Foreign & Colonial

The renowned F&C Investment Trust (LSE: FCIT) was launched way back in 1868, just over 150 years ago. It’s now worth £3.66bn and aims to deliver long-term capital and income growth by investing in an internationally diversified portfolio of equities, as well as unlisted securities and private equity.

Recent performance has been good – it’s grown 99% over the past five years, against 77% for its global benchmark index. It even grew 8.8% over the last 12 months, at a time when most indices actually fell. So it isn’t just living off its history and reputation.

Tech heavy

However, one reason for this success is its outsize exposure to the US stock market, which has beaten most others in recent years. Some 50% of the fund is invested in the States, so maybe skip this if you already have enough US exposure. Top 1o holdings include US tech giants Amazon, Microsoft, Google owner Alphabet and Facebook, so you can probably guess where recent strong growth has been coming from.

Growth is nonetheless impressive, and F&C also gives you exposure to Europe, emerging markets, Japan and the UK. The trust trades at an average discount of 6.8% to its net asset value, but that has currently narrowed to 1.47%, suggesting it is in demand right now. An ongoing charges figure of 0.79% isn’t too expensive.

Your decision partly depends on where you want to put your money. The UK is relatively undervalued, for example. But F&C Investment Trust could be a good one-stop fund, if you’re happy to go large on the US.

Buy British

While F&C was the original investment trust, plenty more were launched at the tail end of the 19th century, including the British Empire Trust (LSE: BTEM). It was incorporated in London in 1889 as The Transvaal Mortgage, Loan and Finance Company Limited, with the aim of investing in the hot emerging market opportunity of the period – the Transvaal colony of southern Africa, a region rich in minerals and resources.

It’s now a globally diversified investment trust with nearly £1bn in assets and now follows what investment manager Joe Bauernfreund calls a “unique strategy of investing in asset-backed companies, including holding companies, closed-ended funds, property companies and, as of June 2017, cash-rich Japanese companies.” So its top holding is Japan Special Situations, which makes up 15% of the entire fund.

Global power

British Empire Trust is also in the global investment trust sector, but is less top-heavy with US stocks. In fact, its largest exposure is to Europe, at 26%, followed by North America, at 24%, then Asia-Pacific and Japanese equities, both 18%. The UK is a measly 1% which could give you much-needed diversification from these shores. It also means that these two funds could balance each other quite nicely. Otherwise, here are two more esoteric global investment trusts to consider.

The post I’d buy and hold these 2 global investment trusts for 100 years appeared first on The Motley Fool UK.

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British Empire(LSE: BTEM) and Caledonia(LSE: CLDN) are two investment trusts that are very much focused on value. While they’ve delivered decent enough returns over the past decade in absolute terms, they’ve underperformed relative to many of their peers. I believe the stage is set for this to reverse.

Out of favour

The table below shows recent share prices and net asset values (NAV) for the two trusts and their 10-year total returns in terms of share price-plus-dividends and NAV-plus-dividends.

As you can see, the 10-year return of the shares has significantly lagged the 10-year return of NAV. This, and the current discounts to NAV, shows how out of favour the two trusts have become over the period.

In contrast, in the investment trust global sector as a whole, the current average discount to NAV is less than 2% with a number of trusts actually trading at a premium. Furthermore, over the last 10 years, the sector’s average share price return of 226% has been well ahead of the NAV return of 182%. This shows how popular many more growth-orientated trusts have become over the period.

I’d happily buy British Empire and Caledonia today on the expectation of high returns over the next decade from the double drivers of an improving performance from value strategies and a change in investor appetite to value from growth. If this plays out, I would expect the two trusts not only to beat the FTSE 100, but also to be prominent performers in the investment trust global sector.

Value hunters

British Empire and Caledonia are both long established and have a geographical go-anywhere approach in their hunt for value. They also don’t restrict themselves to quoted companies and the big stock market names that feature in many global trusts.

British Empire, in which my Foolish colleague Rupert Hargreaves has recently invested, looks to identify discounts to intrinsic NAV in its investments and has particular focus on closed-end funds and family-owned holding companies. Its current largest holding, Japan Special Situations, is a basket of 18 deep-value stocks. Its second-largest holding, Exor, is an Italian-listed holding company run by the Agnelli family.

Similarly, while Caledonia is invested in some familiar names, its top two holdings are Cobehold, a Belgian investment company, and Seven Investment Management, a boutique UK business. Both companies are unlisted.

As well as their focus on value, British Empire and Caledonia actively engage with companies in which they’re invested. Both trusts are also prudently managed, with the former having very modest gearing of 4% and the latter currently having a net cash position.

The post 2 investment trusts I’d buy to beat the FTSE 100 appeared first on The Motley Fool UK.

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G A Chester 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.

Top trusts 

First up is the British Empire Trust (LSE: BTEM). I believe this is one of the best investment trusts today that you can buy to protect your portfolio from market volatility. 

The trust is unlike many of its peers because it doesn’t pick shares to try and beat the market. Instead, the firm invests in other investment vehicles that are trading at what it believes to be a substantial discount to their full intrinsic value. In some cases, management then works with these undervalued instruments to help unlock value for shareholders and investors.

This approach has yielded fantastic results for investors over the past few decades. British Empire has been around in one form or another since 1889, and according to the most recent performance data (30 June 1985 to 30 April 2018), the total return net of fees to investors is 12.1% per annum.

Unfortunately, if you are looking for dividend income, this might not be the trust for you. The shares only yield 1.6%, according to the firm’s website. Still, the capital returns produced over the past four decades more than make up for this lack of income in my opinion.

The power of compounding

My next pick, Witan Investment Trust (LSE: WTAN) is, in my view, appealing for many of the same reasons. 

Founded in 1909, this company has achieved 43 years of consecutive dividend growth with the payout more than doubling over the past 10 years. At the time of writing the shares support a dividend yield of 2.1%.

Witan does invest in single companies, but the trust has a global investment mandate and invests wherever there is value to be found. Right now, only a third of the portfolio is invested in the UK while 22% is devoted to European equities, and 21% is invested in North American equities. The rest is placed across the world with the focus on Asia Pacific.

And the team at Witan has more than proved that it knows what its doing over the past decade. Since 2008 shares in the trust have returned 11.5% per annum.

It is this double-digit annual return that has really got me excited about the prospects for my retirement portfolio. According to my calculations, thanks to the magic of compounding, if Witan and British Empire continue to produce annual returns of between 11.5% and 12.1%, I only need to invest £250 a month to be able to retire with a pension pot of £1.5m in 35 years time. 

Of course, this assumes that the bull market we are currently in continues on for the next three decades, which is unlikely in my opinion. 

That being said, with four decades of over-performance behind it, I’m confident that British Empire at least can continue to produce double-digit returns for investors every year, no matter what the market has in store for us.

The post 2 FTSE 250 investment trusts I plan to retire on appeared first on The Motley Fool UK.

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Rupert Hargreaves owns shares in the British Empire Trust and Witan Investment Trust. 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.

On the same theme, a chart in a recent blog post by veteran fund manager Neil Woodford shows that “the difference between the performance of value stocks and growth stocks today is greater than at any stage in stock market history.”

Past performance is no guarantee of future returns

Now, unless “it’s different this time” — historically one of the most dangerous things for investors to believe — the tremendous run in growth stocks, fuelled by extraordinary post-financial-crisis monetary policy, will come to an end. As the market comes back to its senses, we could be entering a golden period for value investing.

On the view that value is primed to outperform in the coming years, here are two investment trusts, I’d be happy to buy today.

Value plus

Gabelli Value Plus+ Trust (LSE: GVP) was launched in 2015 and the name is probably unfamiliar to many UK investors. However, it’s a different matter in the US, where Gabelli Asset Management Company (GAMCO) is well recognised, having consistently deployed its value investment methodology since 1977 and delivered market-beating returns. The methodology has its foundation in the principles first articulated in 1934 by the fathers of value investing, Benjamin Graham and David Dodd

The investment team of Gabelli Value Plus+ Trust is lead by GAMCO heavyweights, supported by over 30 research analysts. It invests primarily in undervalued US stocks. Specifically, these are stocks trading at a significant discount to what the team calculates “an informed industrial buyer” would be willing to pay to acquire the entire company, and where there are identified catalysts for the stock price to move towards this valuation.

The trust may not be well known to UK investors but Gabelli’s ‘Private Market Value with a Catalyst’ selection criteria is not only founded on sound value investing principles, but also is tried and tested.

A world of value

I’m sure more readers will be familiar with British Empire Trust (LSE: BTEM) than with Gabelli Value Plus+. British Empire Trust was established in 1899 and has been managed by Asset Value Investors since 1985. Again, this team has a well-established strategy of identifying stocks trading at a deep discount to intrinsic value and with catalysts for the value to be outed.

It invests globally and its current 20% exposure to Japan provides an example of how it goes about looking for value. It points out: “There is a striking contrast between the US, where the S&P 500 ex-financials index trades on a Price-to-Tangible-Book multiple of 19.2x, and Japan where the multiple for comparable companies is just 1.9x.” And it sees a catalyst for unlocking shareholder value in the shape of rising activist pressure (including from government, shareholder advisory services and the National Pension Fund) on “corporate Japan’s bloated balance sheets.”

With its relentless focus on fundamental value and willingness to look anywhere in the world to find it, British Empire is another trust I believe could thrive in the coming years.

The post Why these 2 investment trusts are primed to outperform appeared first on The Motley Fool UK.

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G A Chester 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.

Investment trusts are one of the best instruments to help build your wealth. Even though trusts might be more expensive than index-tracking funds, they’re run by skilled managers, whose job it is to try to outperform the market. 

Fidelity Special Values (LSE: FSV) is one such example. This trust is one of the market’s best performers. Since the beginning of the year, the shares have returned 24% excluding dividends. And even after this performance, Fidelity continues to trade at a discount to net asset value, which is around 261p (according to the most recently published net asset value report). 

A focus on value 

Fidelity is focused on value and the firm’s substantial weighting towards financial services businesses has helped it beat the market this year. The fund is not limited by nationality and has benefitted from the rally in US financial stocks during the past 12 months. Its current largest position is Citigroup at 5.7% of the portfolio, followed by UK dividend champion Royal Dutch Shell at 5.2%. 

As well as the trust’s outperformance, the other attractive quality is its relatively low cost. With an annual management fee of 1.1%, the fund is at the top end of what I would call “appropriately priced,” but the returns achieved over the past five years more than justify the higher fee. 

Since the end of 2014, Fidelity has delivered a total return for investors of 144%, outperforming its benchmark, the UK All Companies Index by nearly 100%. The index has returned 75% over the same period. 

With a dividend yield of 1.8% as well, significantly more than the average rate on offer at high street bank savings accounts, Fidelity looks to me to be a great addition to my retirement portfolio. 

International value 

The British Empire Trust (LSE: BTEM) has a much broader mandate than Fidelity, and this is one of the reasons why the fund looks attractive to me. 

British Empire is a global investor, looking for undervalued companies all over the world. Only 1% of its portfolio is allocated to UK equities. Some 32% is allocated to European stocks, 20% is allocated to North American equities, and the remainder to Asian and other international stocks. Over the past five years, the fund has produced a return of 79% for investors, outperforming the FTSE 100 by 38% over the period excluding dividends. 

Despite these gains, the shares trade nearly 11% below British Empire’s net asset value of 805p. 

Another positive about the trust is its low management fee. The fee is 0.9% per year, 0.2% below that of Fidelity, although the performance gap explains the difference (British Empire’s dividend yield is also lower at 1.6%). Still, for exposure to international markets, with a proven management team, it seems that you can’t go wrong with the Empire trust. 

As a way to benefit from global growth and protect my portfolio from Brexit, this trust seems to me to be worthy of further investigation. 

The post Two Footsie beating investment trusts I’d buy to supercharge my pension appeared first on The Motley Fool UK.

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Rupert Hargreaves owns shares in Royal Dutch Shell. 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.

Explosive returns

Over the past 12 months, shares in closed-end investment trust have risen 44% as the enterprise’s net asset value (NAV) has expanded. According to the unaudited results for the half year ended 31 March 2017 published today, NAV increased by 15% compared to the previous period, to a high of 770.9p. Still, despite this rapid growth, the shares continue to trade at a discount to that value. At the end of the period, the value was 753p compared to the current market price of 678p. Year-on-year NAV has risen 39% from 544p.

Investment returns

The trust’s best-performing investment during the period was AP Alternative Assets, which helped add 3.53% to NAV by its value increasing 48% on a dollar basis. This massive gain was driven by the long-awaited IPO of Athene Insurance — the sole asset owned by AP Alternative — that came at a premium to its carrying value.

The trust first invested in AP back in 2012 and the asset has generated an outstanding return since the initial investment. The internal rate of return over the past five years is 55% per annum. Now the IPO of Athene has been completed, British Empire has reduced its holding in AP but continues to see upside in the publicly traded insurance company.

The trust’s second largest contributor during the period was JPEL Private Equity. Like AP, JPEL has achieved some impressive returns on its investments, which have in turn led to substantial profits for British Empire.

After the sale of two substantial businesses from the JPEL portfolio (both of which achieved internal rates of return of 50% or more) JPEL was able to return 19% of its NAV to investors.

Management success

With any investment trust, it’s always difficult to assess whether or not the investment managers in charge have enough investment skill to be able to produce lucrative returns for investors. British Empire’s management looks as if it ticks this box.

By outsourcing capital to experienced private equity businesses, the trust has been able to achieve market-beating returns and shareholders have reaped the rewards. Almost all of the assets owned by the trust are private equity businesses acquired when trading at a discount to NAV. This shows British Empire’s management has shareholder interests at heart and is unlikely to overpay for assets.

As the trust continues with this investment strategy NAV should only increase, and management is trying to reduce the trust’s trading discount to NAV via an ongoing share buyback programme — another sensible capital allocation decision.

The bottom line

So overall, as British Empire continues to reap the rewards from its private equity investments, shares in the trust look as if they can head much higher from current levels. This is one undervalued growth stock you might not want to miss.

The post This momentum growth stock looks far too cheap appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any 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.