With share prices having fallen significantly in 2018, many investors may be feeling somewhat nervous about the prospects for global stock markets. That’s understandable since short, sharp corrections can sometimes lead to increased volatility over the medium term. As such, further paper losses cannot be ruled out for long term investors.
However, the prospects for share prices in the long run remain generally positive with the world economy continuing to deliver relatively high growth. As such, these two investment trusts could be worth buying at the present time.
Reporting on Friday was Allianz Technology Trust (LSE: ATT). The company enjoyed a strong year, outperforming its benchmark by a large margin. In the year to 30 November 2017 its net asset value per share increased by 41%. The Dow Jones World Technology benchmark increased by 31.5% during the same time period, which means the company’s outperformance was 9.5%.
In terms of its share price, there was a 50.2% gain in the same timescale. Of course, it was an exceptional year for the technology sector and for a number of the trust’s major holdings. The likes of Amazon, Apple, Facebook and Microsoft enjoyed strong gains as investors became increasingly positive on the prospects for the US and global economies. With those four stocks its major holdings, they were able to deliver a positive contribution to the trust during the year.
Looking ahead, there could be increased volatility in the wider technology sector. Higher inflation in the US could spark a more risk-off attitude among investors. This may mean that the company’s performance in the current year fails to match its 50%+ gain in its last financial year. However, with it trading on a 1% discount to its net asset value, it appears to offer excellent exposure to what may prove to be a growing technology sector.
High total returns
Also offering the potential for high returns in the long run is the Edinburgh Investment Trust (LSE: EDIN). It trades at a 10% discount to its net asset value, which suggests that it could offer good value for money. Furthermore, a number of its major holdings are relatively defensive. For example, British American Tobacco, Altria and AstraZeneca are among its top 10 holdings. They could provide stability and resilience during possible market turbulence over the medium term. They may also offer significant upside potential in the long run.
Additionally, the trust also has a relatively impressive income outlook with a dividend yield of 4.1% at present. This is likely to remain above inflation and could mean that investor demand for the company increases over time. This may help to reduce or even eradicate its current discount.
With the Edinburgh Investment Trust’s net asset value per share having beaten the performance of the UK Equity Income benchmark by over 10% in the last five years, it appears to have a solid track record which could be repeated in future.
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Peter Stephens owns shares in AstraZeneca, British American Tobacco and Altria. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. The Motley Fool UK owns shares of and has recommended Amazon, Apple, and Facebook. The Motley Fool UK has the following options: long January 2020 $150 calls on Apple, short January 2020 $155 calls on Apple, short March 2018 $200 calls on Facebook, and long March 2018 $170 puts on Facebook. The Motley Fool UK has recommended AstraZeneca. 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.