The Motley Fool

2 cheap investment trusts I’d consider in February

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.

Lady researching stocks
Image source: Getty Images.

With strong investor sentiment driving the average discount-to-net-asset-value that investment trusts trade at to multi-year lows, it’s increasingly difficult to find underpriced opportunities for bargain hunters. For investment trust fans with a long-term mindset however, there are still a few tempting discount opportunities across some under-appreciated sectors.

Smaller companies

One such fund is the BlackRock Smaller Companies Trust (LSE: BRSC), which currently trades at a 12% discount to its net asset value of 1,534p per share. UK smaller companies have fallen out of favour with investors for quite some time, with many investment trusts covering the sector trading at some of the widest discounts to their net asset values (NAV) in the industry.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

But despite uncertainty surrounding the UK economy, not least because of Brexit, the performances of smaller company investment trusts have held up well in recent years. The BlackRock Smaller Companies Trust is a particularly strong performer, with a five-year NAV return of 140%, compared to its Numis Smaller Companies plus AIM (ex Investment Companies) return of just 68% over the same period.

Growth and income

The fund aims to achieve long-term capital growth for shareholders, but it also provides income to shareholders via its twice-yearly dividend, which currently gives shares in the trust a yield of 1.8%.

Fund manager Mike Prentis, who has been the lead manager of the investment trust since 2002, doesn’t think like your average stock picker. Prentis has a preference for the fastest growing, innovative companies and takes a long-term view on fundamentals. He also uses a highly diversified investment strategy, with no single holding accounting for more than 2.5% of the portfolio value.

Industrials dominate its portfolio, with a 33% sector weighting, and this is followed by financial services (15.8%) and consumer services (13.1%). Top holdings include Dechra Pharmaceuticals (2.1%), Avon Rubber (1.8%), 4imprint Group (1.7%), Robert Walters (1.6%) and Central Asia Metals (1.6%).

Asia

Another fund that’s worth a closer look is Symphony International Holdings (LSE: SIHL). The Asia-focused investment company offers exposure to the region’s rapidly expanding markets by investing in firms that are set to benefit from the rising disposable incomes of the region’s growing middle class.

Macroeconomic fundamentals are supportive and valuations are attractive, with Asian stocks expected to benefit from strong economic growth and structural reforms in various countries. Many analysts also reckon Asian equities are only still mid-cycle in their bull market, meaning there’s potential for outperformance against developed market equities this year.

What’s more, shares in the investment company are trading at a massive 26% discount to its NAV, giving investors the opportunity to pick up its shares for significantly less than the sum of its parts.

Unquoted companies

The company is invested in a number of high-growth sectors, which include healthcare, hospitality, lifestyle and real estate. And in addition to owning listed equity investments, 33% of the portfolio is invested in unquoted companies. This gives investors exposure to companies that are in the developing stage or have under-tapped potential.

It’s not an investment suited for everyone, but for investors looking for an undervalued play on Asia, Symphony International Holdings could be a great pick.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.