Funds on the Watch List this week include: SMT, SLFR, CRS, DNA2, TENT, SSIT, PSH, PHI, APEO, CVCG, HHI, BRFI, FSV, SCP, ANII, AUGM, HRI, ASL, BUT, IAT, TEM, VOF, BPCR, MCT, JGGI, AIE
Welcome to this week’s Watch List where you’ll find golden nuggets on trust discounts, dividends, tips and lots more…
By
Frank Buhagiar
08 Jan, 2024
BARGAIN BASEMENT
Discount Watch:
Our estimate of the number of investment companies whose discounts hit 12-month highs over the course of the week ended Friday 05 January 2024 – the same total as the previous week.
No change in the overall number maybe, but all change at the individual trust level. This week’s trio: Third Point Investors (TPOU) from hedge funds; CQS Natural Resources Growth & Income (CYN) from commodities and natural resources; and JPEL Private Equity (JPEL) from private equity.
ON THE MOVE
Monthly Mover Watch: two new names
Muscle their way onto Winterflood’s list of top-five monthly movers in the investment company space. Triple Point Energy Transition (TENT) takes fourth spot courtesy of a 23.2% gain on the month. Shares have reacted well to the mid-December announcement: Proposed Orderly Realisation of Assets. Seraphim Space (SSIT), the other newbie occupies fifth place with a 22% share price gain. Not much in the way of news over the past month from SSIT, but the space investor was mentioned in despatches by This is Money’s Jeff Prestridge – see below Media City section.
As for the three funds retaining their places in the top five, these include the seemingly permanent fixture that is SLF Realisation Fund (SLFR), although the monthly gain did shrink to +25% from +36% – a sign perhaps that the tailwind from November’s news of a return of capital to shareholders is on the wane?
No sign of that happening with Crystal Amber (CRS) which is also in return of capital mode via buybacks – shares are up 26.6% compared to last week’s 24.2%; or Doric Nimrod Air Two (DNA2) which recently completed a “Partial Compulsory Redemption of Shares”.
Scottish Mortgage Watch: +4.2%
Scottish Mortgage’s (SMT) monthly share price gain as at Friday 05 January 2024. That’s a sharp reduction on last week’s +12.2%. Similar story in terms of NAV – up 1.6% on the month compared to 4.8% previously; and the wider global IT sector, a +6.8% gain shrunk to +3.9%.
THE CORPORATE BOX
Buyback Watch: BioPharma Credit (BPCR)
Announced buybacks are back on the agenda after issuing an update on its LumiraDx (LMDX) loan. Over to broker Jefferies for a quick summary: “This announcement marks a successful recovery of BPCR’s troubled loan to LMDX. The business being sold to Roche represents 81.5% of the total loan amount outstanding, but 117% of BPCR’s current carrying value for its 50% share of the loan, so implying a small c.2% NAV uplift. We also note there could be a further recovery of value for BPCR and the other senior lenders upon liquidation of the company. Importantly, BPCR is likely to be able to resume share buybacks now it is no longer an insider, with the recent EGM circular highlighting $115m of cash available for repurchases (equivalent to c.9% of NAV), aimed at closing the discount into 5%. All together this points to some healthy upside to the current share price, with the shares currently trading on a 16% discount to NAV, not least because the recovery firmly validates the manager’s process and the strength of security in protecting the principal value of the loan.”
Issue of Equity Watch #1: £1,787,840
The value of shares issued by Ashoka India Equity (AIE) on 2 January 2024. In all, the Company “…issued 740,000 of its ordinary shares of one penny each (Ordinary Shares) pursuant to its block listing facility. The Ordinary Shares will be issued at a price of 241.60 pence per Ordinary Share, a premium to the prevailing net asset value (cum income) per Ordinary Share.”
Issue of Equity Watch #2: £501,000
The amount raised by JPMorgan Global Growth & Income (JGGI) following the issue of “…a further 100,000 Ordinary Shares for cash at 501 pence per share under its Ordinary Share block listing facility.”
Dividend Watch: 5.3p
The amount per share Middlefield Canadian Income Trust (MCT) proposes to pay out in dividends during 2024, an increase on the 5.2p paid out in 2023: “…the board of directors has declared an increase in the quarterly dividend to 1.325 pence per Share…This increase follows the increase to 1.30 pence (from 1.275 pence) announced in January 2023. In 2023, the Fund paid four quarterly dividends totalling 5.2 pence per share (2022: 5.1 pence per share). During 2024, the Fund intends to pay four quarterly dividends each of 1.325 pence per share, in January, April, July and October…”
MEDIA CITY
Tip Watch #1: Investment Ideas of the Year 2024
Courtesy of The Investors’ Chronicle. First a quick reminder that, when it comes to recommendations, the tipster changed tack a few years ago: “…we changed our focus from a series of individual shares to five portfolios of 10 stocks that capture what we think are some of the most interesting opportunities for stockpickers. This year, our biggest tweak has been to reduce the size of those portfolios, which now contain five ideas each.” And one of those five portfolios is comprised entirely of…investment trusts.
The Chronicle acknowledges that it’s been a tough time for London’s investment companies: “For the past couple of years, despite facing record discounts to net asset value (NAV), the resounding response from the market has been to shrug and look elsewhere. Although there have been some signs of repair in recent weeks as interest rate expectations have adjusted, the average investment trust’s share price was trading 15 per cent below NAV as of early November, according to Winterflood…” And as the article adds, “…investors should treat discounts the way regular equity investors treat valuations. Just as earnings ultimately drive stock prices, what should matter most to trust holders is underlying growth in NAV. Fortunately, there are some excellent investment trusts out there doing just that, including the five…below.”
Pershing Square (PSH)
Pacific Horizon (PHI)
abrdn Private Equity Opportunities (APEO)
CVC Income & Growth (CVCG)
Henderson High Income (HHI)
Turns out, the above are not the only trusts included in the five portfolios. In the Global Portfolio, there is room for BlackRock Frontiers (BRFI) which is “…still trading at a discount despite a recent rally – looks a smart way to get exposure to nations with strong fundamentals for the year ahead, and with an income kicker.”
Elsewhere, Fidelity Special Values (FSV) is included in the Small Cap Portfolio. As the article explains “…travel deep enough into the lower reaches of the market, and you’ll start to find what would normally look like pricing anomalies.” And that includes investment trusts: “Why…should we make space for…Fidelity Special Values (FSV) investment trust as well as individual companies? For the simple fact that FSV – like so many other well-run trusts – has its own discount.”
Finally, Schroder UK Mid Cap (SCP) finds itself in the Special Situations Portfolio because it “…looks vulnerable to M&A activity given its relatively small size and the presence of activist investor Saba Capital on its shareholder register.”
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