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Bargain Hunter: 25 cheap equity trusts towards end of 2021

Kyle Caldwell, interactive investor, 15 December 2021

Some trusts have seen premiums cool, while others are trading on potentially unjustly wide discounts.

The pick-up in market volatility of late, amid concerns over rising inflation levels and the emergence last month of the Omicron variant, has led to a welcome increase in potential investment trust discount opportunities.

For the investment trust sector as a whole, discounts are narrow. Data from Winterflood shows that since the start of 2020 the average discount stands at 4.2%. Currently, the average discount is a bit lower, at 3%…

As we approach the end of the year, a time when many investors review how their portfolios have fared and are on the lookout for opportunities, we asked QuotedData to screen the universe of equity investment trusts for potential bargains…

This metric is viewed as a good indicator of a significant change in a discount or premium over a certain time period, with one year used on this occasion…

Some trusts have seen their premiums cool, and are now trading at near to the sum of their parts, the net asset value (NAV): Scottish American Ord

Other trusts have become cheaper for all the wrong reasons. James Carthew, head of investment company research at QuotedData, urges caution in a number of cases.

For example, he points out that Crystal Amber Ord, the AIM-listed activist investor that mainly backs small and mid-cap UK stocks, recently lost a continuation resolution at its annual general meeting. “We are waiting to see what happens next. Wind-up situations can unlock discounts over time, but it may be a forced seller of some large positions in relatively illiquid companies,” says Carthew…

But there are also some potential opportunities. In particular, Carthew is positive on the prospects for Ecofin Global Utilities & Infra, Foresight Solar and JPMorgan Indian

He comments: “Ecofin Global Utilities & Infrastructure Trust has been trading very well but the shares took a tumble around the end of November when the Omicron variant emerged. There’s no good reason why its NAV would be affected by this. We would expect that the discount closes up again.”

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