees program, reaffirming its commitment to reinvest a portion of the fees back into the Company.”

Dividend Watch: 4.5% Murray Income’s (MUT) year-end yield: “The dividend for the year ended 30 June 2023 was increased by 4.2% to 37.5p per share, giving a year-end historic yield for the Company of 4.5%.” As for the current year, “…the first three dividend payments for the year ended 30 June 2024 are 9.5p per share (previously 8.25p per share)…the fourth interim dividend will be lower than that for last year but it is anticipated to be not less than 9.5p per share, giving an expected total for the year of a minimum of 38.0p per share.” (Murray Income Half-year Report). 57 – the number of consecutive years Alliance Trust (ATST) has upped its payout: “The Board declared a fourth interim dividend of 6.34p on 20 February 2024. As a result, the dividend for the full year increased by 5.0% from the prior year to 25.2p per share (2023: 24.0p). This year’s dividend increase marks the 57th consecutive annual increase, a track record which is one of the longest in the investment trust industry, and one the Board is confident can be extended well into the future.” (Alliance Trust Final Results). 53 – how many years in a row F&C Investment Trust (FCIT) will have increased its dividend: “Subject to approval at the…AGM…shareholders will receive a final dividend of 4.5 pence per share…bringing the total dividend for 2023 to 14.7 pence: an increase of 8.9% over that of 2022. The increase compares to the 4.0% rate of inflation and means that the growth in our total dividend has exceeded the UK inflation rate over three, five and ten years. Indeed, the growth in our dividends over the past decade, at 63.3%, is almost double that of UK inflation over the equivalent period. Furthermore, as well as being our fifty-third consecutive rise in annual dividends, our full year 2023 dividend is our one hundred and fifty-sixth annual dividend payment.” (F&C Investment Trust Annual Report).

MEDIA CITY Tip Watch #1: Hold on tight to this music rights fund despite downbeat developments That’s the title of a piece on Hipgnosis Songs (SONG) by The Telegraph’s Questor Column. Brave move writing about SONG these days. Why brave? Because not a day (ok maybe a week) goes by without the music royalty investor providing an update on the fallout with its investment manager, the valuation of its portfolio or litigation worries. With developments moving so fast, articles can quickly become out of date. Hence Questor’s brave move to put the proverbial head above the parapet and pen a piece on the fund. The trigger for the article? SONG’s announcement that it would be cutting the value of its 65,000-song portfolio by 26% following the completion of an independent valuation. And once currency moves and borrowings are taken into account, NAV per share for sterling investors is down an even bigger 35% to 92.08p. If that wasn’t enough, the company’s $674m borrowings exceed the 30% of assets limit stipulated in its lending agreement. That means SONG won’t be paying out any dividends to shareholders anytime soon, as paying down debt is being prioritised. Not the best of news then. But there are crumbs of comfort to cling to. As Questor writes: “Investors may despair at developments but can take some reassurance that the valuation is now much more robust.” The Column also takes comfort from the fact that even after the one-third valuation drop, the shares are still trading at a sizeable 30%+ discount to the new NAV. Furthermore, Chairman Robert Naylor recently joined SONG fresh from selling peer Round Hill Music Royalty at an 11pc discount to net assets. Enough there then for Questor to advise investors “…to hold on in the belief, expressed by 5pc activist shareholder AVI, that a ‘bright future’ awaits the company.”

Tip Watch #2: Is Scottish Mortgage the next big success story? Asks MoneyWeek. The above titled-article kicks off with a brief recap of SMT’s share price performance in recent years. Volatile springs to mind, just like the high growth stocks the fund invests in – think Nvidia, Telsa and Moderna. How volatile? In the two years to 2021, SMT’s shares tripled to £15 a pop before plunging to £6 in the space of 18 months. The shares have since rallied to the £8 level. Question is, where do the shares go from here? MoneyWeek enlists the help of Winterflood. The broker included SMT among its tips for 2024 – a not-so subtle hint as to where they think the shares will be going. The article quotes Winterflood’s Shavar Halberstadt: “The managers have displayed a sensible focus on a range of structural growth trends…Moreover, the private-equity allocation has been used to good effect in gaining access to positions that competing funds simply cannot offer…” – think private companies such as Space X. And MoneyWeek makes the point that, despite SMT’s rollercoaster share price ride, the majority of the fund’s portfolio companies haven’t stood still over the last two years in terms of either growing revenues or making progress towards commercialisation. All of which leads, MoneyWeek to conclude that “Investors’ sentiment may have gone from starry-eyed optimism to extreme scepticism, but none of the major holdings are short of capital. Their growing success should prove highly profitable for SMT’s shareholders.” Funds mentioned in this article:

Another bumper month for the Doceo investment trust portfolios
The last four weeks have seen more gains for the three portfolios of listed funds. The biggest gains were seen, not unsurprisingly, in the growth portfolio.

By
David Stevenson
12 Mar, 2024

Later on last year (and January this year) I mapped out three investment trust portfolios for Doceo readers: an income portfolio targeting a yield of above 4%, a growth portfolio and a balanced, cautious portfolio (released mid-January). Last month I reported that two of the three portfolios had recorded solid gains but that the balanced portfolio was lagging– at that point (in mid-February) it had notched up a small loss of -1.9%. One month on that portfolio has recovered its mojo and is now up 0.9%. Given the strong state of US and global markets, you won’t be surprised to learn that the Growth portfolio has surged ahead – through to mid-February it was up 9% in price return terms, whereas it’s now up 13.37%. Last but by no means least the income portfolio is now up just a tad under 6% in price return terms since launch in mid-November – against a return of 5.14% at the mid-February mark.

Asset Class Fund % Initial Price Current Price Change

Equities 50%
MYI Murray International 20% 2.44 2.475 1.4
AGT AVI Global 20% 2.18 2.295 5.3
EGL Ecofin Global Utilities 5% 1.67 1.5575 -6.7
CCJI CC Japan Income Growth 5% 1.78 2.045 14.9

Alternatives and Bonds 50%
RICA Ruffer Investment Company 30% 2.65 2.63 -0.8
BIPS Invesco Bond Income 10% 1.71 1.72 0.6
BBGI BBGI Global Infrastructure 5% 134 127 -5.2
TRIG The Renewables Infrastructure Group 5% 112.6 103.5 -8.1

Some funds within these three portfolios have had an especially strong few weeks. Over in the growth portfolio for instance private equity fund HgCapital has surged by just under 10% in the last month. As I write this note, HgCapital Trust has just released its annual results and a note by analysts at Numis sums up the progress this trust has made nicely: “The NAV of 500.5p at December 2023, (0.4% above the company’s initial estimate) represents a 11.1% NAV total return which demonstrates a consistency of returns that we expect to continue, driven by the portfolio of companies with high levels of recurring revenues and attractive margins (30%). The last twelve months’ revenue and earnings growth were 25% and 30%, respectively. Over the long-term, earnings growth is the key driver of value creation.”

Exposure Ticker Fund % of model portfolio Initial Price Current Price Change %

Global equities ATST Alliance Trust 50% 10.76 11.99 11.43
Private equity: mid and late stage HGT Hg Capital 7.5% 4.07 4.59 12.78
PIN Pantheon International 7.5% 2.96 3.18 7.43
Private equity: early stage GRW Molten Ventures 7.5% 2.43 2.44 0.41
CHRY Chrysalis Investments 7.5% 0.7 0.875 25.00
Sector themes: healthcare BIOG Biotech Growth Trust 10% 8.25 9.8 18.79
Sector themes: technology ATT Allianz Technology Trust 10% 2.89 3.57 23.53
Alliance Trust has also surged ahead in the last month with its share price up just over 9%. A note from analysts at Investec sums up this global equity trust’s strong performance to date: “2023 was a vintage year for Alliance, with impressive absolute returns materially ahead of benchmark and open and closed-end global peer group averages. We highlight that Alliance is now ranked in the top quartile in this extended peer group over one, three and five years. We believe that growing recognition of this performance record, combined with effective discount management has resulted in Alliance continuing to trade within a narrow discount range, an experience that contrasts starkly with the wider closed-end industry which has endured a significant de-rating and elevated and damaging discount volatility. Looking forward, the manager notes that when free money ends, the strength of companies matter, while macro risks remain high and equity markets are not cheap; while this environment will inevitably bring challenges, we believe Alliance Trust is well-positioned to continue to outperform.” I’d also highlight tentative signs of a bounce back in the share price of listed venture capital fund Molten Ventures. The shares advanced a little over 8% in the last four weeks, not off any particular news or developments. Sentiment to this large listed VC has been dreadful in the last year, with few obvious buyers and lots of annoyed sellers. But the valuation discount looks a tad extreme and maybe this is a sign that sentiment is at long last improving. Over in the income portfolio, I’d highlight JPMorgan Global Growth and Income’s latest six- month numbers which showed NAV up 9.2% on a total return basis in Sterling, outperforming the 7.0% return from the MSCI AC World Index. Numis analysts noted that the “outperformance was particularly impressive in 2023 given market performance was driven by a small number of US tech stocks, and the approach (of the JPMorgan fund) seeks to combine ideas in both “growth” and “value” styles”.

Fund Ticker Allocation Initial Price Current Price Gain

JPMorgan Global Growth and Income JGGI 20% 4.88 5.49 12.50
Murray International MYI 20% 2.37 2.475 4.43
North America Income NAIT 10% 2.64 2.845 7.77
ECOFIN EGL 10% 1.52 1.55 1.97
Invesco Bond Income Plus BIPS 10% 1.62 1.72 6.17
BioPharma Credit BPCR 10% 0.828 0.889 7.37
HICL HICL 10% 1.3 1.27 -2.31
TwentyFour Income TFIF 10% 1.01 1.06 4.95

I’ll finish by highlighting the only real disappointment of the last four weeks, in the income portfolio – BioPharma Credit which has slipped by 4.4% over the last four weeks in share price terms. The discount had narrowed down to close to 5% but is now back out at 7.6%. To be fair, the shares have advanced by 7% since we launched the income portfolio in mid- November, so this is probably – I would guess – more driven by profit-taking amongst some institutional shareholders who’d bought the shares when they were on a much bigger discount. There’s been no particular news flow about the lending fund although I would suggest that many investors are now focused on what the fund will do with its huge mountain of cash following some recent repayments. News on deployment – new loans – will be especially important for the share price moving forward.

ATR outperforms expectations, strategic plans at FSFL provide cause for optimism and HGT’s Annual Results include a 26.2% share price total return.

Frank Buhagiar
15 Mar, 2024

Doceo’s Weekly 360 – the week’s Investment Trust results
A bumper week this week, so let’s get straight into it.

Ashoka India Equity (AIE) believes India is at the cusp of realizing its true economic potential

Inline half-year performance from AIE thanks to share price/NAV total returns of 16.3% and 15.7% respectively (sterling terms) – the benchmark index clocked up 16.4%. Chairman Andrew Watkins believes there’s more to come “India is at the cusp of realizing its true economic potential while benefitting from several secular tailwinds, the most important being its favourable demographics and rising income levels”.

Numis rates Ashoka India highly “Since listing in July 2018 Ashoka India has been an exceptional performer, producing NAV total returns of 155% (17.9% pa) compared to 86% (11.5% pa) for the index. It is interesting to see comments from the Board that the company is exploring consolidation opportunities. We rate Ashoka India highly, based on the strength of its track record and its clearly defined and differentiated investment approach”.

HgCapital (HGT) successfully navigating challenging market conditions

Highlights of HGT’s Annual Results include a 26.2% share price total return and 11.1% NAV total return. Chairman Jim Strang said “HgT delivered a resilient performance in 2023, successfully navigating challenging market conditions. The portfolio maintained strong underlying performance over the year with sales and EBITDA across the top 20 investments (76% of the portfolio) growing at 25% and 30% respectively”.

Winterflood “We retained HGT in our 2024 Recommendations, and these results offer little to dissuade us from this decision. We note that while some may feel that the 26.1x valuation multiple is on the expensive side, this is roughly in line with SAP, HGT’s closest listed comparable, which has significantly lower revenue growth”.

Numis “We continue to believe that HgT’s portfolio is of exceptional quality and is well placed to continue to deliver strong earnings growth which will drive value creation. HgT remains one of our favoured Investments”.

JPMorgan “At the current price of 457.5pps the shares are trading on a headline discount of 8.5%, with the implied discount at a similar level. This is narrow relative to peers, but we believe is justified on account of HGT’s track record of capturing material uplifts to carrying value, and the differentiated company exposure an investment in the shares provides”.

Liberum “Underlying performance continues to be strong, reflected by the organic growth, while the high frequency of realisations (four between December 2023 and January 2024 and 13 since the beginning of 2023) in the face of a much tougher exit environment helped drive a c.11% narrowing in the discount in 2023. This was the main source of the 26% total share price return”.

Foresight Solar Fund’s (FSFL) strategic plans are cause for optimism

Chairman Alexander Ohlsson describes FSFL full-year performance as “resilient against a challenging market backdrop. Our operational strength, the powerhouse behind our progressive dividend, enabled us to comfortably meet our dividend target of 7.55p per share for 2023 and allows us to propose an above inflation increase of 6.0% for the 2024 target dividend of 8.0p per share”.

And Ohlsson is confident for future “After a challenging year for markets, we believe there are reasons for optimism. Industry fundamentals remain attractive and solar generation continues to be one of the cheapest and most reliable sources of electricity available. This promising outlook, coupled with Foresight Solar’s improved financial position and clear strategy to deliver income and growth, positions the fund well to capitalise on the opportunities ahead”.

Jefferies “FSFL had pre-announced a NAV per share of 118.4p at 31/12/23, resulting in a total return of 1.9% for Q4, and -0.4% for the year. Given the shares traded at wider than a 10% average discount over calendar 2023, the fund has triggered a discontinuation resolution (structured as a special resolution) to be held at the forthcoming AGM”.

Liberum “Based on the buyback yield in 2023 (c.2.7% –total repurchases/beginning of year market cap) and the current dividend yield, an implied total distribution of nearly 11% is within the top 20 of all alternative funds”.

Numis “Given the ongoing buyback, 200MW disposal programme which has shown some notable success to date, and a well-covered dividend, we believe the current discount of 23% remains too wide”.

Fidelity Emerging Markets’ (FEML) unique investment process

FEML posted a 3.2% NAV total return for the half year, a little short of the MSCI Emerging Markets’ 4.4%. The managers note “While the long book detracted overall, the short book performed well, and added over 100bps to relative returns over the six-month period.” According to Chair, Heather Manners “The managers’ ability to hold short as well as long positions – investing in well financed, well managed businesses that can drive growth, while also making money from identifying those at risk of disruption – is a key differentiating factor that is increasingly feeding into positive performance for the Company”.

Winterflood “Underperformance largely attributed to weakness in Consumer names held in China. Short positions contributed over 1% to relative performance. China allocation remains underweight. Latin American allocation increased over period, with managers seeing opportunities in Mexico and Brazil”.

Finsbury Growth & Income’s (FGT) Magnificent Five drive portfolio outperformance “Four of our magnificent five outperformed the FTSE All-Share last month; not that that was too much of a challenge because the index itself was effectively unchanged. Those five are the holdings in your portfolio of more than 10% of NAV and are ‘magnificent’ in the sense they are world-class and substantive businesses, each with a clear secular growth opportunity…we hope they will be drivers of value for our investors for years to come.” FGT factsheet for February 2024 during which NAV was “up 1.7% on a total return basis and the share price up 2.3%, on a total return basis, while the index was up 0.2%”.

Cautious optimism at Seraphim Space (SSIT)

1.8% increase in NAV per share at SSIT at the half-year mark. Chair Will Whitehorn said “Private companies continue to account for the majority of the portfolio (88.2% by number and 97.5% by fair value). The fair value of the private portfolio increased over the Period, reaching 121.5% vs. cost (121.4% excluding FX impact) at the Period end. The listed element of the portfolio remained depressed (13.2% fair value vs. cost)”.

Whitehorn said he is cautiously optimistic “Indications of inflation being tamed and interest rates having peaked has resulted in some evidence of improved sentiment in both the private and public markets. We continue to believe that SSIT’s current cash reserves are sufficient to meet the near-term capital needs of the portfolio”.

Liberum “Looking towards what might provide a further catalyst to the shares, a portfolio sale and higher magnitude share repurchase combination probably stands out”.

Numis “The portfolio comprises interesting companies, many of which benefit from first mover advantage which help to cement their place in a growing sector, helping to fuel a rerating. The shares are up c.50% in 2024 ytd, but we believe they remain cheap on a c.42% discount”.

Winterflood “We do not think that a 40%+ discount will be appropriate if 2024 indeed sees more widespread cash generation across the portfolio and further evidence of operational execution is provided, particularly once portfolio companies put the funds raised to work”.

Schroder Asian Total Return (ATR) Investment Managers on a possible cure for insomnia

“We will keep our strategy review mercifully short this year. For professional clients that would like a more comprehensive run down we would recommend they ask their Schroder contact for our 60-page Year of the Dragon report, a perfect cure for insomnia”.

ATR outperforms with room to spare

ATR’s 8.8% NAV total return for the full year comfortably above the benchmark’s 1.3%. Chair Sarah MacAulay says the “key to performance is our continued focus on long-term fundamentals when selecting stocks. In the case of China and Taiwan our outperformance was often as much about the stocks we avoided rather than the ones we held”.

Following a trip to Asia, the investment managers are feeling “a little more upbeat on prospective Asian stock market returns. We think inflation is likely to be less of a headwind and outside of China the economic picture in Asia looks reasonable. Company balance sheets are generally in good shape and whilst the earnings outlook is uncertain, valuations and market sentiment in the main reflect this in your Portfolio Managers’ view”.

Winterflood “The portfolio outperformed the index in 10 out of 12 Asia Pacific markets. The managers note that ageing demographics in Asia are likely deflationary”.

AVI Japan Opportunity Trust’s (AJOT) deep relationships pay off

Chairman Norman Crighton said that AJOT’s 15.8% return for the year means “Since its inception, AJOT has delivered returns of +40.5% versus +16.2% for the benchmark. In JPY terms, since inception, returns are significantly higher, at +73.7% vs +43.6% for the benchmark.” The Chairman puts this down to relationships “AVI’s investment team builds deep relationships with the management of every portfolio company. This approach has led to numerous shareholder-friendly measures being introduced across multiple companies which has delivered strong results for our investors”.

Numis “We think that AVI Japan Opportunity is an attractive way to access the Japanese market, through an activist approach seeking to unlock value from companies that the manager believes suffer from weak corporate governance and capital misallocation”.

Oakley Capital Investments (OCI) shows resilience

4% NAV per share total return and 18% total shareholder return at OCI for the full year. Chair Caroline Foulger believes the results are “testament to the resilience of the underlying portfolio and Oakley’s active management that, in spite of the unsettled nature of the global economy, the Company continued to deliver. Most importantly, total shareholder return was 18%, taking the annualised five-year total shareholder return to 24%. OCI continues to offer one of the most accessible ways to gain exposure to pan-European private equity through one of the industry’s best performing managers”.

Jefferies: “NAV performance has been relatively pedestrian of late, likely reflecting a cautious approach applied to future earnings and a lack of exit uplifts. However, this arguably sets OCI up for a strong recovery”.

Numis “The shares are trading at a 31% discount to NAV, which we believe offers exceptional value for exposure to a high-quality private equity manager, with a very strong track record”

Liberum “The underlying portfolio is growing well, benefitting from a focus on digital disruptors exposed to megatrends”.

Pacific Horizon (PHI) says east is the way to go

PHI outperformed over the half year courtesy of not falling by as much as the benchmark – NAV off 4.8% compared to 7.3% for the index in sterling terms. The Interim Management Report notes “a significant dispersion of geographic returns across the region, with the worst performing market indices, China and Hong Kong, both falling approximately 20%, while the best performing markets, India and Taiwan, rose approximately 16% and 8% respectively. The portfolio was generally well positioned in this environment, with India our largest country position. By contrast, China and Hong Kong were among our most substantial underweights”.

The investment managers “remain extremely positive on the long-term outlook. Asia has already taken up the baton of global demand growth. Asia is now better positioned financially than much of the developed world and, with a renewed investment cycle unfolding, Asian growth is likely to significantly outperform over the coming years. We believe looking east remains firmly the right course of action”.

Winterflood “Unlisted holdings 8.4% of NAV. Largest sector exposure remains India Real estate (10% of NAV), which was top contributor over period”.

Strategic Equity Capital (SEC) focusing on high quality

SEC’s 1.7% NAV total return for the half year was a little way off the FTSE Small Cap (ex Investment Trusts) Index’s 9.6%. According to the investment managers “This reflected the relatively defensive positioning of the portfolio compared to the wider market” That’s because the focus is “on high quality businesses in less cyclical parts of the market and with resilient business models and robust balance sheets”. Typically, these businesses are “exposed to structural growth, key competitive advantages or self-help opportunities”.

Winterflood “Underperformance largely reflective of defensive positioning of portfolio, e.g. being underweight cyclical sectors, such as Consumer Discretionary, which contributed strongly to index performance”.

Manchester & London’s (MNL) favoured themes gaining momentum

Tech-heavy MNL posted a 23.3% jump in NAV per Ordinary Share for the half year. Chairman Daniel Wright said “It is becoming ever more evident that corporate digitalisation and automation of the labour force command increasing significance, and the Manager’s three favourite secular growth themes of Cloud Computing, Artificial Intelligence and Semiconductor Use gather further momentum. In summary, the portfolio remains focused on larger capitalisation, liquid, listed stocks with profitable and cash generative business models that are aligned with some of the most exciting forward-looking themes of the day”.

Winterflood “Key stock contributors included Nvidia (22% of NAV), Microsoft (29%), AMD, Arista, Cadence, ASML and Synopsys. The managers expect secular growth in Electric Vehicles, Artificial Intelligence, Cloud Computing, IoT, Digitalisation and Automation driving the Semiconductor market to double over the next decade”

Why dividend yields are more important than ever

Story by Alan Oscroft

MotleyFool

I’d say we really shouldn’t try to judge the value of our investments based on share prices. Did anyone famous ever say that? They should do.

Total returns matter. And they’re made up of share price gains and dividends. So don’t they both contribute to the valuation of our shares?

In the long run, yes. But on a short-term basis, using share prices can lead us astray. They’re based on… fear, hype, day-to-day news… and all kinds of irrational influences.

But dividends are cold hard cash. Cash doesn’t change with today’s fears, or tomorrow’s hopes.

What if we own some shares paying good dividends? And we don’t plan to sell for at least another 10 years? Should we care what they’re priced at today?
Why now?
So why do I say dividend yields are more important right now?

I see worse disjoint between company share prices and long-term valuation than I have for a long time. That’s no surprise when people are under pressure and worried about the future.

But it makes me sad to see people dumping their ownerships of quality companies for silly low prices.
Let’s pick a bank stock as an example. I choose that sector because I think it offers some super low valuations now, and good dividends.

Cheap stock
I’ll go for NatWest Group (LSE: NWG), with its nice fat 6.8% dividend yield.

I see a recent share price of around 250p. Does that fairly value the bank?

Well, I see NatWest shares were at just a bit over 200p not long ago. Is it a nearly 25% better company now than it was just a few weeks ago?

Over that same short timescale, the forecast dividend is unmoved at 17p per share.

Keep the cash
What if we buy NatWest shares today, and pocket the dividend cash?

If the dividend stays the same, we could get our money back in less than 15 years. And still own the shares.

We could double our investment in that time. Is that worth giving up at today’s share price?

Reinvest
It gets better if we buy more shares each year with the cash. Then, we could double our money in only 11 years, even if the share price gains nothing.

Saying that, I can understand why people might want to sell bank shares, including NatWest, right now.

These are risky times, and there could well be worse to come for the sector. And I can see interest rate uncertainty holding the banks back for some time yet.

Dealing with it
But I think the best way to deal with it is to keep an eye on their dividend yields. Watch to see the earnings are there to cover them. And check cash flow and liquidity are strong enough.

As long as that all looks good, the share price can do whatever it likes.

Why dividend shares are more important than ever.

Story by Harvey Jones

The Motley Fool
Lately I’ve been piling into FTSE 100 dividend shares while ignoring all the headlines about chip maker Nvidia and other super soaraway US tech stocks

It hasn’t been easy, given the hype over the Magnificent Seven mega-caps, but I’ve stuck to my guns. While UK income stocks don’t have the same pizzazz, I think these tortoises may be just as rewarding as the tech hares in the end.

I still have exposure to US tech, through my Vanguard S&P 500 UCITS ETF and Legal & General Global Technology ETF. But when it comes to buying individual stocks, I’ll continue to focus my efforts on undervalued UK blue-chips.

Income over growth
There are a heap of FTSE 100 income stocks on the market right now, trading at low valuations while offering sky-high dividend yields.
The financial sector is particularly fertile ground. Insurance conglomerate Phoenix Group Holdings now yields 10%, wealth manager M&G yields 8.46% and Legal & General Group yields 8.29%. I hold all three in my self-invested personal pension (SIPP).

High yields can be vulnerable. Companies need to keep the free cash flowing, or they die. A rising yield is often the sign of a declining share price, and none of these have shot the lights out lately.

Yet I believe their shareholder payouts may prove sustainable. They may also climb over time. This should give me both a high and rising income, which I will reinvest straight back into stocks.

If today’s yields persist, I should double my money in less than eight years, even if the share prices don’t rise at all.

Personally, I think they will, when inflation is defeated and interest rates fall. That will hit cash savings rates and bond yields, potentially boosting demand for high-yield UK dividend stocks, and reviving their share prices.

When it comes to every dividends, size isn’t everything. Weapons manufacturer BAE Systems (LSE: BA), which I bought recently, has a headline yield of just 2.32%. That’s way below the FTSE 100 average of 3.9%, and pales into insignificance compared to Phoenix.

Progressive policy
However, BAE still plays plenty of dividends, it’s just that its yield has failed to keep up with its rocketing share price. It’s up 42.13% over one year, and 179% over five years.

The board recently increased its annual dividend by an inflation-busting 11% to 30p per share, following another strong set of full-year results. BAE is forecast to yield 2.51% in 2024 and 2.71% in 2025.

It’s a great British dividend growth stock but there are still risks. If Middle East tensions ease, or US-China relations improve somehow, that could slow today’s arms race. The stock trades at 20.42 times earnings, double the average FTSE 100 valuation, so isn’t cheap.

I’m a little impatient so mostly I’m targeting stocks that pay a generous yield today. I’ve also bought Glencore, Lloyds Banking Group and Taylor Wimpey, all of which I believe will give me a solid, rising income over time. That’s hugely important to me, because I plan to build my retirement on the dividends they pay me. I won’t base my pension plans on volatile, low-yielding US tech stocks.

 Provided by The Motley Fool

Billionaire Warren Buffett is famous for his investing tips. The one I’m about to discuss was a real eye-opener for me. It’s something that, if ignored, could cost me or any other average investor hundreds of thousands over a lifetime. 

At first glance, that doesn’t seem like a big deal. I mean, of course losing 1% is going to cost me. That’s obvious. 

But the reality, which isn’t clear at first, is that this isn’t small change. The amount of money I lose could be nothing short of life-changing. Let me explain.

I’m saving £500 a month and I receive a 9% return – broadly in line with the recent history of the stock market in this country. And let’s say that I invest from age 28 to 68, which is 40 years of my working life.

It looks like I’d build my way up to £2.1m. A nice amount there, enough for a cosy retirement, but I’ll point out that inflation will mean that figure won’t be quite so impressive in the future. Either way, we’ve got a baseline for what to expect from my investments. 

So, now I’ve built up to £1.6m. That’s half a million less than my previous value, all from only taking a single per cent off the returns. In terms of a percentage, I lose 24% of my money. All from that just 1% less! 

24% off

If that doesn’t sound right, well, that’s what Buffett is talking about. I expect a 1% cut to slice 1% off what I get, not nearly a quarter of it all

So how to apply this advice? Well, in short, I have to be aware of how much difference a small change in the percentage can make. 

To be specific, if I buy an index fund then it pays to look for low-fee ones. Vanguard is very popular for low-fee funds that track markets like the FTSE 100 or the S&P 500. I invest in a Vanguard fund already and pay just 0.04%. 

The advice is true even if I invest in individual companies. I can reduce my fees by shopping around for brokers or investing in larger chunks. And it’s more proof of how important research is too. 

A game-changer

I’ll point out here that while 1% difference can be a game-changer, it doesn’t guarantee anything. All investments in stocks can be risky and I may get back less than I start with.

I’ll end here by showing how this tip goes both ways. In my example, if I add 1% instead of taking it away? Well, I’d end up with a £2.8m nest egg instead. That would suit me nicely, and I imagine I’d start my retirement by saying a big thank you to Mr Buffett .

Watch to see which way it breaks.