Tip Sheet

The Tip Sheet

The Times says risk-averse investors should consider sweeping up shares in Supermarket Income REIT, while The Telegraph reviews its successful Pershing Square Holdings tip.

ByFrank Buhagiar•21 May, 2024•

Tempus: Time to sweep up shares in this trust

The Times tipster is tipping Supermarket Income REIT (SUPR), particularly for investors sitting on the risk-averse end of the investing spectrum. That’s because, as the name suggests, SUPR generates its income by collecting rent from supermarket tenants – 77% of rent as at last financial year-end came from Tesco and Sainsbury’s alone. The REIT also counts the likes of Waitrose, Morrisons, Asda, Marks & Spencer, Lidl and Aldi as tenants.

The fund’s portfolio is currently comprised of 73 predominantly ‘large, edge-of-town outlets that offer click-and-collect or online delivery services’. Historically, the UK has been the company’s sole hunting ground but recently 17 Carrefour stores in France were acquired for €75 million. Although this represents ‘a tiny addition to the portfolio, its significance is that it marks a fresh diversification strategy’.

The existing portfolio has been valued at over £1.7 billion. And yet, the shares trade 15% below net asset value and offer a dividend yield of 8.3%. The pandemic, Ukraine war and higher interest rates are all cited as reasons for why retail rents have been depressed and sentiment low. As Tempus writes, ‘prospective investors should consult professional advisers to ensure that the Reit format is right for them, but subject to that Supermarket Income looks on course for recovery and expansion. Advice: Buy.’

Questor: This US fund has rallied with its billionaire manager’s notoriety

US fund? Billionaire manager? That can only be Pershing Square Holdings (PSH) and its star manager Bill Ackman. The Telegraph’s Questor Column tipped the US equities investor back in August 2022 citing Ackman’s conversion from ‘Wall Street buccaneer to Warren Buffett’. The tip was well-timed as the share price is since up +57%, making the fund the top performer in the North America sector – over five years shareholder total return stands at +225%, double the US stock market’s +108.6%.

How has this been achieved? Firstly, several holdings have performed well – Universal Music Group is 26% higher while Alphabet is up 39%. Share buybacks have also helped. So too, Ackman’s growing presence on social media – he has 1.2 million followers on X. Having such a large and growing following has, according to Questor, helped raise PSH’s profile – the fund was one of the most bought in February and March. Increased investor interest has helped narrow the discount at which the shares trade at to 27% from 36%.

The discount is still higher than average though. Questor points the finger at the fund’s relatively high fees – a 1.5% annual management fee plus 16% performance fee charged on all investment gains. Last year, fees incurred amounted to $467.5m (£370.8m). But there may be positive movement on the fee front. In February 2024, Ackman unveiled plans for a new fund, Pershing Square USA. The interesting bit for PSH shareholders is that 20% of fees earned by the managers will go towards offsetting that PSH performance fee. In terms of numbers, if the US fund raises US$10bn, the UK fund’s costs will reduce by US$40m.

Questor concludes ‘With the fund performing so well and delivering strong returns after all costs, we are happy to remain holders but will look out for any signs the fund manager is taking his eyes off the ball or a widening in the discount.’

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But as it will always be, best to DYOR.