I often think the worst thing you can do with your investment cash is trust it to a fund manager, but that doesn’t mean I turn my nose up at all the professionals. Here’s a couple that I think are certainly worth a closer look:
HICL Infrastructure (LSE: HICL) this morning reported an annualised total shareholder return for the six months to 30 September of 10.4%, based on dividends paid and an increase in the firm’s net asset value (NAV).
HICL is an investment firm that puts its shareholders cash into public infrastructure, and so NAV is a good valuation measure — with the cavaat that asset values are sometimes subjective and can be volatile.
NAV per share came in at 145.7p, for a rise of 2.5% from March’s figure of 142.2p, and dividends in the period of 3.82p per share support the company’s full-year target of 7.65p — which would provide a yield of 4.6% on today’s share price.
A return of 10.4% is very impressive, and if it could be repeated year after year, it would be enough to double your original investment in just seven years — but be aware that it’s a stretching target.
HICL told us its investment portfolio value was up 7.9% in the six months, to £2,189.9m, and there appears to be a strong pipeline of investments in the planning stages. Total income rose by 19.2%, with pre-tax profit up 19.1%, and dividends declared so far have been lifted by 2.7%.
The share price didn’t move a lot today, and at 168p it’s ahead of the firm’s NAV per share — but not by much, and the excess seems to me to represent a fair premium for HICL’s investment expertise.
In all, I see strong overall returns over the next few years, and coupled with a progressive dividend policy I like what I see here.
Trust in trusts
I’ve always been a fan of investment trusts, which provide pooled investment vehicles whose profits belong solely to shareholders — so there’s no clash of interest between company owners and customers.
I’ve been looking at Alliance Trust (LSE: ATST), whose shares are up 50% over the past five year, at 584p. The venerable investment trust puts its shareholders’ cash mostly into large global companies and aims at long-term growth. And it’s doing well at it.
By the halfway stage at 30 June, Alliance’s NAV per share had reached 591.4p — up from 561.1p in December 2015, and 545.9p the previous June.
Investment returns over the summer have been erratic due to EU referendum upheaval, and Alliance predicted “at least a mild recession as investment and consumption freeze up in the midst of so much uncertainty“, but the firm stressed its reliance on “a defensive portfolio that is invested in companies that are growing through structural change“, which should be less vulnerable to cyclical change and short-term political machinations.
With the shares price at 584p today, we’re looking at a discount to NAV of less than 1.5%, which has narrowed considerable since the interim stage. In a sector in which discounts are common, that suggests sentiment has been improving in recent months, and Alliance Trust has probably attracted some of the cash fleeing the Brexit panic.
Dividend yields are low at around 2%, but with Alliance chasing growth that’s fine — and the shares look attractive to me.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.