The outlook for share prices may be somewhat uncertain at the present time. Stock markets across the globe have enjoyed a major bull run in the last few years which has been backed by improving global economic growth. Now though, there are various political risks such as Brexit, US uncertainty and the prospect of tighter monetary policy across the developed world.
However, here are two investment trusts which appear to be well-managed and that could therefore offer high total returns in the long run. They could continue to deliver impressive investment performances for their investors.
Reporting on Monday was The Scottish Investment Trust (LSE: SCIN). The company was able to deliver a mix of capital growth and income during the year to 31 October 2017. Its share price total return was 12.8%, while its net asset value per share increased by 11%. It was also able to deliver a dividend growth rate of 11.1% plus an additional special dividend of 5p. This could prove useful if inflation remains stubbornly high, although the company’s dividend yield of 1.6% remains at just over half of the rate of inflation.
Looking ahead, the company appears to be relatively cheap. It trades at a discount of 8% to its net asset value. This suggests that there could be upside potential, while the company’s holdings also seem to be undervalued themselves. This is at least partly because of the investment style adopted by the Trust. It focuses on investing in unfashionable companies which have generally been overlooked by most investors. This could provide a wide margin of safety that could translate into capital appreciation.
With a total of 54 holdings, the portfolio is now more concentrated than it was a year ago. Back then it had 70 holdings, and this suggests that there could be even less correlation between the Scottish Investment Trust and the wider stock market. Therefore, as well as relatively high returns, it could also be a means of diversifying away from the performance of the wider index.
Also offering an upbeat outlook at the present time is the Murray Income Trust (LSE: MUT). It has a dividend yield of 4.6%, which is over 50% higher than the current rate of inflation. This should help its investors to overcome the threat of higher inflation, while a discount of 7% to its net asset value could mean that it offers a wide margin of safety. With stock markets being generally high, this could be appealing to a range of investors.
Among the Murray Income Trust’s top 10 holdings are defensive shares such as GlaxoSmithKline and British American Tobacco. This suggests that the trust’s outlook may be relatively stable. However, there are also growth opportunities through other top 10 holdings such as Prudential and Unilever. As such, it could be argued that the company offers a mix of defensive growth prospects. With its focus on UK equities, investors may continue to benefit from a weak pound in future.
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Peter Stephens owns shares in GlaxoSmithKline, Prudential, Unilever and British American Tobacco. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. 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.