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Investment trust bargains at the start of 2021

Investment trust bargains at the start of 2021

by Kyle Caldwell from interactive investor | 12th January 2021 09:35

Investing in shares or sectors of the market that are ‘cheap’ and undervalued is an approach that entails many risks, but potentially offers great rewards…

Trading on a discount does not make a trust an instant bargain. Some trusts will justifiably be trading on a wide discount that could remain static or widen further. For example, a trust that has persistently poor performance and a small amount of assets (less than £100 million) is an unlikely candidate to be a potential bargain…

Assessing investment trust bargains at the start of 2021

Substantial stock-market corrections offer brave investors the chance to go bargain-hunting, with the heavy sell-off in the first quarter of 2020 the most recent example. During the worst of the sell-off, the average investment trust discount figure exceeded its widest point since the global financial crisis over a decade ago, reaching 18.4% on 23 March. That compares with an average discount of 17.6% on 31 December 2008.

By the end of March, the average discount had tightened to 11.8%, which goes to show how rapidly discounts can change and how investors need to be alert to potential opportunities…

Where to find trust bargains at the start of 2021

Two global-focused trusts catch the eye. The first is Brunner (LSE: BUT), which is trading on the widest discount of the trusts in its global sector. The discount stands at 17.6% versus its 12-month average of 11.8%, as at 11 January.

James Carthew, head of investment trusts at QuotedData, explains…

“The trust hasn’t got the strong growth bias that has propelled many of the trusts in that sector higher in 2020. There is also no particularly high yield (around 2.3%) to attract investors.”

Read more here

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