Securities Trust of Scotland (STS) aims to generate income and long-term capital growth through a bottom-up approach to investing in global equities. The manager, Mark Whitehead, focuses on quality companies with an ability to sustain dividend growth, to build a relatively concentrated portfolio of 35–55 high-conviction stocks. In his view, this approach is naturally aligned with selecting companies that score highly on ESG issues. Since Whitehead’s appointment, and the adoption of the mandate, STS has delivered an annualised NAV total return of 12.9% and increased demand for its shares the valuation from trading at a persistent discount to trading at a premium to NAV.
Global equity markets performed strongly in 2019, as geopolitical and recession risks receded. However, valuations for global equities have started 2020 at elevated levels, and the outbreak of the coronavirus challenges prospects for earnings growth to support re-rated markets. This environment may favour a fundamental and longer-term approach to investing in equity markets.
- Rigorous bottom-up approach to identify quality companies that are able to sustain dividend growth through economic cycles.
- Managed by a highly experienced group of global equity income specialists, supported by the resources of the wider Martin Currie analyst team.
- Utilisation of gearing and derivatives to potentially enhance returns.
- A proactive board that is committed to promoting the trust and serving shareholders’ interests.
STS is currently trading at a 2.3% premium to cum-income NAV, which is a significantly improved valuation from the three-year average discount of 4.1%. This partly reflects the trust’s successful track record since the change of manager and mandate in June 2016, and the board’s proactive approach to significantly increasing the promotion of the fund over the past 18 months. The board and the investment manager remain committed to these initiatives.