Shares magazine looks at ‘bargain’ trusts – Seven trusts on bargain ratings: which ones to buy?
We reveal the trusts trading on a steeper discount to the 12 month average…
MONITORING PREMIUMS AND DISCOUNTS
Many investors monitor premiums and discounts to NAV very closely as a way of spotting if there is an opportunity to buy something cheaper than the value of its underlying assets, or sell a trust if the market is overpricing it.
We’ve used data from Winterflood to look at the average discount to NAV over the past 12 months and then compared it to the share price on 1 August.
In the global sector, the one that really stands out is Majedie (MAJE) which at 242p is trading on a 21% discount to NAV versus a 12-month average of 14.4%…
‘Majedie is an outlier in the global market,’ says James Carthew, head of investment company research at QuotedData. ‘There is quite a big family holding in the trust and its shares don’t trade much, plus people don’t know it very well. It is the worst performing global trust over the past year and the wider discount would suggest people are voting with their feet.’
…SMALL CAP STRUGGLES…
‘People are starting to get concerned that we are near the end of the economic cycle,’ says Carthew at QuotedData. ‘If you think this is true, small caps are among the things that tend not to do as well in a recession.’
…Another small cap trust to trade on a wider-than-normal discount is Herald Investment Trust (HRI), a tech fund run by Katie Potts. At £13.32 it is trading 16.5% below the value of its underlying assets versus a 12 month average of 14.5%.
We believe there are better funds to play the tech theme as Herald is restricted by only focusing on the UK and in the smaller end of the market. However, Carthew is more optimistic, saying: ‘Herald hasn’t kept pace with large cap US tech stuff, but the numbers have been pretty good and the trust deserves a better rating’.
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