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.

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.

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

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

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

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »