Income: Victrex

For years, polymer specialist Victrex (LSE: VCT) had a reasonable but unremarkable dividend yield.

But a stumbling share price has pushed up the yield.

After a 39% fall so far this year alone (and 72% over five years) in the Victrex share price, the yield has reached 9.2%. That puts the FTSE 250 share firmly into the high-yield category.

The share price slump points to problems. The mix of products sold has changed unfavourably, hurting profitability. Ongoing weak demand in the lucrative medical market is a risk.

A new chief executive is due to take charge this week, and his inbox will already be overflowing. If business performance does not improve, a dividend cut could certainly be on the cards.

However, Victrex has proprietary polymers and a well-developed customer base willing to pay for quality when it comes to mission-critical applications.

For now, at least, the company has maintained its dividend.

Growth: Fidelity China Special Situations

Where might growth on the global economic stage come from next year?

China continues to grow at a solid pace, even if that is slower than it once was.

That may explain why the investment trust Fidelity China Special Situations (LSE: FCSS) is up 37% in value so far this year. It has a 2.6% dividend yield to boot.

Can the growth continue?

The trust trades at a discount to net asset value of 8%. Its four top holdings by size right now are all players in the Chinese digital platform space and they include the owner of TikTok.

With over 60% of the trust’s investments in consumer and communication services, I do see a concentration risk, especially if there is a tech market rout in 2026.

But I see ongoing growth potential for this strategically focused 2025 investment trust.

Value: Greggs

Greggs (LSE: GRG) might know how to put tasty stuffings in its sausage rolls, but its own share price has had the stuffing knocked out of it in 2025.

So far this year, the Greggs share price is down by two-fifths.

What looks like good value in the stock market can sometimes be a value trap. The tumbling Greggs share price reflects concerns about growth rates.

Poor demand forecasting over the summer disappointed the City, raising questions about management competence. Based on that, I regard bad planning as an ongoing risk for the FTSE 250 business

Still, Greggs shares have rallied almost 20% since the last week of last month.

On a price-to-earnings ratio of 12, they still look like tasty value to me given the company’s large shop network, competitive product pricing, and loyal customer following.

The post 3 FTSE 250 shares to consider for income, growth, and value in 2026! appeared first on The Motley Fool UK.

Home comforts

Housebuilders like Bellway (LSE:BWY) have surged in value in 2024, with falling interest rates and improving buyer confidence helping home sales rebound from recent troughs.

Encouragingly this upward trend remains in tact. According to Halifax today (7 October), the UK average house price reached £293,399 in September. This was just below the record peak of £293,507 struck before the housing market slumped around two years ago.

Prices are flying again due to dropping mortgage costs and good wage growth. With the Bank of England (BoE) expected to keep cutting interest rates through the next 12-18 months, too, housebuilders should go from strength to strength.

Bellway’s share price is up 22% since the start of the year. I think it could spike further when full-year results are released next week (15 October), too, when the company advises of the current state of the market. At its last update in August, it said its weekly private reservation rate per outlet was up 10.9% in the 12 months to June.

There are risks here, of course. A sudden pick-up in inflation could prompt the BoE to dial back its plans for interest rates, hitting home sales in the process. Rising build costs also remains a significant threat across the construction industry.

Still, I think Bellway remains an attractive value stock to buy right now. It trades on a forward price-to-earnings growth (PEG) ratio of 0.8. Any sub-1 reading suggests a stock is undervalued.

Playing a China recovery

Investing in stocks that have a high dependence on China has been a miserable experience for many. My decision to buy Asia-focused Prudential‘s shares in 2020 has spectacularly failed to pay off so far.

But market sentiment seems to be shifting in favour of companies with large Chinese exposure, as Prudential’s recovering share price shows. For investors looking for recovery stocks, now could be a good time to consider stocks like these.

The Fidelity China Special Situations (LSE:FCSS) investment trust is one FTSE 250 asset on my watchlist. Like The Pru, it’s also rebounded strongly in price recently, as the chart shows.

However, at 247.5p per share, it still trades at a meaty 10.7% discount to its net asset value (NAV) per share of 277.1p.

Trusts like this spread capital across a wide range of companies, giving them access to many growth opportunities while allowing them to manage risk. In total, it has holdings in around 100 large, medium, and small Chinese firms, including familiar names like Tencent Holdings, Ping An Insurance, and HiSense.

Look, there’s no guarantee that China’s economy is past the worst. Indeed, data from the Asian powerhouse remains frustratingly patchy. However, with lawmakers accelerating stimulus measures to revive growth, things could be looking up in the emerging market, and therefore for Fidelity’s trust.

Indeed, with China’s rising middle class driving domestic consumption, and technological innovation steadily improving, the long-term outlook there is pretty bright in my opinion.

The post 2 terrifically cheap FTSE 250 stocks to consider this October! appeared first on The Motley Fool UK.

That’s true, especially given the £20k annual allowance limit to put funds in an ISA. Yet here are some slightly more unusual stocks that could help accelerate growth.

The world of private equity

The first company I’m flagging up is 3i Group (LSE:III). Over the past year the share price has jumped 62%. It’s included in the FTSE 100 with a market-cap of £18bn, yet I don’t feel it gets that much interest from retail investors. This might be partly down to the fact the company is a private equity investor.

This means the firm uses capital to invest in projects and other businesses that aren’t listed on a stock exchange. The aim is to try and boost the growth of the firm and then exit the business via an IPO, or simply selling its holding.

The area of speciality for 3i is infrastructure projects. This includes the likes of Belfast City Airport and the East Surrey Pipeline.

I like the stock because it gives me access to opportunities I simply can’t get by investing in listed companies. However, private equity investments are often illiquid and difficult to value. Trying to pin an accurate value of a multi-year airport building project is almost impossible. This is a risk.

It’s certainly an unusual stock to consider buying as it isn’t a traditional manufacturing or services company. Yet the track record of share price growth means this could certainly help to accelerate the goal of becoming an ISA millionaire.

China’s still hot

The other stock in focus is the Fidelity China Special Situations (LSE:FCSS). This is an investment trust which means the business invests in other stocks. Over the past year, the share price has fallen 24%.

This is an unusual consideration because it’s quite niche in what the fund manager targets. Fidelity actively invests just in companies listed in China and Chinese companies listed elsewhere.

There are popular names we all know such as Alibaba and Tencent. These are in the top holdings for the trust, yet there are plenty of smaller firms I’ve never heard of.

China has been under pressure over the past year with slowing growth and a tentative reopening following the pandemic. Yet the large stimulus packages being talked about will really help to get things moving again, particularly in the property sector. As a result, I feel this is a great way to get exposure to this theme.

Given the focus of the trust, a risk is that it’s very concentrated on just China. Therefore, to reduce this risk I’d ensure it’s just one stock within a diversified Stocks and Shares ISA.

Ultimately, if China is to become the largest economy over the next decade, the growth potential from this fund could be very large.

The post 2 unusual shares to help build a £1m Stocks & Shares ISA appeared first on The Motley Fool UK.

Powerhouse economies

Each trust is focused on a powerhouse economy — indeed, the two biggest economies in the world. China’s growth rate has slowed recently, as it transitions away from decades of colossal infrastructure investment towards consumption. However, an IMF forecast of 6.2% growth for 2019 is still impressive. The US doesn’t come near this, but its forecast growth of 2.5% still outstrips developed markets in the West, like the UK (1.5%).

The scale and growth of the US and Chinese economies provides a favourable backdrop for our investment trust managers to root out dynamic growth businesses.

Focus

As you can see from the breakdown of their portfolios in the table below, both trusts are tilted towards investing in companies with market capitalisations of less than £5bn.

Smaller companies generally have higher growth potential. Furthermore, in the case of the US and China, they have huge domestic markets to expand in. For example, a JPMorgan trust holding, Eastgroup Properties, is focused on developing and acquiring distribution facilities across the US ‘sunbelt’ states.

As I mentioned earlier, China’s economy is shifting towards domestic consumption, with the numbers and spending power of its middle class increasing rapidly. The Fidelity trust is very much focused on products and services that cater for this growth within the country. China MeiDong Auto, for example, is a car dealership, handling the likes of Lexus, BMW and Porsche.

Of course, there are companies in both trusts that aren’t focused solely on their domestic markets. But a good many are, or largely are, and with plenty of growth to go for on home soil, I’m not too concerned by Donald Trump’s trade war with Beijing.

Mis-priced quality companies

Another thing the two trusts have in common is that they lean towards businesses with strong management teams and competitive advantages that are profitable and cash-generative. You’ll find little, if anything, in the way of speculative (‘blue-sky’) companies — oil explorers, biotechs and so on — in their portfolios.

I like the trusts’ focus on quality businesses and their bias to smaller companies, which are less well-researched and lead to greater opportunities for mis-pricing. Furthermore, the management teams of both trusts have delivered returns above the average of their sector peers.

Performance

Over the last 10 years, the JPMorgan trust has posted a net asset value (NAV) total return of 430% versus a North American Smaller Companies sector return of 312%. Over five years the numbers are 93% versus 84%.

The Fidelity trust hasn’t been around long enough to notch up a 10-year record. Over five years, it’s delivered a NAV total return of 106% versus an Asia Pacific sector return of 99%.

I think both trusts have a lot going for them, and that they could serve growth investors well in 2019 and beyond.

The post My top 2 ‘growth’ investment trusts for 2019 appeared first on The Motley Fool UK.

Unfortunately for growth investors, nothing on the same scale has happened for investment trusts seeking to deliver long-term capital growth. There are fewer funds for growth-focused investor to pick from… but I believe I’ve found two exciting ones.

China’s growth story

Fidelity China Special Situations (LSE: FCSS) is a fund which seeks to offer direct exposure to China’s growth story. But instead of just investing in a broad market index tracker, this fund uses an actively-managed strategy in an attempt to beat the market.

Fund manager Dave Nicholls reckons there may be better investment opportunities from buying companies which are set to benefit from China’s structural shift away from a reliance on investment towards consumption. This is because, going forward, many analysts reckon China’s middle class will be the main driver of economic growth, benefiting companies which directly deal with consumers.

As such, the fund has an outsized exposure to the consumer discretionary sector, with a weight of 31.5%, compared to the benchmark MSCI China Index’s weight of just 9.5%. Technology stocks also dominate the fund (as it also does for the benchmark), with its two biggest positions being Tencent (14.7%) and Alibaba (13.7%).

On the downside, unbalanced, actively-managed investment trusts can have their disadvantages too. Firstly, there’s no guarantee that a specific sector will continually outperform the market, leading to occasional bouts of underperformance against the market index. Additionally, excessive focus on some sectors could reduce diversification benefits, potentially leading to higher portfolio volatility and risk.

Technology stocks

For investors looking to increase their exposure to technology stocks, the Polar Capital Technology Trust (LSE: PCT) may be of greater interest. The fund aims to maximise capital growth for shareholders through investing in a diversified portfolio of technology companies around the world.

Despite the recent sell-off in tech stocks over the past week, I reckon the technology sector holds plenty of promise for investors. Reflecting the impact of technology disruption on traditional industries, technology stocks have the potential to generate significantly faster earnings growth than the broader market.

Large-caps

Large-caps, companies with a market capitalisation of more than $10bn, dominate the fund’s top holdings, accounting for just over 75% of its portfolio. The fund is geographically diversified, although because of the sheer disparity in the number of large technology companies in the US compared to the rest of the world, the fund is heavily exposed to the North American market. US & Canada stocks account for 66.8% of its portfolio’s value, with 10 out of its top 15 holdings coming from there.

Its top five holdings are Apple (7.5%), Alphabet (7.4%), Mircosoft (6.2%), Facebook (6.2%) and Samsung Electronics (3.8%).

The post Looking to invest for growth? Check out these top-performing investment trusts appeared first on The Motley Fool UK.

Yet many have been sceptical about the future prospects of these emerging nations. There’s been much talk of a slowdown in China, and political in-fighting in India. But if we dig a little deeper, we find that the fundamentals are remarkably resilient: Chinese GDP has still been growing at 6.7% per annum, while India has been growing at 7.9%.

China and India: industrial powerhouses

The broad picture is that these countries are now industrial powerhouses, and they’re set to boom relative to more developed markets for decades to come.

Profitability at a range of companies in these countries has been surging. Take China Pacific Insurance. Net profits were CNY9.2bn in 2013, and this jumped to CNY17.7bn in 2015. Revenue increased from CNY193bn in 2013 to CNY246bn in 2015. These are startlingly strong numbers.

Or take India’s Infosys. Net profits were INR104bn in 2013, and this rose to INR136bn in 2015, while turnover climbed from INR493bn in 2013 to INR630bn in 2015.

Rank after rank of businesses has seen rapid growth in both revenues and earnings.

I’ve chosen to invest in these countries with two investment trusts: Fidelity China Special Situations (LSE:FCSS) and JP Morgan Indian Investment Trust (LSE:JII). How well have these done?

On 1 January 2016 FCSS was priced at 121p per share. It has now risen to 170p. That’s an increase of 40%. On 1 January JII stood at 477p. It has now risen to 641p. That’s an increase of 34%.

Why have the shares risen so much? Well, part of this is currency fluctuations. Since January the pound has fallen by about 10% against the yuan, largely because of the Brexit vote on 23 June.

And this is a great time to invest

Also, stock indices such as the Hang Seng and the Sensex have been on the up. Plus, these are well-managed funds that have produced better returns than the overall markets in these countries. What’s more, a substantial amount of gearing for Fidelity China has added to the growth.

Yet the amazing thing is, in terms of equities, we’re still really only at the end of a 17-year bear market, and the next bull market hasn’t even got underway. That means there are likely to be many more stock price rises to come. Thus, if you haven’t bought in yet, this may be a great time to get on board.

And what makes investment trusts like these even more attractive than standard funds is that they currently trade at sizeable discounts. The current discount on Fidelity China is 14.8%. While JP Morgan India is 10.2% cheaper than its net asset value.

That’s why I’ve invested a large part of my portfolio in these funds, and I think you should too. People are often afraid of the growing power of these emerging nations. But if you’re an investor considering buying into China and India, I would encourage you to make the leap.

The post My investments in China and India are up over 30% this year appeared first on The Motley Fool UK.

First, let’s think about the fundamentals. What determines whether a stock will rise or not? In one word, profitability. You need to invest in businesses that are likely to make strong earnings now and for years to come. You also want long-term investments that will trend steadily higher. Are these stocks that you can buy and forget about?

Go where the profits are

You need to consider where in the world the growth will be. Although you may know less about other regions, you need to be brave and look beyond the shores of the UK. And, wherever possible, think contrarian: when you genuinely believe in the prospects for a company, buy when others are selling.

Let’s look at the world today. The fastest growing economies in the world are emerging market economies. The two emerging engines of the world economy are China and India. The low salaries paid in these countries, combined with a highly skilled workforce, will produce a whole new range of global titans that will rake in the profits. Investing in these giants will be a key part of your portfolio.

There’s now a broad range of emerging markets funds, and I favour investment trusts in particular. Unlike unit trusts, investment trusts are listed on the UK stock market, and so can be traded like a common-or-garden share. Most emerging market investment trusts are now trading at a substantial discount, meaning you can buy them for less than their net asset value (NAV). This can add to your returns.

These are the picks

So, pick number one: Fidelity China Special Situations (LSE: FCSS). This is the leading China fund, and trading at a whopping 15.77% discount to NAV. The original Fidelity Special Situations was run by renowned fund manager Anthony Bolton and achieved an annual return of 19.5% over 28 years. Could Fidelity China achieve something similar? It just might.

Then, pick number two: JP Morgan Indian Investment Trust (LSE: JII). There are fewer options for investing in India, but this is the leading investment trust. And with a discount to NAV of 12.9%, again this is unduly cheap, and thus a strong buy.

Then, pick three: I would choose a few carefully selected UK companies with a large stake in the future. One clear trend is a boom in global consumerism. Another is growth in emerging market financial services. And another is the rising demand for healthcare services. Next is a global retailer that looks cheap at the moment. My contrarian instincts draw me to banks with a substantial business in emerging markets, such as BGEO and HSBC. And AstraZeneca is one of the world’s leading pharmaceutical companies. Pick a handful of these businesses for your portfolio.

Invest one third of your money in China, one third in India, and one third in these well-chosen British firms. Sprinkle well with cash, and wait, very patiently, for the bull market to get underway. In a few years, your investments should be blooming.

The post What makes the perfect portfolio? appeared first on The Motley Fool UK.

If you’re thinking of dipping a toe into shares, there’s no better time to start investing. Here are my three picks for 2016.

HSBC

Perhaps one of the biggest disappointments of 2015 has been the performance of HSBC (LSE: HSBA). Yet this is one of the most profitable companies in the UK and one of the world’s leading banks. I see the price falls of the past year not as a warning to steer clear of this firm, but as a buying opportunity.

That’s why I’ve made HSBC one of my picks of the year. Analyse the numbers and you’ll see why I like this bank. The forecast 2015 P/E ratio of 10.43 falls to 10.19 in 2016. And the dividend yield is an enticing 6.17%, rising to 6.3%. This makes HSBC the ideal income share.

I wouldn’t expect fireworks from this company, but the stock is set to climb steadily upwards.

Fidelity China Special Situations

Regular readers will know that I’m a fan of investing in China. The reasons why are not difficult to see. This is already the second richest country in the world, it has the highest growth rate, and the momentum this nation is building is astonishing.

Yet stock markets in China have been in the doldrums. I expect this to change next year. Once momentum has built in equity markets, you’ll be glad you listened my advice and bought into the rise of China.

There are a wide range of funds to choose from, but I think Fidelity China Special Situations (LSE: FCSS) is still the pick of the bunch. The fact that this investment trust trades on a discount of -14.77% makes this a no-brainer.

International Consolidated Airlines Group

The falling oil price has been one of the headlines of 2015. As we hear stories of woe from the oil producers and oil services businesses, it’s easy to overlook the fact that there will also be many winners from the commodities crisis.

And one of the biggest winners is the airline sector, especially airlines such as IAG (LSE: IAG). The owner of British Airways and Iberia is expected to rake in profits as one of its main costs tumbles in price.

Whereas competitors such as EasyJet are budget operations that are dependent on volume to make money, premium airlines like IAG are more dependent on margin and so will benefit hugely as the oil price continues to fall.

The predicted 2015 P/E ratio of 11.58 falls to just 8.16 in the following year.

I expect oil prices to remain low for the next decade and more. Which means IAG is a strong buy now and for the future.

The post My 3 Picks For 2016: HSBC Holdings plc, Fidelity China Special Situations plc & International Consolidated Airlines Group SA appeared first on The Motley Fool UK.

As investment trusts are traded like shares, their shares can trade at a premium or discount to the value of their assets. Demand and supply factors determine the value of the shares in investment trusts, and this usually means trusts that have been underperforming the sector usually trade at a discount to its net asset value (NAV). On the other hand, a strongly performing trust is likely to trade at a premium to its NAV.

Buying investment trusts that are trading at a discount to their NAV can be regarded as a bargain, as you are purchasing a collection of assets for less than the sum of its parts. But there is no guarantee that the discount will close and a sizeable discount could be regarded as a warning sign for poor management, excessive fees or lacklustre investment performances.

We will now look at whether it would be wise to invest in these five heavily discounted investment trusts.

Alliance Trust (LSE: ATST), the globally-focused investment trust, has been trading at a discount of more than 5% for a number of years now. With an investment return of just 1.4% in the first half of 2015, its recent performance has been underperforming its peers.

But management seems to be finally getting their act together. It has engaged with an activist hedge fund Elliott Advisors to tackle its bloated cost structure and improve its performance by increasing its share of equity investments.

The trust could take action to shrink its discount, by buying back shares in itself on the open market to reduce the discount in its shares. It did just that in 2011, when it bought back some £350 million worth of its own shares. With pressure from an activist investor, a return to share buybacks is quite likely.

Mercantile Investment Trust (LSE: MRC) is a UK-focused equity investment trust that has a long history of outperforming the sector. In the past year alone, the investment trust delivered a 20.9% after fees return on its NAV, which compares favourably to the peer average of 17.0% and the FTSE All Share total return of 5.0%. With an ongoing annual charge of just 0.50%, its 11.2% discount seems unjustified.

Templeton Emerging Markets Investment Trust (LSE: TEM) is one of the most popular emerging market investment trusts on the market, with assets under management totalling £1.63 billion. Unfortunately, its heavy exposure to China and Brazil has meant its investment performance has lagged its peer average in recent years.

Caledonia Investments (LSE: CLDN) has a significant proportion of its assets in private unquoted companies through direct holdings and private equity funds. Because of its heavy exposures to the UK, the rest of Europe and Asia, its investment performance has lagged the sector average. On top of this, it has a very high ongoing annual management charge of 2.61%.

Fidelity China Special Situations (LSE: FCSS) trades at a very substantial discount to its NAV, as the recent volatility in the Chinese equity markets and sell-off in emerging markets has reduced demand for the trust. As volatility settles down in China’s equity markets, the trust’s discount could narrow to its historical average of around 10%.

More information?

The Association of Investment Companies (AIC) publishes a wide range of data about investment trusts, including the premium/discount that they trade at, the amount of gearing used and their ongoing charges. Click here to see its latest published statistics.

The post 5 Investment Trusts Trading At Discounts Of Over 10%: Alliance Trust plc, Mercantile Investment Trust plc, Templeton Emerging Markets Inv Trust plc, Caledonia Investments plc & Fidelity China Special Situations plc appeared first on The Motley Fool UK.