Doceo Results Round-Up

The Results Round-Up: The week’s investment trust results

Baillie Gifford Japan’s (BGFD) net asset value (NAV) total return per share comes in at exactly 10% for the full year; Henderson International Income (HINT) does slightly better with a 10.4% total return as it joins the Association of Investment Cos. Next Generation Dividend Hero list; while New Star (NSI) tops the lot with an 11.69% total return for the year.

By Frank Buhagiar

Baillie Gifford Japan (BGFD) philosophical approach woos markets

BGFD posted a +10% net asset value (NAV) per share total return for the full year. That’s a little short of the TOPIX index’s +14.7% total return (sterling). Encouragingly, the fund modestly outperformed the benchmark in the second half of the year but not by enough to recover the ground lost against the benchmark in the first half. The latest full-year numbers mean five and ten-year NAV total returns now stand at +12.6% and +151.8% respectively compared to the TOPIX’s +36.7% and +140.0%.

The investment managers note “The obvious question on shareholders’ minds following a 5-year period with a disappointing relative outcome will be whether they should remain confident in the prospects for their Company’s portfolio.” The answer, “Nothing in life is guaranteed but we believe there are both philosophical and practical reasons for optimism.” Philosophical includes the fund’s consistent approach that has previously served the fund well for long periods; the portfolio’s low turnover; and also “the lack of recent interest in what the Company is offering, which means that it is unlikely that we are at a peak of optimism where everything is already in the price.” As for practical, the portfolio has demonstrated higher sales growth than the market over the past five years and is forecast to grow by 9.2% p.a. over the next three years versus 3.1% p.a. for the market. “If this superior business growth materialises as anticipated, we are confident we will be able to report on more share price success”. The market liked what it heard, marking the shares up 3p to 704p.

Numis: “The fund has experienced a difficult few years as growth stocks have fallen out of favour and its mid-cap bias has hurt performance. Exposure to Japan remains a useful portfolio diversifier, benefiting from an established and stable political system, and an increasing focus on returns to shareholders. The shares may offer value on a c.13% discount, although a turnaround in sentiment towards growth stocks will be required for it to come back into favour.”

Investec: “The manager has a clear and successful growth-focused philosophy which has generated superior long-term returns.”

Henderson International Income (HINT) increases total dividend

HINT’s +10.4% NAV total return for the year, a little behind the MSCI ACWI (ex UK) High Dividend Yield Index’s +14.2% (sterling). Not all about capital appreciation though. For HINT has a dual-focus: to provide shareholders with a growing total annual dividend, as well as capital appreciation through a diversified portfolio of global stocks outside of the UK. And on the dividend front, the fund continues to deliver with a +3.2% increase in the total dividend for the year. That makes it 10 consecutive years of dividend growth which sees HINT make it onto the Association of Investment Companies’ “next generation dividend hero” list.

Still, the shortfall in total return did prompt a strategic review, resulting in a tweak to the investment strategy. As explained by chairman Richard Hills, while dividends will remain “the primary contributor” to the fund’s distributions, when the fund managers spot “compelling opportunities in stocks, regions or sectors that would otherwise be excluded due to their yield”, the board is prepared to dip into reserves to supplement dividends. “This will expand the potential universe of stocks in which the investment team can invest.” Shares closed down at 165.75p compared to 168p the previous day – well it was Halloween after all.

Winterflood: “Share price TR +6.5% as discount widened from 9.6% to 12.8%. Underperformance relative to benchmark predominantly due to stock selection.”

New Star Investment Trust (NSI) goes defensive

NSI reported an +11.69% total return for the year to 30 June 2024. For comparison, a whole host of indices provided: the Investment Association’s Mixed Investment 40-85% Shares Index (a peer group of multi-asset funds with allocations to equities in the 40-85% range) up +11.80%; the MSCI AC World Total Return Index up +20.61% (sterling); the MSCI UK All Cap Total Return Index up +13.16%; and UK government bonds up +4.50%. The reason for the multiple indices, because, as the investment managers explain, the fund invests across asset classes “to increase diversification and reduce longer-term risks.” This did mean that over the year performance fell short of “a strongly rising equity market.”

Sounds like the investment managers have adopted a defensive stance too, as “changes over the year have resulted in a higher allocation to more lowly-valued countries and sectors, which may prove defensive if investors become disenchanted with the scale or pace of the commercialisation of AI advances.” Another defensive-oriented word included in a sentence or two later “A focus on equity income investments may provide some defensiveness in times of heightened volatility and facilitate the payment of dividends.” The shares were largely unchanged – off just 0.5p to finish the day at 105.5p. The market sympathising with the defensive stance perhaps.

Winterflood: “Relative performance hurt by allocation to cash and low-risk multi-asset investments. Within equity allocation, the fund’s relatively high Emerging Markets weighting at the expense of the US was also negative. As at 30 June 2024, portfolio comprised: investment funds (71%), investment trusts & ETFs (15%), unquoted investments incl. loans (2%), other quoted investments (1%) and cash (12%). Board is proposing to widen the fund’s investment objective towards total return rather than simply capital growth.”