Edinburgh Investment Trust owns a portfolio of mainly UK stocks, supplemented by up to 20% listed abroad, and aims to outperform the FTSE All Share on an NAV basis while providing a dividend that grows faster than inflation. Manager Mark Barnett uses a value approach to picking stocks, and so takes contrarian positions in companies, sectors and themes which are out of favour in the market. This can cause the performance to deviate significantly from the index, and has led to underperformance since the 2016 Brexit referendum. Currently Mark has tilted the portfolio to stocks with UK earnings, which he thinks are undervalued as the market is too pessimistic about the prospects for the UK economy. Mark looks for businesses with the ability to maintain or grow their dividends, and the result is a portfolio with an attractive yield of 3.9% and a dividend that is well-covered by reserves, meaning he should be able to grow the dividend in future years. The current discount of c.9% is wider than the one-year average of 8% and the weighted sector average of 4.2%, following the underperformance since mid-2016.
