By Jenne Mannion The investment trust growth and income sector offers a number of good buy ...
By Jenne Mannion
The investment trust growth and income sector offers a number of good buy opportunities, according to David McFadyen, investment trust analyst at ABN Amro.
Among notable trusts, according to McFadyen are Dunedin Income Growth, Securities Trust of Scotland, Temple Bar and Shires Income.
Dunedin Income Growth is now trading at a discount to its net asset value of 14%, possibly as a reaction to the fact manager Graham Campbell is leaving to join Scottish Widows. The average discount is 13%, but it has been as low as 5%.
"I expect the discount has narrowed with the expectation that whoever takes over from Graham Campbell won't be as exciting in terms of performance. However I believe the 14% discount is overcooked and that maybe there is some opportunity there. It is yielding 3.4%, so it is in excess of the UK market, and it is still performing very soundly." McFadyen said.
Temple Bar, managed by Investec, trades on a narrow discount of 1%, and historically has a strong performance track record.
"Chris Burvill, Temple Bar's manager, has a long term record of performing very soundly and successfully with this value approach that he takes to investment. The trust yields 4.1% at the moment, which is more than many of the other funds in the sector," McFadyen said.
He said Securities Trust of Scotland is interesting. This trust used to be a global growth (international generalist) fund, but when Tom Maxwell joined Martin Currie from Friends Ivory & Sime, he converted the trust into a UK growth and income growth fund.
"It's had a difficult period recently. The manager might have been too weighted toward growth stocks, but he still has a very sound income stream and the trust is yielding 4%."
Shires Incomes, yields 4.9%, and also has a weighting toward the higher growth small cap stocks through one of its own trusts Shires Smaller Companies. It is trading on a 2% discount, but McFadyen says Shires Income still a viable buy opportunity.