Results Round up

The Results Round-Up – The Week’s Investment Trust Results

Among this week’s results, Allianz Technology clocks up a +28% NAV total return in just six months; while Murray International is surprised at the strength of equity market returns; and The Renewables Infrastructure Group’s interims trigger a flurry of positive broker commentary.

ByFrank Buhagiar

Among this week’s results, Allianz Technology clocks up a +28% NAV total return in just six months; while Murray International is surprised at the strength of equity market returns; and The Renewables Infrastructure Group’s interims trigger a flurry of positive broker commentary.

Fidelity European (FEV) gearing up for a difficult environment
FEV’s+7.6% NAV total return for the half year beat the +7.1% posted by the FTSE World Europe (ex UK) Index. Share price total return fared even better, up +10.6%. Portfolio managers put the outperformance down to the positive effect of the fund’s gearing in a rising market. Having large holdings in ASML and Novo Nordisk also helped, allowing the fund to jump on the AI and anti-obesity bandwagons.

As for the outlook, the portfolio managers are cautious and see the stock market as being vulnerable if the outlook worsens and sentiment shifts to be more negative. What’s more, “Ageing populations, low productivity, high and growing levels of government debt, etc., will mean that growth is likely to remain anaemic.” Because of the uncertainty, “We will continue to focus on attractively valued companies with strong balance sheets that should be resilient, and able to grow dividends, even in a more difficult environment.” Numbers good for a 5p rise in the share price on the day of the results – shares closed at 384.5p.

Winterflood highlights “the attractiveness of FEV’s quality growth bias, which in our view provides it with defensive characteristics to withstand an uncertain macroeconomic environment.”

Numis: “This is our favoured fund among the Europe ex UK peer group”.

Rights and Issues (RIII) hunting for value
RIII Chairman, Andrew Hosty, described the UK small-cap fund’s half-year performance as “robust”. Easy to see why when NAV grew +13.2% and total shareholder return increased +15.8%, both outperforming the FTSE All-Share’s +7.4% total return. The outperformance can be traced back to “the work started eighteen months ago to thoughtfully diversify and modestly reduce concentration of the portfolio.”

According to the Investment Managers “the macroeconomic backdrop appears to be improving, with inflation under control and the potential for lower interest rates. This should create better conditions for equity investors. Clearly macroeconomic risks remain, however, we approach the remainder of the year with a degree of optimism and continue to look for attractively valued investment opportunities in our market.” Shares lost 30p on the day. Sounds worse than it is, as the shares are trading at the 2400p level. So, barely a 1% fall that was more than made up the following day.

Winterflood: “Outperformance driven by stock selection. As previously announced, at the end of the period RIII co-manager Dan Nickols, Head of Jupiter’s UK Small and Mid-Cap (SMID) equities team, retired. Co-manager Matt Cable will assume role of lead manager, ensuring continuity.”

European Assets (EAT), a leader in more ways than one
EAT’s+3.5% NAV total return over the half year period to 30 June 2024 beat the benchmark’s +3.1% with room to spare. That’s not the only way the fund is leading the pack – EAT offers a peer-group leading 7.0% dividend yield based on a 5.9 per share dividend and 84.4p closing share price as at 6 August 2024. Good start for new lead manager Mine Tezgul who took over the reins on 2 May 2024. What’s more, according to Chair, Stuart Paterson, “there are reasons to remain optimistic. Earnings have been resilient despite higher interest rates and, over the longer-term, share prices tend to follow earnings. Good companies continue to grow, and we see opportunities in the current market.” Share price barely moved on the day – market adopting the wait and see approach perhaps.

Winterflood: “Share price TR +0.1%, as discount widened from 8.8% to 11.8%. Technology-related names drove outperformance.”

Allianz Technology (ATT) outperforms
ATT posted a +28% NAV total return for the half year, outperforming the Dow Jones World Technology Index +27% in the process. The Portfolio Manager’s Report notes “The Company was a beneficiary of a number of tailwinds from exposure in key technology segments, including AI, cyber security, Internet of Things (IoT) and digital commerce, among others, and outpaced the benchmark due to stockpicking.” The outperformance is all the more impressive as the fund was underweight the mega-tech stocks “From a market capitalisation exposure perspective, our bottom-up selections in mega-caps overcame headwinds from a relative underweight to the segment, with bottom-up results in large caps also aiding performance. Meanwhile, our emphasis on mid-caps detracted from relative results due to the first half narrowness of the market.”

That “emphasis on mid-caps” could soon pay off though, as “We anticipate a potential broadening of performance across industries and market caps, consistent with a more normalised environment.” Share price tickled 2.5p down to 349p but resumed its upward path the following day to close at 359p.

Numis: “ATT takes a bottom-up stock picking approach driven by exposure to key themes, with relatively high turnover in what is a dynamic, fast-moving sector, and we believe that this approach and its mid/large cap bias may serve it well.”

Murray International (MYI) staying wary
MYI Chair. Virginia Holmes. opens her half-year statement with something of a puzzle, “If a primary driver of solid equity market returns in 2023 was the expectation of easing inflationary pressures and central banks cutting interest rates, one could be forgiven for being slightly surprised at the strength of equity market returns, particularly in developed markets, in the first half of this year. Inflation has eased in some areas, proved stubborn in others and the six or seven interest rate cuts expected in the United States at the end of last year have yet to come to pass.” And yet, markets performed strongly, including MYI’s reference index, the FTSE All World TR Index which rose +12.2%. Go figure. The global equity income fund’s NAV total return meanwhile couldn’t match that, finishing the half up +5.5%.

The investment managers aren’t being fooled though, “while there are positive signs of economic recovery and growth in specific sectors, the global economy faces several significant risks and uncertainties. Inflation, geopolitical tensions, market concentration and consumer confidence are all factors that could derail equity markets trading at lofty levels and lead to increased volatility.” Because of this, the managers will “continue to seek companies robust enough to preserve capital in periods of market weakness, with attractive, growing, and sustainable dividends, exposed to strong structural drivers for long-term growth.” With the shares moving higher on the release of the report, market appears to have liked what it heard.

Winterflood: “Board optimistic that progressive dividend can be maintained. Bruce Stout has now departed; Martin Connaghan and Samantha Fitzpatrick have taken joint responsibility for the portfolio.”

Numis: “Martin and Samantha worked with Bruce for over 20 years and therefore, unsurprisingly, there are no significant changes to the portfolio. The results show a period of underperformance, primarily driven by a lack of exposure to mega cap US tech and the funds ‘value’ bias relative to the market.”

The Renewables Infrastructure Group (TRIG) in it for the long haul
TRIG reported a 4.3p reduction in NAV per share to 123.4p for the six months to 30 June 2024 (31 December 2023: 127.7p). A combination of factors cited for the NAV decline: lower near-term power price forecasts, lower forecast inflation and below budget generation. Chair Richard Morse doesn’t sound too concerned though, “TRIG continues to offer investors scale, diversification and value.”

And in terms of shareholder value, the renewable fund continues to deliver “TRIG’s attractive dividend, which has been increased by 12.5% over the past five years, is being supplemented by a £50m buyback programme in recognition of the Company’s robust cash flows, balance sheet strength and the premium to carrying value achieved by the management team across £210m of successful divestments signed during the past 12 months.” Finally, the Chair reminds investors that TRIG’s balanced portfolio has been designed “to deliver long-term value to shareholders.” Shares opened largely unchanged. Steady as she goes, the name of the game.

Jefferies: “The previously flagged generation difficulties weighed on the NAV and cash flow generation during the half. However, progress continues to be made on the balance sheet side, with further disposals and possibly a terming out of a portion of the RCF expected over the course of the next 18 months.”

Investec: “The company has a stable and predictable revenue profile with 75% of forecast revenues fixed for the next 12 months and 70% fixed through to December 2028. We reiterate our Buy recommendation.”

Numis: “In our view this remains an attractive entry point for a portfolio that is diversified by both geography and technology managed by an experienced team.”

Liberum: “We view the 19% discount and 7.5% dividend yield as an attractive entry point for a company with a high degree of inflation linkage and strong track record.”