Gervais Williams’ and Martin Turner’s multi-cap approach to managing The Diverse Income Trust (DIVI) has yet again paid off, protecting on the downside. The trust has topped the ranks of UK high dividend yield peers over the past 12 months, and remains in the top quartile by NAV total return over the medium term. It has also materially outperformed the comparative indices since launch in 2011, demonstrating the managers’ skill to pick winners, patience, consistent approach, and the ability to diversify away most of the risk of dividend cuts. Williams believes that DIVI’s small- and mid-cap tilted portfolio is well positioned to continue benefiting from increased investor demand for cash-generative businesses, caused by fears over the current coronavirus pandemic and lockdowns.
Companies: Diverse Income Trust
The Diverse Income Trust (DIVI) aims to provide shareholders with an attractive income, as well as capital growth, over the long term through a bottom-up approach to investing in UK equities across the market capitalisation spectrum. This gives the manager a wider opportunity set from which to pick stocks and dial down portfolio risk. DIVI has also profited from put options that boosted cash levels when the market was extremely weak. Although DIVI’s income may decline in the short term, as many UK companies have recently cut their dividends, the board has recently maintained the third interim dividend, which suggests it expects this to be a transitory feature for the trust.
The Diverse Income Trust (DIVI) aims to provide shareholders with an attractive and growing level of income, as well as capital growth, over the long term. Unconstrained by index considerations, the managers (Gervais Williams and Martin Turner) have a wide investment universe from which to select companies that are well managed and able to deliver sustainable and growing dividends. The portfolio is well diversified, with a bias towards small-cap companies; since DIVI’s inception in April 2011 to end-September 2019, the trust has delivered an annualised NAV total return of 11.5% and consistent growth of its regular dividend.
The Diverse Income Trust (DIVI) aims to generate a good and growing level of income, as well as capital gains over the long term. It is not constrained by benchmarks and has a wide opportunity set across the market capitalisation spectrum to find high-quality, resilient companies that can sustain dividend growth over the long term. The managers, Gervais Williams and Martin Turner, have a small-cap bias and over two-thirds of the portfolio is outside of the FTSE 350 index. Since its inception in April 2011, the trust has delivered an annualised NAV total return of 12% and consistent growth in its regular dividend. Performance in more recent years has lagged the FTSE All-Share index, which the managers believe reflects small-cap and value stocks being overlooked, and they are finding superior investment opportunities in this segment of the UK equity market.
Today, we introduce our investment trust ratings. According to the quantitative screens we have selected in an attempt to highlight the best performers in the closed-ended universe, the trusts discussed here have been the best in their classes over the last five years. We have selected trusts using two different sets of criteria, aiming to identify the top performers for capital growth and for achieving a high and growing income. There are many rating systems for open-ended funds, but no quantitative-based system for investment trusts that is available to the average investor. While we cannot identify trusts which will perform well in the future – past outperformance is no guide to future out-performance – we hope these ratings will highlight the outstanding performers in the closed-ended universe and those managers who have best used the advantages of investment trusts to generate alpha. We are trying to reward consistent and long-term outperformance, and so we have decided to look over a five-year period. All data is as of the end of December 2018, sourced from Morningstar and JPMorgan Cazenove. We have looked at NAV total return performance and discount value has not been considered: the aim is to identify those trusts which have performed the best rather than highlight bargains.
Companies: IPU FAS ATR JEO FEV FGT THRG SEC PAC BRSC IAT HNE MIGO TRY JMG DIVI SLS BGS SDP JETI SOI BCI MRC TIGT EDIN JAGI BEE SDV BRIG AAIF HFEL SCF SIGT BRFI IVPG CTY HINT JCH NAIT
The Diverse Income Trust (DIVI) aims to generate a good and increasing level of income, as well as capital gains over the long term. It primarily invests in UK equities, across the market capitalisation spectrum, seeking companies that are underappreciated by the market and able to generate productivity gains, which in turn underpin future dividends growth. The trust has around two-thirds of its holdings in companies outside of the FTSE 350 index, and is relatively lowly correlated with mainstream UK indices. DIVI has a solid medium- and long-term performance track record with a total return of c 14% pa when both the NAV and dividend income are included, over the period since inception in April 2011 to end-September 2018. UK equities remain out of favour ahead of Brexit and volatility has increased. This combination is presenting greater opportunity to add value, according to the managers Gervais Williams and Martin Turner.
The Diverse Income Trust (DIVI) seeks to provide shareholders with an attractive level of dividends and capital growth over the long term. It achieves this through investing primarily in UK-listed companies that are able to improve productivity, where strong cash flow can underpin sustained dividend growth. The managers Gervais Williams and Martin Turner believe a multi-cap approach has the advantage of investing over a wider opportunity set relative to those limited to large mainstream stocks, and around two-thirds of DIVI’s holdings are outside the FTSE 350. The strategy also seeks to manage the scale of potential capital loss, in the event of a major market setback, through the use of a FTSE 100 put option. DIVI has a solid track record of performance; from inception in April 2011 to end February 2018, it has generated an annualised total return of 13.8%.
The Diverse Income Trust (DIVI) invests in UK listed companies across the market capitalisation spectrum. It aims to deliver good and growing dividends as well as capital returns. Over two-thirds of its investments are outside the FTSE 350 index of large and mid-cap stocks, and the managers believe the small-cap universe is still rich in opportunities. The fund also seeks to minimise the scale of downside risk, and therefore the portfolio currently includes FTSE 100 put options. DIVI’s share price has risen by around 110% since launch in April 2011 to end-September 2017, outperforming the FTSE All-Share index by over 50%.
The Diverse Income Trust (DIVI) invests in UK stocks from across the market cap spectrum that have strong prospects for sustainable dividend growth. This all-cap income generating strategy was developed by Gervais Williams and Martin Turner of Miton Asset Management. The c 145 stock portfolio provides a broad spread of investments and has a strong bias towards dividend-growing smaller companies. In terms of NAV total return, the trust has generated +125% over five years, ranking it second in its 23-strong peer group (the Association of Investment Companies’ UK Equity Income sector). Since launch, DIVI’s annual dividend has grown from 2.0p in FY12 to 2.8p in FY16 and it has built a substantial revenue reserve.
The Diverse Income Trust (DIVI) is a UK equity income fund that is differentiated by investing across the market capitalisation spectrum. At 31 December 2015 around one-third was invested in the largest 350 UK stocks with the balance in smaller quoted stocks. Since launch in 2011 it has grown substantially, and has outperformed both the broad UK market and the high-yielding large- and mid-cap sector in total return terms in three of the last four years. It has also outperformed the majority of its sector since launch. A further element of differentiation comes through a FTSE 100 put option. This runs through to March 2017 with a strike level of 6,000, and also provides an element of downside protection covering around onethird of the portfolio.
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Litigation Capital Management (LCM) is an alternative asset manager specialising in disputes financing, with its main operations in Australia and the UK. The company provides funding for litigation in exchange for a share of any settlement and has built a strong track record of supporting winning c
Companies: Litigation Capital Management Ltd
Mondelez International has announced that it has appointed MediaMonks to manage global technology infrastructure, global websites and content production for North America, Latin America and AMEA. We believe this account win by S4 Capital further vindicates the unitary structure and integrated offer of the group as Mondelez initially worked with MightyHive before broadening the scope of this relationship to encompass MediaMonks. S4 Capital describes the account as a Whopper, indicating that it will generate revenues of over $20m when the account is fully transitioned. We will update our forecasts for the account win at the next financial newsflow from the group. We currently forecast LFL Gross Profit growth of +26% for FY21 and believe the Mondelez win will further accelerate this. We raise our target price to 500p (was 475p) and retain our Buy recommendation.
Companies: S4 Capital plc
Liontrust has delivered in line interims, however AuM growth since the HY point drives higher earnings estimates. In H1, net inflows remained strong despite the backdrop and, alongside performance, contributed to 28% AuM growth. Post-period, performance momentum has boosted AuM by a further 5% to £28.1bn, plus the completion of Architas. Together, this results in a step up in the run rate. We update our forecasts for higher than expected AuM driving a +5% upgrade to FY21e EPS and +10-13% in outer years. We do not forecast scaling in Architas or Global which could prompt further upgrades, reducing the 15x FY22e PER.
Companies: Liontrust Asset Management PLC
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Today’s $2.3m framework agreement with an existing Tier 1 global customer is further validation of Clareti’s competitive advantage, of its ability to land and expand and, logically, is the augury of incremental revenues ahead. Gresham continues to gain market share in the critical Tier 1 space and we expect this to show in a resumption of revenue growth next year. Trading on forward Clareti recurring revenues of c. 4.1x, we see significant upside.
Companies: Gresham House
Today's news & views, plus announcements from Capita, JD Wetherspoon, HarbourVest Global Private Equity, Walker Crips Group, Randall & Quilter*, Michelmersh Brick, LoopUp, Schroders British Opportunities Trust and Baillie Gifford UK Growth Trust.
Companies: Randall & Quilter Investment Holdings Ltd.
The COVID-19 pandemic has accelerated trends in online retailing, to the benefit of the European logistics market, in which Tritax EuroBox (EBOX) is a leading player. Demand for logistics space is growing exponentially, while supply of existing and new stock is depleted. This dynamic is even more acute in prime locations close to heavily populated conurbations and prolonged rental growth is forecast. EBOX has amassed a portfolio of big box facilities located in major logistics hotspots across Europe. Numerous value-add opportunities also exist within the portfolio, including development and asset management projects. One of the key differentiators of EBOX to its peers is its exclusive ties with established logistics developers. Through the relationships, EBOX has access to and first right of refusal over a pipeline of development assets worth €2bn.
Companies: Tritax EuroBox Plc
Palace Capital’s (PCA) H121 performance was robust and ahead of our central expectations. We have slightly increased FY21 earnings forecasts and introduced FY22–23 estimates, with growth driven by Hudson Quarter completion, on track for March 2021. Significant additional reversionary potential and development/refurbishment represent significant value creation potential.
Companies: Palace Capital plc
Today's news & views, plus announcements from KGF, MRO, UU, BAB, BRW, FUTR, GNS, HICL, LIO, AEXG, FUL, KWS
Companies: AEX GNS HICL
Alliance Trust (ATST) underwent a major overhaul three and a half years ago, refocusing on its global equity portfolio. Non-core parts of the company have been sold and overheads slashed. Today, the trust’s assets are managed by nine of the world’s best stock pickers. Investing sustainably is a strong theme within the fund, but the manager, Willis Towers Watson, seeks to blend managers with different styles so that the trust is not beholden to any particular fashion in markets.
Companies: Alliance Trust
Murray Income Trust’s (MUT) recent combination with Perpetual Income and Growth Investment Trust (PLI) has doubled the trust’s assets under management to £1.1bn and is expected to deliver a substantial fee reduction to investors. MUT invests in a diversified portfolio of mainly UK equities and aims to provide a high and growing income, combined with capital growth. It has achieved these objectives, having just delivered its 47th consecutive year of increasing annual dividends, while also outperforming its benchmark (a broad UK stock market index) and most of its peers over both the short and longer term. Manager Charles Luke’s success – even in the current climate, which has been characterised by widespread dividend cuts – confirms his conviction that ‘quality, sustainable and growing income is out there, if you know where to look’. He intends to maintain his research-intensive search for resilient companies capable of growing future earnings and dividends over time.
Companies: Murray Income Trust
NextEnergy Solar Fund’s interims show continued generation outperformance, driving a NAV rise from 98.4p in June to 99.6p in September. Pricing was also ahead with power sales contracting adding £5.4m of benefit in the period. The company continues to benefit from efficient financing which we believe, along with low operating costs, gives it a cash cushion protecting the dividend. The shares offer the lowest NAV premium and highest yield of the UK renewable yieldcos.
Companies: Nextenergy Solar Fund
Standard Life UK Smaller Companies (SLS) manager Harry Nimmo is very bullish on the outlook for UK small-cap stocks, with the proviso that Brexit presents a near-term risk. He notes that despite current challenges due to the coronavirus, many companies are trading above expectations and there are now only a handful of SLS’s portfolio companies that are not paying dividends. The manager is comfortable with the trust’s ability to maintain its own dividend payments and is hopeful its valuation will improve given its very strong performance record. SLS’s NAV has outperformed its benchmark over the last one, three, five and 10 years; however, Nimmo cautions that given the trust’s focus on quality businesses, if there is a cyclical recovery in the UK market with a ‘dash for trash’, SLS is likely to underperform during this period.
Companies: Standard Life UK Small Co's Tst
Aberdeen Asian Income Fund (AAIF) has recovered well from the widespread market sell-off driven by the coronavirus pandemic, although its focus on quality stocks with attractive dividends has held back returns relative to the broad Asian index, which is increasingly dominated by non-yielding Chinese internet companies. Portfolio manager Yoojeong Oh says the team has ridden the technology wave differently, with exposure to semiconductor companies that are supporting the cloud-based boom in working from home, as well as e-commerce stocks in high-yielding markets like Taiwan, and firms that benefit from green stimulus in Europe. While gearing (currently c 8%) was a drag in the March market falls, keeping it steady has helped boost returns in the recovery, and the fund is on track to deliver a 13th consecutive year of dividend growth, partly supported by reserves it has built up over the past decade.
Companies: Aberdeen Asian Income Fund
1H’21 results cover the depths of the initial market impact of COVID-19. We note the 4.7% fall in EPRA NTA and the effect of the dividend rebasing announced some months prior. There are no negative surprises. The focus on regional offices is a positive. There are other positives that we consider to be important, namely the ongoing contractual performance of the leisure asset tenants and lengthening of leases there, and the continuing encouraging residential sales (and small letting) at the mixed-use development of PCA’s newly created Hudson Quarter, York. Here, we see just one of PCA’s initiatives to unlock value and deliver attractive returns.