By ANNE ASHWORTH, Daily Mail, 15 July 2023:
When in a clothing store, the reduced rail is always my first destination. But my enthusiasm for a bargain is tempered by scepticism. The items may cost less, but they must also be the pieces my wardrobe needs, rather than impulse purchases.
The same considerations apply when contemplating additions to my portfolio.
The average investment trust discount – the gap between the trust’s share price and its net asset value (NAV) – is about 15 per cent, the worst since the height of the global financial crisis. At the end of 2021, the average was 2 per cent.
Does this represent a bargain better than anything available in the High Street this month?..
Discounts can offer opportunities for new investment
Emma Bird, analyst at Winterflood Securities, argues that discounts may present opportunities – but for long-term investors…
James Carthew of QuotedData, the analytics business, thinks price declines are overdone. Yet he senses they are becoming self-reinforcing, as nervous investors sell out.
A few believe that NAVs do not necessarily provide an accurate picture, meaning that discounts should be even wider.
Meanwhile wealth managers, responsible for billions, are departing – as rules require them to invest only in substantial funds with ample liquidity, which excludes smaller trusts.
Carthew says: ‘As a consequence, there may be more consolidation, with smaller trusts seeking mergers, or being wound up and cash returned to investors.’
Where are the bargains?
Carthew thinks bargain hunters should be cautious, but also remain aware that there may be chances in the offing, citing Next Energy Solar, the renewables trust which is at a discount of 19 per cent – and another Footsie name: Pershing Square Holdings.
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