I have always been an advocate of investment trusts, as they offer all types of investors exposure to an array of stocks. Up around 25% over the past year, F&C Investment Trust (LSE: FCIT) has established itself as one of the best performers in recent times. It has over £5bn in assets, and invests in over 400 companies. Here I am going to explain why I am buying this FTSE 250 stock.
The main reason I like this FTSE 250 stock is because of its investment strategy. It aims to secure long-term growth through its diversified portfolio, and for my investing style, this is perfect. This also nullifies issues with volatility, exemplified through its near 80% return over the last five years. Being the oldest investment trust in the world, it has survived multiple challenges – most recently the pandemic. A near 11% rise in the share price since the outbreak of the pandemic shows its strengths.
I also like the look of FCIT’s top holdings. As of June 2021, this included Amazon, Alphabet, and UnitedHealth. The diversification offsets risk while increasing exposure to different markets. A standout for me is its eighth-largest holding, Taiwan Semiconductor Manufacturing Company, which has risen nearly 40% over the past 12 months. Fund manager Paul Niven has been running the trust since 2014 and has been key in FCIT’s recent success. Since he took over the trust is up 125%, a clear indication of his management strength. This gives me real confidence in the future of the FTSE 250 stock.
With this said, I do have a few issues with FCIT. Firstly, as of June 2021, its third-largest asset allocation was in emerging markets equity. Although emerging markets provide opportunities as they grow, they are often volatile. To add to this, Covid-19 cases in countries such as India and Brazil are still high, and if F&C has invested in affected countries this could have a negative impact. With a long-term outlook, however, I am not put off by this. I believe the prospects that emerging markets can offer outweigh the short-term threat of the pandemic. Instead, a dip in the market may offer greater opportunities.
Another issue is its large exposure to the US, and more specifically, tech stocks. Although they have rallied over the past few years, with over half (56.2%) of its asset allocation in North American equity, along with its top five holdings being tech stocks, this makes it vulnerable should these stocks experience a dip. We recently witnessed this with the tech sell-off.
Why I’m buying
Although I have highlighted issues such as volatility, I think a long-term perspective quashes these. As many developed countries increase their control over the pandemic, I think the rest of 2021 could see a rise in the FCIT share price. I think the FTSE 250 stock is yet to reach its full potential. Currently trading at around 855p, I deem now a perfect time to buy this stock for my portfolio before potentially missing out.
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Charlie Keough owns shares of FCIT. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, and Taiwan Semiconductor Manufacturing. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. 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.