Robin Oakley, for many years BBC Political Editor and then, until 2008, European Political Editor for CNN writes a column, The Turf, in The Spectator. He recommends twelve to follow twice a year; twelve jumpers and twelve on the flat.
I suppose he missed those cold evenings spent outside Number 10 waiting to file a live report and so went racing to recreate the same conditions. I am not especially interested in the turf, unless I have a friend with a Derby runner, but I always read Robin’s column. It provides insights into the lives of trainers and jockeys and how they approach their work. I am going to copy his “twelve to follow”, with my “six to follow”.
Mine are Investment Trusts: three with high yields and so less capital growth and three with especially low yields and so hopefully with much more capital appreciation. Let’s start with the ones that are dividend gushers. Merchants Trust (the subject of a post in June, Boxcars) yields 5.4% and trades at a discount to Net Asset Value (NAV) of 5.7%. To remind, it is important to buy Investment Trusts when they are trading at a discount to NAV. Next, Schroder Income Growth Fund that yields 4.2% and trades at a discount of 7.5%. This is the only trust in this post in which I do not hold shares because it is entirely exposed to UK equities and at the moment I am not investing for income. However, it has raised its dividend every year for the last twenty years and looks a safe haven if you believe the UK economy will flourish outside the EU. If you think that EU economies are going to do well, I don’t, then look at European Assets Trust, managed by F&C, that only invests in Europe, excluding the UK. Finally, a contender that does not meet my criteria now but is worth watching: Murray International. The 5% yield is attractive but it trades at a premium of 3% to NAV.
It’s easier to find high quality, low yielding trusts. Top of the list is Monks that has improved its performance since Charles Plowden took the reins. It trades at a discount of 7% and yields 0.7%. The discount is shrinking as the value of Plowden’s stewardship becomes apparent. Next, Worldwide Healthcare yielding 0.8% and at a discount of 1.5%. It does what it says and it is a growing market as developing countries have more to spend in this sector. Then Pacific Assets (see Back to Business) that yields 1% and is at a discount of 0.4%. Scottish Mortgage, yielding 0.9%, would usually make the cut but it trades at a premium of 3.3%. Put it on your Watch List.
On Wednesday the Chancellor announced a government savings bond yielding 2.2% that must be held for three years with a maximum investment of £3,000. That’s a safety play for sure but I’d rather have exposure to equity markets and preferably outside the UK.