Over the past year, the FTSE 250 is up 2.26%. Some might think this is rather underwhelming, but at least it’s still in positive territory. And within the index, there have been some notable performers. Here’s one FTSE 250 stock that has surged over 20%, marking a close-to-10x gain in comparison to passively putting money in an index tracker.
An infrastructure trust
I’m talking about Pantheon Infrastructure (LSE: PINT). The UK-listed investment trust provides investors with access to a diversified portfolio of global infrastructure assets (mainly North America and Europe). The performance of the trust has been strong, with the stock up 24% in the last year.
The thinking is rather simple on paper. It buys infrastructure assets, mainly in essential, cash-generating sectors such as utilities and transport. It holds on to them, aiming for growth over time in the net asset value (NAV). In the meantime, it can pay out dividends as the portfolio assets typically have income streams. After a period of time, it looks to sell the assets, either to a private equity company or other large buyer.
Over the past year, the gains have come from a few areas. Of course, the stock should track the NAV of the portfolio closely. So the strong performance on assets is one key reason the share price has increased. Another factor has been the successful conclusion of some deals, such as banking profit from its stake in Calpine in January. This added approximately 2.6% to the overall value of the fund.
Looking ahead
The gains versus the broader index are significant. But for investors, the key consideration is whether the move can continue over the coming year and beyond. I think it can.
For a start, the share price is still at an 11% discount to the latest NAV figure. Over time, I’d expect the price to increase to make it more in line with the NAV. Another attraction is the dividend yield. At 4.14%, it’s above average, meaning that income investors are likely to pile in to benefit from this. This could act to push the share price up even more.
There are risks though. The size and scale of the infrastructure investments make it difficult to sell or liquidate quickly. This means that if the business has cash flow problems, it could struggle to ease things quickly.
Of the five analyst recommendations I can see, four of them have a Buy rating, with one having a Hold rating. Although these views shouldn’t be taken as a guarantee, it does provide another reason to view the stock positively for the future. When I look at the bigger picture, I think investors could consider this as a stock to buy based on the strong momentum it has right now, as well as the income payments.
