Investors who want a view on the direction of a Trump administration might look at individual stocks that are set to benefit, as outlined here on Saturday. However, there is an easier way — through an investment trust with a higher than usual weighting to US stocks.
One such is Martin Currie Global Portfolio Trust, managed since its launch in 1999 by Tom Walker. This has almost 60 per cent in US stocks. It is one of those trusts that tries to keep its net asset value closely aligned with the share price, by buying back or issuing shares as necessary. This should provide sufficient liquidity for investors to buy in or exit.
This is what might be called an old-fashioned stock picker, investing in companies on their merits rather than following any obvious cyclical trend, such as the oil price or the future direction of interest rates. There are a little more than 50 investments; of the top ten, eight are quoted in the US, including Alibaba, the Chinese online retailer.
Mr Walker does not hold Amazon or Twitter shares because he seeks companies with an earnings multiple that either reflects their basic solidity or strong growth prospects. He holds Facebook equity because he believes its expected 30 per cent earnings growth over the next three years justifies an earnings multiple of approaching 30.
Likewise, the glory days of breakneck Apple growth may be over but a price-earnings multiple of about 14 seems reasonable. He eschews European banks but his biggest investment is in JPMorgan Chase, which has the ability to boost the dividend. He also likes the stability and reliability of telecoms stocks even if they may be low-growth. Verizon Communications fits the bill, while KDDI is a Japanese counterpart. Telecoms stocks tend to be good dividend payers too.
About a fifth of the trust’s assets are in Europe. It recently dumped its holding in Royal Dutch Shell. Mr Walker has concerns, as do other fund managers, over the dividend. Instead, he has invested in another US stock, Pioneer Natural Resources, which has assets in the low-cost Permian field in Texas.
The shares, unchanged at 213p, yield about 2 per cent, which is not bad for a growth fund, and offer an easy exposure to the US market for those who want it.
MY ADVICE Buy
WHY The fund is a little heavy on tech stocks that have not done well since the election but looks an effortless way into US markets
Greencore
Acquisitions by London-quoted companies of American retail businesses do not have the best track record. Greencore’s decision to pay $747.5 million for Peacock Foods looks like a stretch. It increases the value of the group by about a half. There is a nine-for-13 rights issue at 153p, a sharp discount to the share price.
This is a bold move but the market seems to like it and it can be assumed that the main institutional investors approve — the shares gained 27¾p to 319¾p, which is an unusual reaction when a company chooses to issue so much new equity. Peacock complements Greencore’s US operation, which has been expanded by adding three new plants over the past couple of years.
It might seem an odd time to add to the US operation but talks between the two have apparently been taking place for eight months. Plainly the deal will be more expensive than it would have been before the fall in the value of the pound, but the earnings in dollars will translate into a higher sum in sterling. Greencore is best known as a supplier of chilled foods, such as sandwiches, in the UK but the purchase means the proportion of earnings from the US rises from 15 per cent to nearer 45 per cent.
Peacock, which specialises in frozen breakfast sandwiches, is being bought on a reasonable ten times earnings, if losses available to set against future tax are factored in. Investors should definitely take up their rights, and on 15 times earnings the shares look like good value if the Peacock deal works out.
MY ADVICE Buy
WHY US deal is an ambitious one but looks good enough
DCC
This column has compared DCC to Bunzl before. It is marginally better known, even if neither FTSE 100 company is exactly a household name. Both rely on finding acquisitions to bolt on to their existing operations, which deliver basic products. DCC’s biggest business is in energy. The company has tended in the past to do well from sweeping up businesses that are being sold by the oil majors.
The latest deal is a little different, buying Gaz Européen Holdings from a couple of French entrepreneurs. It is, however, a good fit with the purchase a year ago of Butagaz, which is mainly a retail business providing liquefied petroleum gas and one with a high profile in the French market.
DCC has announced further purchases, of an Irish pharmaceuticals distributor and a UK seller of audio-visual equipment, and brought forward its figures for the year to the end of September. These show revenues up by 10.5 per cent and the company says revenues and profits for the full year, taking in the more important second half, will beat expectations. The shares rose 170p to £62.05. On 22 times earnings they start to look a little dear.
MY ADVICE Avoid
WHY DCC is a reliable consolidator but expensive
And finally...
John Laing looks like one of the British companies set to benefit from infrastructure spending under the Trump administration, having worked on several big projects and just finished the equivalent of the Heathrow Express in Denver, Colorado. The question mark is over the ability to find new investments, given that plenty of others are fishing in the same pond. Encouragingly, the company yesterday announced the purchase of two more wind farms in France and Germany, to add to one in Australia bought this month.
