Henderson Far East Income — Cautious of continued volatility but value on offer – Edison Group

Warren Buffett’s idea of investing to generate passive income remains the holy grail of making money. It is simply:

“If you don’t find a way to make money while you sleep, you will work until you die”.

Cash for re-investment £10,430.00

Murray International

22 December 2023

Disclaimer

Disclosure – Independent Investment Research

This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.

MYI’s diversified approach may offer stability in an uncertain environment…

Overview

Murray International (MYI) offers investors a benchmark-agnostic approach to delivering long-term capital growth alongside a high yield and a growing dividend. MYI has been managed by industry veteran Bruce Stout since 2004, who will retire in June 2024. However, Bruce has worked closely with Martin Connaghan and Samantha Fitzpatrick since 2001, and in June 2023, Martin and Samantha were made co-managers of the trust to help ensure a smooth transition

As discussed in Portfolio, the investment process is expected to remain consistent. The managers look to maintain a well-diversified, benchmark-agnostic portfolio, limiting the exposures to any one geography or sector. The importance of generating an attractive yield has led to a lower allocation to typically growthier, lower yielding markets such as the US, when compared to standard global equity indices in favour of Europe and a meaningful allocation to the emerging markets and Asia. In addition, the valuation-sensitive approach has influenced the trust’s sector allocation which is typically geared to higher yielding sectors such as telecommunications, energy, and materials. An allocation to emerging markets fixed income has bolstered yield in the past, however, this has significantly reduced since the pandemic, reflecting the valuation opportunities and the strength of underlying holdings. The Dividend has returned to being fully covered, providing a yield of 4.6%

Strong Performance has tended to occur in value-driven environments such as 2022. However, during periods of growth dominance MYI has tended to lag broader equity markets with higher technology exposures. That said, the diversification has resulted in some downside protection. The manager’s caution is reflected in the historically low level of Gearing following the repayment of £60m tranche of debt in in May 2023.

MYI currently trades on a 5% Discount which is at the wider end of the trust’s long-term discount range and compares to a five-year average discount of 2%.

Analyst’s View

In our view, MYI is well positioned to offer a level of stability for investors during a period where markets are still struggling to find an equilibrium. Although Bruce is retiring in 2024, we believe it is unlikely there will be any change in the style of management. The highly diversified, benchmark-agnostic approach has provided some protection against drawdowns when compared to a broader global equity peer group and broader equity indexes. However, the distinctive value sensitive approach employed by the managers can leave the trust lagging in times of strong growth. With inflationary pressures significantly off their peaks and interest rates in the developed markets plateauing, this may mean a period of underperformance.

However, the underlying quality of the holdings has been reflected in the most recent dividend, which returned to being fully covered by underlying revenue following two years of being supplemented by the trust’s significant revenue reserves. This has ensured MYI’s impressive track record of 18 years of consecutive dividend growth has continued. Despite high interest rates currently on offer, we believe MYI still offers an attractive yield which can offer support to the total returns objective when capital growth is under pressure.

MYI’s discount has been volatile; however, there is a clear long-term range where the board actively issues and buys back shares when required. With the discount at 5.5% this is at the lower bound of the range and may offer a good long-term entry opportunity.

Bull

• Highly diversified, benchmark-agnostic portfolio relative to alternative strategies
• Discount wider than long-term average
• High yield versus peers and 18 consecutive years of dividend growth

Bear

• Retirement of longstanding manager
• May lag in growth-driven markets
• £30m tranche of debt repayable in 2024 which would be expensive to replace

……………………….

With a current yield of 4.6% not a contender for the portfolio.

As u can see from the chart HFEL has had torrid time, which means the

dividend yield has grown to 11%.

Dividend

The Board has again increased its dividend to shareholders, marking 16 consecutive years of uninterrupted dividend progress. A total dividend of 24.20p has been paid in respect of the year ended 31 August 2023, representing a 1.7% increase on the dividend paid last year.

In keeping with the outcome of our discussions on strategy and implementation, we have opted to augment our fourth interim dividend using the Company’s substantial reserves. We have therefore covered £5.7m of the dividend from distributable reserves. Doing so enables our Fund Managers to better position the portfolio, with scope to invest in a greater number of companies with higher growth characteristics. 30/11/23

The big advantage for investors is that Investment Trusts can build up

reserves in good times to supplement dividends in less good times.

Sunday share tips: Top picks to consider for 2024

The Sunday Times and Mail on Sunday have offered their top investment tips for 2024, which includes stocks from a variety of sectors such cruises and market research to metals and real estate.

Business writers from The Sunday Times each gave their individual choices on what stocks to back. Here are a selection of their best picks.

First up was Oliver Gill who recommended investors take a look at housebuilder Persimmon following a tough year for the sector in 2023. In November, the company reported it was trading in line with forecasts and that build costs were moderating. Meanwhile, it has earmarked £8m to cover the cost of cladding following the Grenfell disaster, which is a lot more than others in the sector. “Whichever way you look at it, this move by the York-based housebuilder could stand it in good stead in 2024,” Gill said.

William Turvill has highlighted market research firm YouGov, given the company’s political polling services will be in demand amid the “prospect of political turbulence in 2024”.

Jill Treanor says professional services group Begbies Traynor is worth a shot, as the company’s insolvency services could be much needed with the economic climate set to sour further in the UK next year.

Carnival is another top pick, according to Jon Yeomans, with the cruise-ship operator set to deliver another record-breaking year for revenues in 2024 with customer demand on an upwards trajectory.

Oliver Shah recommends accountancy and business software group Sage despite the stock having already risen 60% in 2023. “My bet, however, is that integrating artificial intelligence into the company’s products will put new boosters under the share price. I am hoping for at least 10 per cent from Sage in 2024,” Shah said.

Over at the Mail on Sunday, Joanne Hart’s Midas column has highlighted four key stocks to take a look at in 2024.

Hart said Empire Metals, the AIM-listed miner based in Western Australia, could surge given it may have discovered one of the biggest titanium deposits in the world.

“Early-stage exploration firms are not for the faint-hearted but adventurous investors should give Empire a go. At 9.3p, Empire shares could go far,” Hart said.

Midas also recommends Royal Mail owner International Distribution Services, whose shares have halved over the past two years. Hart said the stock “has been through the mill but at £2.72, the shares should deliver rewards in time. Buy and hold”.

Commercial property firm Land Securities is also worth a look, and offers “plenty of upside” after a tough year during which elevated interest rates hit share prices across the real estate sector. “Land Securities has had a tough few years but prospects are much brighter. At £7.05, these shares are a buy,” Hart wrote.

Finally, cellular agriculture firm Agronomics could stand to benefit from the booming cultivated meat industry, which could be worth £20bn a year by 2030, the column said. “Agronomics provides investors with a chance to access this market at an early stage and the shares, at 9.5p, are worth a punt.”

SHARECAST

One of the best traders, who publishes their trades.

Difficult to trade due to the time lapse in publishing

and as u can see below don’t even think about copying

the trades unless u have an extremely strong stop loss

policy,

U want to invest in the FTSE dividend shares but u do not have enough cash

to provide diversification , IUKD currently yields a variable 6%

so u get paid whilst u wait for the FTSE to recover, just in case

it doesn’t, for a long while.

No discounts to worry about, so you get all the growth in the ETF

straightaway.

Tradeable exactly as Investment Trusts.

There are only 3 stages of a chart.

Up Down Sideways.