Trust Watch: BMO’s calm trust picker Hewitt up for grabs

Welcome trust pickers!

We present our weekly lists of ‘cheap’ and ‘expensive’ investment trusts plus the big risers and fallers among closed-end funds.

This week’s bargains include a well-known portfolio of investment trusts while on the dear side a leading UK mid-cap fund is enjoying a re-rating, an intriguing move ahead of Brexit.

Just to recap, our first two tables rank investment trusts and investment companies by their ‘Z-scores’, which is a measure used by analysts to put their discounts – shares trading below net asset value (NAV) – or premiums – when shares stand above NAV – into historical context.

Roughly speaking a Z-score of -2 or below shows a trust is getting cheap compared to its own trading history and may provide a buying opportunity (first table). By contrast, a Z-score of 2 or more is getting dear and may signal an opportunity to take profits (second table).

Next: BMO Managed Portfolio at your service

If you want to see all the slides in this gallery on page click here.

'Cheap' trusts Share price premium (- discount) to net asset value % 12-month average premium (- discount) % Z-score
Blackstone GSO Loan Financing C (BGLC) -6.9 -1.5 -3.4
Witan (WTAN) -3.3 -1.6 -3.0
BMO Managed Portfolio Growth (BMPG) -2.8 1.0 -3.0
Jupiter Green (JGC) -9.9 -4.2 -2.8
Greencoat Renewables (GRP) 3.5 8.7 -2.8
Jupiter European Opportunities (JEO) -5.6 -0.7 -2.7
GRIT Real Estate Income (GR1T) 0.0 4.0 -2.6
Ratos AB B (RATOB) -34.0 -1.1 -2.5
Fondul Proprietatea GDR (FP/) -42.4 -31.6 -2.5
Doric Nimrod Air Two (DNA2) 13.0 22.7 -2.5
Macau Property Opportunities (MPO) -41.5 -30.3 -2.3
NB Global Floating Rate Income - £ (NBLS) -6.2 -3.6 -2.3
Ceiba Investment (CBA) -18.7 -16.0 -2.2
VietNam Holding (VNH) -18.2 -14.2 -2.2
Aberdeen Frontier Markets (AFMC) -15.7 -11.4 -2.1

Source: Numis Securities 14/2/19

BMO Managed Portfolio at your service

If you’re reading this column it’s presumably because you like trading in and out of investment trusts. However, should your enthusiasm be waning, there is a chance to buy the shares of an experienced trust picker on the cheap.

BMO Managed Portfolio Growth (BMPG) ranks third in our table with a ‘cheap’ Z-score of -3 after shares in the investment trust portfolio managed by Peter Hewitt failed to keep up with the underlying 8% gain in asset value so far this year. As a result the shares have shed their small 1% premium at the start of January and stand at a 2.7% discount to net asset value (NAV).

As bargains go, it’s not huge but given the trust generally trades pretty close to NAV and within a 5% target, it is an opportunity. It’s a chance to assess the £70 million trust which, while small, has done a good job over the years.

While its performance does not come anywhere near the leading lights of the AIC Global sector, such as Bankers (BNKR), F&C (FCIT) or Scottish Mortgage (SMT), over three, five and 10 years it does beat the FTSE All-Share, although not the harder-to-beat MSCI World index.

But what stands out about this trust - which includes a much-loved holding in under-pressure Jupiter European Opportunities (JEO) - is the comparatively smooth ride it offers shareholders. While recent returns have been boosted by the rebound in healthcare trusts and hedge fund BH Macro (BHMG), the remarkable aspect of its performance is the fact that its shares have nearly half the volatility of the average global investment trust, according to Numis Securities data.

The other interesting feature is the ability to switch between this trust and its sister fund BMO Managed Portfolio Income (BMPI) free of capital gains tax.

Next: Schroder UK Mid Cap gains ground

'Expensive' trusts Share price premium (- discount) to net asset value % 12-month average premium (- discount) % Z-score
Terra Capital (TCA) -3.4 -46.1 3.6
SDCL Energy Efficiency Income Trust (SEIT) 3.1 2.2 3.1
Carador Income Fund Redeemable (CIFR) 13.4 -6.9 3.0
Drum Income Plus Reit (DRIP) 4.9 1.4 2.7
Schroder UK Mid Cap (SCP) -12.5 -15.6 2.6
Hansa Trust (HAN) -20.1 -26.0 2.5
Mobius (MMIT) 4.3 -1.7 2.4
Alpha Real Trust (ARTL) -14.6 -21.9 2.3
Lindsell Train (LTI) 64.4 39.4 2.3
Dunedin Enterprise (DNE) -8.8 -21.8 2.3
Carador Income Fund (CIFU) 0.0 -8.6 2.3
Target Healthcare REIT (THRL) 12.3 5.2 2.3
Ranger Direct Lending (RDL) -20.7 -39.4 2.3
BlackRock Throgmorton Trust (THRG) -5.0 -9.3 2.2
Hipgnosis Songs (SONG) 12.2 9.5 2.1

Source: Numis Securities 14/2/19

Schroder UK Mid Cap gains ground

In recent years Schroder UK Mid Cap (SCP) has failed to impress against its two main rivals in investing in stocks just outside the FTSE 100 blue chips, JPMorgan Mid Cap (JMF) and its big stable mate Mercantile (MRC). However, the New Year rally has lifted this £184 million boat, crewed by Andy Brough and Jean Roche, faster than most.

Since the start of the year its net asset value (NAV) has advanced nearly 12% but the shares have raced over 17% higher as their discount to NAV has narrowed from 16% to 12.5%. That gives them a dear Z-score of 2.6.

The rally comes as UK smaller company trusts also enjoy a New Year revival, with BlackRock Throgmorton (THRG), this week reporting another year of outperformance, seeing its discount nearly halve to 5% from its one-year average of 9%. That gives it a slightly expensive Z-score of 2.2.

Next: Witan and Pershing shine

Week's big risers Thursday's closing price (p) Previous week's close (p) Change
HBM Healthcare Investments (HBMN) 168.80 158.00 6.8%
Witan Pacific (WPC) 323.50 303.50 6.6%
Pershing Square Holdings £ (PSH) 1276.00 1200.00 6.3%
Geiger Counter (GCL) 21.00 19.85 5.8%
Atlantis Japan Growth (AJG) 207.00 196.00 5.6%
Edinburgh Worldwide (EWI) 181.00 171.48 5.6%
Pershing Square Holdings (PSH) 16.30 15.50 5.2%
Allianz Technology (ATT) 1470.00 1400.00 5.0%
Fidelity China Special Situations (FCSS) 213.00 203.00 4.9%
North American Income (NAIT) 1410.00 1345.00 4.8%
Pacific Horizon (PHI) 315.00 300.50 4.8%
Manchester & London (MNL) 486.00 465.00 4.5%
Jupiter US Smaller Companies (JUS) 1032.50 989.00 4.4%
CATCo Reinsurance Opportunities Fund C (CATC) 0.38 0.36 4.2%
Blackstone GSO Loan Financing (BGLF) 0.81 0.78 3.8%

Source: Numis Securities 14/2/19

Witan and Pershing shine

The healthcare rally boosting Peter Hewitt’s growth portfolio of late is echoed in the nearly 7% gain of HBM Healthcare Investments (HBMN), a Zurich-listed investment company at the top of our table of risers.

Following close behind are two of this week’s big stories. The surprise announcement from Witan Pacific (WPC) that it will offer shareholders a chance to get their money back in two years’ time if performance does not improve saw shares in the pan-Asia multi-manager trust jump 6.6% in the week to yesterday’s close.

Pershing Square (PSH), Bill Ackman’s hedge fund investment company, continues its impressive rebound, up 6.6% this week after its annual Investor Day in London which was preceded by an announcement that it is starting to pay quarterly dividends. The advance takes its year-to-date surge to 26%. However, as I explained in my article today, it will need to deliver more of that - and some - if it is to reduce its wide 25% discount to net asset value (NAV).

Next: Jumbo-sized declines

Week's big fallers Thursday's closing price (p) Previous week's close (p) Change
Ratos AB B (RATOB) 19.80 24.54 -19.3%
Global Resources (GRIT) 2.50 3.00 -16.7%
Amedeo Air Four Plus (AA4) 95.00 107.00 -11.2%
Doric Nimrod Air Two (DNA2) 192.00 216.00 -11.1%
Doric Nimrod Air One (DNA) 102.00 114.50 -10.9%
Doric Nimrod Air Three (DNA3) 93.00 103.50 -10.1%
Draper Esprit (GROW) 480.00 525.00 -8.6%
Alternative Liquidity (ALF) 0.14 0.14 -4.9%
Blackstone GSO Loan Financing C (BG:C) 0.46 0.48 -4.4%
Sirius Real Estate (SRE) 62.80 65.00 -3.4%
Electra Private Equity (ELTA) 357.50 370.00 -3.4%
Unite Group (UTG) 880.50 909.00 -3.1%
NB Distressed Debt - Extended Life (NBDX) 0.83 0.85 -3.1%
JPMorgan Russian (JRS) 520.00 535.00 -2.8%
Princess Private Equity £ (PEYS) 848.00 872.00 -2.8%

Source: Numis Securities 14/2/19

Jumbo-sized declines

It was a bad week for the small band of plane-leasing funds Amedeo Air Four Plus (AA4) and the Doric Nimrod Air trio. Their 8% yielding shares dived over 10% on Valentine’s Day after Airbus announced the end of its production of A380 ‘super jumbos’ that the investment companies lease, mostly to the Emirates airline.

The shares made a limited recovery today but there is huge uncertainty over how much capital shareholders will get back when the funds mature, although fortunately their cash flows and dividends are unaffected. Amedeo, which is less reliant on the jets and the Emirates, which slashed its order, is the least exposed, analysts said today.