Finding the best investment trusts can be somewhat challenging. Past performance, fees, gearing and valuations are all worthwhile areas for investors to focus on. However, unearthing the trusts which offer the best mix of diversity and total return potential is still tough. With that in mind, here are two which seem to offer a mix of value and return potential for the long run. As such, they could be worth buying right now.
Reporting on Thursday was Dunedin Enterprise Investment Trust (LSE: DNE). It specialises in investing in UK mid-market buyouts and saw positive returns over the first half of its financial year. The company’s net asset value per share increased by 5.9% during the period, with it making £12.5m in realisations.
This did not include a stake in Blackrock which was sold after the period end in August 2017, with the total proceeds of £12.8m from the sale exceeding the valuation of £10m as at the end of 2016. The original cost of the investment was £4.9m, and together with monies received from the company it equates to a 2.8 times return on the original investment.
With the Dunedin Enterprise Investment Trust trading at a discount of around 28% to its net asset value, it appears to be relatively cheap. Its dividend yield is in excess of 4% at the present time, and this mix of value and income potential could lead to improved returns over the long run. Alongside this, it continues to make new investments such as the £7.3m put into Forensic Risk Alliance during the first half of the year. This could help it to continue outperforming the FTSE small-cap index as it has done by over 11% during the last six months.
Also offering long-term appeal is real estate investment trust (REIT), Shaftesbury (LSE: SHB). The company focuses on London’s West End, and it recently reported good footfall and strong trading despite the potential risks from Brexit. It has seen good occupier demand across all of its uses. This has driven rental growth, while its refinancing in 2016 has meant that its cost base has also become more attractive for the long term.
Certainly, higher inflation and lower wage growth could weigh on the company’s outlook. They could cause a general slowdown across the UK and while London is very much an international city, it may not be immune to a drop in confidence and spending power among consumers. As such, the outlook for Shaftesbury may be somewhat more uncertain than it otherwise would be.
However, with the company trading on a price-to-book (P/B) ratio of 1.2 it seems to offer a wide margin of safety. This suggests that investors have already priced-in potential challenges over the medium term. Therefore, now could be an opportune time to buy it for the long run.
Peter Stephens has no position in any of the shares 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.