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Bargain Hunter: Baillie Gifford trusts are cheap, time to buy?

by Kyle Caldwell, interactive investor, 14th June 2022:

11 Baillie Gifford trusts are trading on wider-than-usual discounts. We ask analysts whether this is an opportunity for brave investors to pick up bargains…

With inflation levels soaring and interest rates on the rise, growth companies, including tech firms, have fallen out of favour. Instead, investors have turned their attention to cheaper ‘value’ stocks.

As a result, most of Baillie Gifford’s investment trusts have fallen out favour, and are now trading on discounts to net asset values (NAVs)…

While the discounts are eye-catching, the risk is that investors buying today will catch the proverbial falling knife, given that growth shares look likely to remain under pressure in the short term.

However, for investors taking a long-term perspective, the current discounts may be seen as an opportunity to ‘buy low’ – ahead of share prices and discounts recovering from current levels…

Dowling picked out Baillie Gifford Shin Nippon and Baillie Gifford European Growth as the two most interesting options in terms of current discounts…

Haynes instead favours Baillie Gifford trusts with a wide global remit that focus on exciting long-term growth prospects. He picked out Scottish Mortgage and Keystone Positive Change Investment as two cheap trusts looking attractive for brave investors willing to invest for the long term…

James Carthew, head of investment companies at QuotedData, cautions that in the case of some of the Baillie Gifford trusts, there may be a reasonably well-founded suspicion among investors that the true value of the trusts’ unlisted investments may be lower than the figure in the NAV.

He said: “Baillie Gifford revalue its unlisted investments on a three-month rolling basis. So there may be a bit of a lag for the ones that are valued with reference to comparable quoted companies.”

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