Investec upgrades Merchants trust to 'Buy'

'Remarkable' balance sheet transformation

Investec has upgraded the £834m Merchants trust to ‘Buy’, moving on from the long-standing ‘Sell’ recommendation the firm had maintained until 2021.

In a research note today (14 April), analysts Alan Brierley and Ben Newell wrote their long-standing thesis on Merchants, managed by Simon Gergel, saying that a high dividend yield restricted portfolio flexibility, with a dependency on relatively high levels of gearing to generate income.  "Meanwhile, a feature of a truly horrific balance sheet was very expensive long-term debt which we once described as resembling something out of a Mary Shelley novel," they said. "Given these millstones, and what we regarded as the perils of reaching for yield, historically we struggled to recommend...