High Returns

Scafell Pike, England’s highest mountain.

Monday morning, back to business. Recent posts have tended to concentrate on shares that offer prospects of capital growth and low income. Older posts looked more at high income. I have returned to looking at high income investments.

This was prompted by Robert who is looking for a better return than Premium Bonds. He is busy playing tennis so he fagged me to find something. Incidentally he now takes two rackets which seems like taking a pair of guns to a shoot unless it is a bit of Stephen Potter One-Upmanship.

I have come up with Henderson High Income (HHI.L). I had looked at this Investment Trust some years ago but, although I have shares in fewer than ten individual companies, three of them are among Henderson’s ten biggest holdings. Henderson’s portfolio is skewed to high income but is reasonably well positioned Brexit-wise. Although they are listed in London they derive most of their earnings abroad. The annual fee is a reasonable 0.82% but a performance fee can raise this to around 1.5% if they do well. The trust borrows money (gearing, as it’s called) to enhance performance and may hedge currency risk.

So let’s cut to the chase. It yields 4.95% and trades at a discount of 0.4% to its Net Asset Value. Historically it has traded at a premium of 1% so not a bad time to step in.

An article in the FT Weekend points to an interesting paradox. If OPEC and Russia can raise oil prices above $50 by cutting production, which they did earlier this year, they create the right conditions for shale production in the US to increase which drives prices down again. In the same edition, Ken Fisher trills his usual song about being in the middle of a bull market. The words “caution” or “diversification” are not in his lexicon.

Today’s number, besides having a Henderson theme, is dedicated to Cousin Ros who has just climbed the highest peaks in Wales, England and Scotland for charity, Project 17.

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