As I noted the last time I covered the Scottish Mortgage Investment Trust (LSE: SMT), while this company has been investing shareholders’ funds for the past 109 years, it has come into its own over the past decade.
Managed by James Anderson and Tom Slater, the duo is on the lookout for companies that have the potential to disrupt industries. This objective has led it to invest in tech giants such as Tesla and Amazon before many other managers here in the UK cottoned on to the potential of these businesses.
These astute investments have helped the trust produce a return of 164% for investors over the past five years compared to the Investment Trust Global benchmark return of 74%.
On a discount
Until recently, investors had been clamouring to buy into Scottish Mortgage, paying a premium to do so. Over the past five years, the trust has traded at an average premium to the underlying net asset value of around 5%.
However, over the past few weeks this discount has narrowed, and today, the shares in the trust are trading at around net asset value.
There have only been a few occasions in the past five years when investors have been able to buy the shares without having to pay a premium. With this being the case, I think it could be worth snapping up a few shares in this winning, globally diversified investment trust for 2019.
Another investment trust that’s recently caught my eye is the Mercantile Investment Trust (LSE: MRC).
While Scottish Mortage has a global focus, Mercantile aims to “achieve capital growth through investing in a diversified portfolio of UK medium and smaller companies.” Recently, Brexit concerns have weighed on the shares wiping out almost 12 months of gains at the trust. Nevertheless, I’m confident that over the long term, Mercantile can recover.
The trust has been managed by Martin Hudson since 1994 and does have an impressive track record. Over the past five years, it has beaten its benchmark by 13.2%. On top of this remarkable performance, it also offers a dividend yield of 3.3%, and the shareholder-focused management has pushed down the average annual management fee to a modest 0.45%.
Right now, shares in Mercantile are on special offer. They are trading at a discount to net asset value of 11.9%, a considerable gap and one that management is trying to moderate with share buybacks. Over the past five years, the discount to net asset value has averaged 10.4%.
If you’re looking for a way to invest in beaten-down UK small-caps, I think this could be the best investment to do so. You’re getting a diversified portfolio of companies, managed by a seasoned investment manager who is committed to producing the best returns for investors.
So overall, I reckon these two investment trusts are a sensible buy for 2019 considering their current valuations and record of creating value for shareholders.
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Rupert Hargreaves owns shares in the Mercantile Investment Trust. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. 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.