We’d like to wish all the readers of this column a very Merry Christmas and hope you are able to look forward to a positive New Year.
The markets in fact are proving quite buoyant and we (and our clients of course) have seen some good increases in several of our core holdings.
As of Monday in fact we had 11 of the strongest 12 listed on the FTSE350, which appears to be a record for us.
Why are things doing well? It does seem the prevailing attitude has swapped from ‘everything is negative’ to ‘everything is positive’. In all honesty, neither outlook is sensible nor sustainable, but an improvement in investments is not to be sneezed at.
We have mentioned Investment Trusts and closed-ended funds in this column before as offering good value for us and our clients, so we thought it might be worth attempting to explain a little further with the examples below.
There has been quite a bit of solid news recently relating to three we hold shares in, and their plans/hopes for reducing the discounts at which their shares are currently trading.
Don’t share values change a lot anyway, you ask? Yes they do, but these funds/trusts hold tangible assets such as secure loans, real estate and all manner of things which hold an intrinsic value. So when the shares of that fund trade at a lower price than the assets are worth, there is clearly plenty of value there for an investor.
For example, GCP Asset-backed Income is undertaking a strategic review, which is likely to include the wind-down of the Company and return of all funds to investors.
That would represent a sizeable premium for us. The shares rose 3.4% on the news. The shares are still 64 pence (up on Monday on news of an early loan repayment) and we hope for a final sum nearer 95p.
The next example is Abrdn Diversified Income & Growth ( which we’ve mentioned before) which will seek an approved wind down at the 27/2/24 AGM. The shares jump 9% on the news. Cash will start to be returned in the first half of 2024. The shares are 82p and the latest net asset value £1.12.
Lastly, IP Group has announced a £20million share buy-back as it believes the markets are seriously undervaluing its portfolio (we agree). The shares jump 7%.
These are all quoted companies which simply hold ‘investments’. The market prices at which their shares trade have been way below the value of all the assets they hold.
Some are exceedingly ‘boring’, such as secure loans, so not ‘affected’ by the daily vagaries of market movements in ordinary trading companies.
We see them too as a safer form of investment at the moment against excessively high US shares valuations and come any rout – for example if the ‘magnificent seven’ biggest US companies’ share prices fell by half, a secure loan fund’s mortgages don’t change in value and neither do their customers’ liabilities to pay interest and to repay them in due time.
Investing is as much about security for what you have in the face of unexpected difficulty as it is chasing extra returns, especially if they are based on too much thin air.
We hope you have a happy and peaceful Christmas.
