Finsbury Growth & Income Trust

Finsbury Growth & Income Trust (LSE: FGT) invests in the shares of predominantly UK-listed companies, with the objective of achieving capital and income growth. It aims to generate absolute returns in excess of that of its benchmark, the FTSE All-Share Index. Shares in the trust yield 1.9% and benefit from relatively low costs, with an AIC annual ongoing charges ratio of just 0.74%.

The trust is one of the top-performing UK equity funds, having outperformed its benchmark over the past three years, with an NAV total return of 54.8%, against the benchmark performance of 25.4%.

Portfolio manager Nick Train uses a bottom-up stock-picking approach and looks to invest in a quality companies that appear to be undervalued. Unusually for a fund of its size, its portfolio is relatively concentrated, with a total of just 26 stocks as of 31 July. And this is because the fund aims to keep portfolio turnover as low as possible and focus on long-term holdings, which helps to reduce stamp duty and commissions expenses for investors.

However, its important to be wary of the downside of concentration risk. The Finsbury Growth & Income Trust has a great deal of exposure to the consumer goods sector, with big positions in Unilever (10.3%), Diageo (10.1%) and Burberry Group (6.7%). Along with holdings in foreign-listed groups, such as Dutch brewer Heineken and US snacks giant Mondelez, its total exposure to the sector added up to 48.1% as of 31 July.

Edinburgh Investment Trust

The £1.4bn Edinburgh Investment Trust (LSE: EDIN), formerly run by Neil Woodford until 2014, might be a better pick for income-minded investors. In addition to its aim to produce index-beating absolute returns, the trust seeks to deliver dividend growth that exceeds the UK inflation rate.

The fund is now co-managed by Mark Barnett, who has 24 years of experience in the industry, and James Goldstone, who joined the company in 2016. And although the new team has not run the fund for very long, they have demonstrated considerable skill in picking large-cap dividend-paying stocks.

Over the past three years, the trust has beaten the average UK equity income investment trust by nearly five percentage points, with a cumulative performance of 29.3%. Encouragingly, the investment trust also managed to beat Neil Woodford’s CF Woodford Equity Income fund, which gained 24.7% in the period.

Like the Finsbury Growth & Income Trust, the Edinburgh fund invests primarily in UK-listed companies. Large-cap stocks dominate the Edinburgh Investment Trust, with 55.6% of portfolio value represented by FTSE 100 companies as of 31 July. Top holdings include British American Tobacco (7.9%), BP (4.6%), Legal & General (3.6%), BAE Systems (3.5%) and Imperial Brands (3.5%).

FTSE 250 companies represent another 25.6%, while international equities and small-caps account for a further 8.3% and 6.8%, respectively.

With shares in the investment trust currently trading at a yield of 4%, the Edinburgh Investment Trust seems a great pick for investors looking for income through equities. What’s more, with shares in the trust trading at a modest discount to its net asset value of 8%, investors can effectively purchase its assets for less than the sum of its parts at today’s price.

The post 2 top investment trusts for long-term investors appeared first on The Motley Fool UK.

More reading

• 2 top FTSE 250 investment trusts to consider in April

Jack Tang 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.

While I tend to review my positions when results and trading statements are released to the market, I also like to review my performance and the stocks that have driven that performance at the end of each quarterly period, as sometimes the market can throw up opportunities, especially during periods of volatility, and there has been no shortage of that recently.

The chart doesn’t lie

As we can see from the chart, things haven’t quite gone to plan for these three shares over the last quarter, but has anything fundamentally changed with the companies themselves, or does the market simply have other things on its mind?

A bank on the mend

February was a month of two halves for Lloyds Banking Group (LSE: LLOY) with the shares falling to three-year lows in the first two weeks of the month and then bouncing strongly along with the market, then stronger still when the final results were released on 25 February. The market seemed particularly pleased with the special dividend and generally more positive comments about how management expects the bank to perform against previous guidance.

Despite the recovery in the share price the shares still trade on a 12-month forecast rolling PER of less than 9 times earnings and are expected to yield over 6% according to data from Stockopedia.

Firing on all cylinders

Another pick in the doldrums during a volatile month was housebuilder Persimmon (LSE: PSN) as the shares fell with the market. However, as we have seen with Lloyd’s, the shares rallied strongly following a better-than-expected set of results and a significantly enhanced capital return plan. That’s something that we’ve also seen at sector peer Berkeley Group Holdings.

Following the results Mr Market, or more precisely analysts, have been upgrading EPS estimates leaving the shares trading on a forecast PER of less than 12 times earnings. And as the capital return plan has also been enhanced to return £5.50 between 2017 and 2021 inclusive, the shares still yield over 5%.

Exposed to the volatility of the market

The underperformer of the group by a fair margin is investment manager Jupiter (LSE: JUP). Its shares have underperformed despite strong results that saw it increase assets under management (AUM) to just shy of £36bn and inflows of £1.9bn with margins remaining at 51% of EBITDA and an underlying increase in the full year dividend to 25.5p.

All that said, the market looks forward and it has to be said that Jupiter is a geared play on the health of the markets. Even if the company manages to outperform I could still see the shares underperforming in a difficult or worried market.

However, should the market rally then the opposite would be true and shareholders could well see a sector-beating performance over the rest of the year with a yield just shy of 6% while they wait.

The post 2016 Top Stocks: Lloyds Banking Group plc, Persimmon plc And Jupiter Fund Management plc Quarterly Review appeared first on The Motley Fool UK.

More reading

• As the Lloyds share price falls while profits rise, is it time to dump?
• How much is needed in an ISA for an annual income equal to this year’s £12,547 State Pension?
• What next for Lloyds shares after better-than-expected Q1 results?
• Lloyds shares in the spotlight: how should investors navigate the latest drama?
• Here’s how £20,000 in this overlooked FTSE gem could make investors £9,089 in annual dividend income over time

Dave Sullivan has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Short-termism is the pros’ biggest failure. Every year we see tables of the best-performing funds from the previous 12 months and previous three years. Is it any surprise that people almost always plump for those that have done the best? We see the “past performance is no guide to future performance” disclaimer, but how else do we judge?

The thing is, that disclaimer really is true — even if every investment manager picked shares randomly, one of them would be the best performer over 12 months, and one would be the best over three years! Competent investors (Warren Buffett and Neil Woodford spring to mind) eschew these annual rankings and leave it to investors to look to their longer-term performance — and superior performance only really counts when it comes to decades.

Trading costs money!

To get ahead in the annual race, too many managers trade their portfolios too often, trying to get into the next hot stock — if they miss this year’s big winner, they’ll gain fewer customers for next year. That incurs extra costs and would you be surprised to learn that around three-quarters of all managed funds have failed to even beat the FTSE average long term?

We have to look beyond current funds to see this shocking statistic, because these City institutions have an unsavoury habit of closing down the worst performers, transferring their assets to new funds, and starting again with a clean slate. That leads to a distortion called survivorship bias, which makes still-operating funds look better than they deserve as so many have gone the way of the dodo and aren’t included in the latest statistics.

One outcome of the race to be “this year’s best” is the distasteful practice known as window dressing. If you ran a fund that was holding a few 12-month losers, you might not look so good at the end of the year. So what many do, just before the end of their reporting period, is sell-off recent losers and buy into shares that have been flying so it looks like they’re holding winners.

That has two nasty effects. It increases trading costs purely for cosmetic purposes and with no real benefit. And selling shares that have fallen and buying ones that have risen is a pretty dumb strategy if that’s all you go on. It’s a way to lose out on undervalued shares with a recovery due in the near future, and a surefire way of finding overpriced junk that’s up there just because it’s part of the latest fad.

It’s easy to avoid

As private investors, we can avoid these mistakes. We should buy quality companies that we want to hold for the long term, and avoid whatever bandwagon fad-followers are jumping on. And it follows that we would be trading rarely and thus minimising costs. Plus we’ll have no need to make our portfolios look good over just the past 12 months or the past three years.

If you follow these principles, I think you’d be unlucky to not beat most of the professionals.

The post Here’s How You Really Can Beat The Investment Professionals appeared first on The Motley Fool UK.

More reading

• A £20,000 ISA invested in red-hot BP and Shell shares 1 year ago is now worth…
• 3 FTSE 100 shares I think look undervalued heading into May
• As the Lloyds share price falls while profits rise, is it time to dump?
• Might it make sense to ‘go away’ from the stock market in May?
• Up 1,000% in 5 years, but the UK government could send Rolls-Royce shares even higher

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.