Two investment trusts I’d buy with £1,000 today

These two trusts have a great record of looking after your money.

| 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.

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.

Strategic Equity Capital (LSE: SEC) is, in my opinion, one of the market’s most underappreciated investment trusts.

In the grand scheme of things, the trust is relatively small with net assets of only £185m at the end of December 2017. However, its size has not held it back. Over the past five years, the company has delivered an annualised net asset value total return per share of 20.4%, that’s compared to a return of just 15.5% for its benchmark small-cap index.

Working to unlock value 

Strategic Equity has been able to generate this outperformance thanks to its interesting strategy of finding companies that are looking to increase their value through strategic, operational management change. The investment managers then work with these companies to enhance shareholder value. This activist approach is different to the buy-and-hold approach employed by many other investment trusts, but Strategic Equity’s returns speak for themselves.

There were just 19 Holdings in the investment company’s portfolio at the end of December, and the top 10 account for nearly two-thirds of net asset value. While this sort of concentration might not be appropriate for other investment trusts, with Strategic Equity, the fact that the firm is engaging with its investments to unlock value, reduces risk. 

For example, one of the more substantial holdings, accounting for 8% of the portfolio at the end of 2017 was small-cap Wilmington. To help unlock value here, during 2017, Strategic Equity “put forward two experienced candidates” to replace the firm’s existing chairman. These new candidates should, according to the trust’s year-end update, help the market realise the value of “deeply undervalued” Wilmington.

At the time of writing, shares in this champion investment trust are trading at a 12.8% discount to net asset value and help unlock further value from the portfolio, management is buying back shares to reduce the discount.

Emerging market play 

Another investment trust I’d buy for my portfolio today is the JP Morgan Chinese Investment Trust (LSE: JMC). 

Every investor should have some exposure to emerging markets in their portfolio as these regions are growing at a much faster clip than developed regions. Also, China specifically is becoming a world leader in technology, and the country’s tech firms have grown to become some of the most significant and most important in the world over the past decade.

JP Morgan China is well positioned to take advantage of these trends. Over the past five years, the trust has produced a total return for investors of a little over 100% thanks to its extensive exposure to Chinese tech stocks such as Tencent and Alibaba. These two holdings account for just under 20% of the portfolio.

The one downside of this investment is its high price. The total annual charge is around 1.4%, which is nearly three times more than the annual dividend of 0.5% offered to shareholders. Still, I believe that this is a this is a price worth paying to invest alongside experienced investors in one of the world’s fastest-growing economies.

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.

Rupert Hargreaves owns no share 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.

More on Investing Articles

Investing Articles

Will it be too late to buy Nvidia stock in March?

NVIDIA stock is up more than 60% since the start of 2024. Our writer considers whether it might still be…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

Why did Direct Line shares just soar 27%?

Direct Line shares have jumped more than a quarter in the course of today's trading session. Our writer explains why…

Read more »

Close-up of British bank notes
Investing Articles

These 2 shares are Dividend Aristocrats. Which should I buy this March?

Our writer likes the business model of this pair of FTSE 100 Dividend Aristocrats. So why would he only consider…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Investing Articles

I bought 49 Unilever shares in June. Here’s what they’re worth today

Harvey Jones bought a modest amount of Unilever shares last summer hoping the stock would soon recover. He's having to…

Read more »

BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.
Investing Articles

I reckon these shares, potentially 20% undervalued, are Warren Buffett’s type of investment

Oliver Rodzianko thinks Games Workshop is an absolutely stellar investment. As it's potentially undervalued, he reckons Warren Buffett would agree.

Read more »

Calendar showing the date of 5th April on desk in a house
Investing Articles

Great investing habits that can boost my Stocks and Shares ISA

Forget complicated calculations and financial jargon! Our writer uses a few simple habits to build wealth inside his Stocks and…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Why has the St. James’s Place share price crashed 30%, after FY results?

The St. James's Place share price has just fallen off a cliff. What could have gone wrong in 2023 that's…

Read more »

Family in protective face masks in airport
Investing Articles

Here’s how much I’d have if I’d bought 1,000 Rolls-Royce shares 10 years ago

Rolls-Royce shares may be flying high this year but that wasn't always the case. I'm calculating how much I'd have…

Read more »