2 bargain investment trusts I’d buy and hold for 10 years

These two investment trusts could generate high total returns.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The outlook for share prices may be somewhat uncertain at the present time. Stock markets across the globe have enjoyed a major bull run in the last few years which has been backed by improving global economic growth. Now though, there are various political risks such as Brexit, US uncertainty and the prospect of tighter monetary policy across the developed world.

However, here are two investment trusts which appear to be well-managed and that could therefore offer high total returns in the long run. They could continue to deliver impressive investment performances for their investors.

Strong performance

Reporting on Monday was The Scottish Investment Trust (LSE: SCIN). The company was able to deliver a mix of capital growth and income during the year to 31 October 2017. Its share price total return was 12.8%, while its net asset value per share increased by 11%. It was also able to deliver a dividend growth rate of 11.1% plus an additional special dividend of 5p. This could prove useful if inflation remains stubbornly high, although the company’s dividend yield of 1.6% remains at just over half of the rate of inflation.

Looking ahead, the company appears to be relatively cheap. It trades at a discount of 8% to its net asset value. This suggests that there could be upside potential, while the company’s holdings also seem to be undervalued themselves. This is at least partly because of the investment style adopted by the Trust. It focuses on investing in unfashionable companies which have generally been overlooked by most investors. This could provide a wide margin of safety that could translate into capital appreciation.

With a total of 54 holdings, the portfolio is now more concentrated than it was a year ago. Back then it had 70 holdings, and this suggests that there could be even less correlation between the Scottish Investment Trust and the wider stock market. Therefore, as well as relatively high returns, it could also be a means of diversifying away from the performance of the wider index.

Income potential

Also offering an upbeat outlook at the present time is the Murray Income Trust (LSE: MUT). It has a dividend yield of 4.6%, which is over 50% higher than the current rate of inflation. This should help its investors to overcome the threat of higher inflation, while a discount of 7% to its net asset value could mean that it offers a wide margin of safety. With stock markets being generally high, this could be appealing to a range of investors.

Among the Murray Income Trust’s top 10 holdings are defensive shares such as GlaxoSmithKline and British American Tobacco. This suggests that the trust’s outlook may be relatively stable. However, there are also growth opportunities through other top 10 holdings such as Prudential and Unilever. As such, it could be argued that the company offers a mix of defensive growth prospects. With its focus on UK equities, investors may continue to benefit from a weak pound in future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares in GlaxoSmithKline, Prudential, Unilever and British American Tobacco. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing For Beginners

After getting promoted from the FTSE 250, what’s next for Hiscox?

Jon Smith mulls over the latest reshuffle in the FTSE 250 and explains why he feels this top stock could…

Read more »

Investing Articles

Want dividend yields up to 9.9%? Here’s 3 FTSE 100 and FTSE 250 shares to consider

Looking to turbocharge your passive income? These high dividend yield FTSE 100 and FTSE 250 stocks could be just what…

Read more »

Investing Articles

2 shares absolutely crushing the FTSE 100 in 2024!

Not all FTSE 100 stocks are sleepy and meandering. This duo has surged more than four times higher than the…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Growth Shares

The FTSE 100 could hit 9,000 points by year end. Here’s why

Jon Smith talks through some factors that could help to lift the FTSE 100 to a new all-time high and…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

I’d seriously consider buying this UK technology small-cap stock today

Today's positive trading figures and a runway of growth potential ahead make this small-cap stock look attractive to me now.

Read more »

Investing Articles

It’s October! Does this mean UK stocks are going to crash?

Whisper it quietly, but four of the five biggest one-day falls in the FTSE 100 have been in the month…

Read more »

Investing Articles

With new nuclear energy deals in view, Rolls-Royce’s share price looks cheap to me anywhere under £11.48

Rolls-Royce’s share price dipped after a problem on a Cathay Pacific flight but has now bounced back on positive news…

Read more »

Investing Articles

Is the Greggs share price now a screaming buy for me after falling 10% this month?

Harvey Jones watched the Greggs share price climb and climb, but decided it was too expensive for him. Should he…

Read more »