These are all pooled together, allowing a retail investor to simply buy the stock and get exposure to everything owned by the trust. Here are three that I think are underrated at the moment.

Access to private firms

First up is the abrdn Private Equity Opportunities Trust (LSE:APEO). The trust has fallen in value by 2% over the past year, but is up a very respectable 33% over the past three years. It also pays out a dividend, with the yield at 3.59%.

I believe this is an underrated trust because of what it allows retail investors access to. As the name suggests, abrdn as the manager uses the money to buy stakes in privately listed companies. It also puts money in private equity funds, which usually have a high minimum investment amount.

Given the barriers for a regular person like myself to directly invest in private companies, the trust is a great way to get exposure here. There are some strong businesses that aren’t listed on the stock market.

A risk is that it can be hard to sell a stake in a private company. This is because there is no open market to do so.

Tapping into knowledge

Another trust on my radar is the JPMorgan US Smaller Companies Investment Trust (LSE:JUSC). The stock is down 5% over the past year, but up 23% over the past three years.

I feel confident in picking large-cap US stocks, including those large tech names that are popular here in the UK. However, do I have the knowledge and expertise to pick US small-cap shares? Not at all.

Yet I do believe there’s value in this part of corporate America. So that’s why I feel the fund is underrated, in that it serves a really important area of the stock market. An investor can buy the trust and get access to the fund managers that have between 16-26 years’ experience in this sector.

Of course, investing in small-cap stocks is difficult and carries with it a higher level of risk and that should be acknowledged.

A hedge fund for anyone

The last trust is Pershing Square Holdings (LSE:PSH). The stock is listed on the FTSE 100, yet I feel it’s underrated as not many appreciate the value it can add to a portfolio.

Pershing Square is a hedge fund run by Bill Ackman who is well known for his views on certain stocks. Normally, someone would need a large amount of cash to get access to a hedge fund. Very few are listed on the stock market, let alone the size of Pershing Square.

This presents a unique opportunity for investors to get involved. The expertise involved in the fund and the type of financial instruments used to generate profit are beyond most of us.

The trust is up 7% over the past year, however it always has the potential to offer high returns due to the aggressive strategies it has. On the other had, this is the main risk. Large losses are possible and have happened in the past!

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Getting access to private equity

The first company I like is Abrdn Private Equity Opportunities Trust (LSE:APEO). The trust sits in the FTSE 250, and does what it says in the name. It invests in a selection of private equity funds and places money with unlisted companies with the aim of generating long-term capital appreciation.

Private equity has come back in fashion in recent years. Some large deals have been seen recently in all areas of the market. Given the uncertainty in the market at the moment, I think private equity companies will be able to snap up some great deals over the next year or so. It’ll also be able to make investments in struggling companies that aren’t listed on the stock market, that I personally wouldn’t be able to access.

Putting this all together, investing in this trust gets me access to everything, with no high minimum investment amount. The share price is down 5% over the past year. However, it trades at a large 41% discount to the net asset value. If this discount reduces, as well as seeing the fruits of returns from selling restructured businesses in years to come, I think my gains overall could be large.

One risk I do note is that the trust has a focus on Europe. Given the war in Ukraine and soaring gas prices, this region might not perform as well as the UK.

Flying high in my Stocks & Shares ISA

The second business I’m considering is easyJet (LSE:EZJ). Down 48% in a year, the business is currently trading lower than it was just after the March 2020 market crash. My idea here is that this might be a high-risk play, but one that could yield rich returns in my ISA.

The airline sector has been hampered over the pandemic, with easyJet being no different. Further, the company has struggled this summer, due to the shortage of staff and the issues at major UK airports. I feel that we have reached peak pessimism for the share price. Of course, going bankrupt would send it down again, but I think most of the potential risks for the business are firmly reflected in the current share price.

On the upside, easyJet flew 22m passengers in Q3, more than seven times the same period last year. It also achieved a yield per passenger of £22.07, which is higher than pre-pandemic! Finally, the net debt stands at just £0.2bn which is roughly 0.2 times EBITDAR. This is a low and manageable level, in comparison to other airlines that have much larger debts that could cripple the airlines.

I’m not expecting the share price to explode over the course of the next few weeks. But as a long-term pick for my ISA, I think that the risk/reward looks very attractive at current levels.

The post 2 Stocks & Shares ISA gems that could SOAR in the long term appeared first on The Motley Fool UK.

However, during the same time frame, two investment trusts have posted significantly stronger returns. Could they continue to outperform the FTSE 100 and, in doing so, help make you a millionaire?

Strong performance

Reporting on Wednesday was the Standard Life Private Equity Trust (LSE: SLPE). Its performance in the quarter to 30 June 2017 was impressive, with its net asset value increasing by 5.9%. In the last five years, the company has recorded a rise in its price of 133%. This is clearly significantly higher than that of the FTSE 100, and is also well ahead of its Private Equity benchmark. It has increased in value by 90% during the same time period.

Despite such a strong performance over a sustained period, the trust still trades at a 10% discount to its net asset value. This suggests it may still offer good value for money. Furthermore, since it invests in funds, it provides considerable diversity. That’s especially the case since it is geographically diversified. For example, 19% of the fund is invested in North American equities, while 18% is in European equities. This could help to reduce its overall risk, which makes its risk/reward ratio highly enticing at the present time.

Growth potential

Also performing well in recent years has been real estate investment trust (REIT) Big Yellow Group (LSE: BYG). The storage specialist has recorded a share price rise of 136% during the last five years as demand for its services has remained buoyant. The company has a strong position within its market, and with demand likely to grow in future years it could report a rising bottom line.

Looking ahead to the 2019 financial year, the company is forecast to record an increase in earnings of 8%. This is slightly above the FTSE 100’s forecast growth rate and means that dividend growth could outpace inflation. In fact, the company’s dividends per share are forecast to increase by 9% next year and this puts it on a forward yield of 4.4% from a shareholder payout that is due to be covered 1.25 times by profit. This suggests that dividend growth could at least match profit growth without putting the company’s financial stability under pressure.

Certainly, there are concerns about the prospects for the UK economy over the medium term. Brexit is causing uncertainty to rise, and this may hurt overall economic activity. However, with a relatively defensive business model, Big Yellow Group could continue to be a strong performer over the next five years.

The post Can these 2 top-performing investment trusts help to make you a millionaire? appeared first on The Motley Fool UK.

Small caps

The BlackRock Throgmorton Trust (LSE: THRG) is classic case of a well-run investment trust going cheap right now. Over the past five years, this fund has produced a total return of 165% for investors, which compares favourably to the UK smaller companies benchmark performance of 148%.

Run by Mike Prentis and Dan Whitestone, who have been managing the fund together since 2008, it invests primarily in small- and mid-cap stocks listed on the London Stock Exchange. The top five holdings at the end of April included CVS Group, JD Sports Fashion, 4imprint Group, Dechra Pharmaceuticals and Cineworld Holdings.

The fund has a NAV of 513p per share, but trades at a price of just 429p. This indicates a discount of 16.4%, which seems unwarranted given the liquidity of its assets and its historic outperformance.

Diversified

With a low total ongoing charge of just 0.54%, Foreign & Colonial Investment Trust (LSE: FRCL) could be a savvy way to gain international exposure at a reasonable cost.

The fund’s discount may be more modest, at just 7%, but investors would benefit from the fund’s diversification, both in geographical terms and across different industries. This offers investors some downside protection from country- or industry-specific risks, which may lead to significant outperformance in the long run.

Foreign & Colonial is cautiously managed, with no single equity investment currently representing more than 2% of its total assets. The US is the top country exposure in the portfolio, with 38.8% of its total assets at the end of June (up from 35% in June 2013). Other sizeable exposure is to the UK, with 12.6% (down from the 29% it represented four years ago), followed by Japan, Ireland and Germany.

Private equity

The last investment trust worth mentioning is Standard Life Private Equity Trust (LSE: SLPE), which currently trades at a discount to NAV of 16.2%.

Private equity has been one of the fastest-growing and best-performing alternative asset class in recent years, but it is often closed off to retail investors. Investment trusts, such as this one therefore give retail investors rare access to an opportunity to generate higher absolute returns while improving portfolio diversification.

What’s unique about private equity funds is that they typically invest in unquoted companies that are in the developing stage or have under-tapped potential. The Standard Life fund holds a diversified portfolio of private equity funds, with a majority focused on European companies. 

There is at least one major downside though. Fees can be quite expensive — last year, the fund had an AIC ongoing charge of 2.33% when performance fees were included. Nevertheless, the fund still managed to deliver a total return performance of 161% over the past five years.

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