Monks Investment Trust
For years, Monks has toiled in the shadow of Scottish Mortgage, its big brother investment trust and FTSE 100 member (Patrick Hosking writes). Both are managed by the well-regarded, patient and Edinburgh-based Baillie Gifford. Both like growth stocks that harness the way in which technology is changing the world. And both like to pep things up with a bit of gearing and will consider stocks from anywhere in the world.
Monks, though, is a bit more cautious and is seen as less risky. It is more diversified and takes less concentrated bets. And it has far less exposure to unlisted companies, a feature that might appeal to the many private investors burnt by the implosion of the Woodford empire last year.
In annual results yesterday, Monks Investment Trust — quirkily named after the monastics who once occupied the Austin Friars address where it was founded 91 years ago — reported a net asset value total return of 3.4 per cent for the year to April. That compared with -1 per cent from its benchmark, the FTSE World Index (in sterling terms). Strong performances from holdings such as Amazon and Shopify, as well as Tesla, delivered. The biggest detractor in the portfolio was Prudential, the insurer battered by worries about potential bond losses.
Over the five years since the present management team took over, Monks has been one of the conspicuous winners in the global investment trust category. Of 16 trusts, it came fourth, measured by total share price return, turning £1,000 into £2,393. That lags the £2,982 achieved by Scottish Mortgage, but beats the sector average of £2,042.
In recent weeks, the trust has been busy scenting out opportunities triggered by the pandemic. The gloom in commercial property badly hit property consultancy groups and Monks took advantage by snapping up a stake in the New York-listed CBRE in April. More generally, it sees even more opportunity in home shopping and home food delivery, beefing up existing holdings in Naspers, of South Africa, and Metuan Dianping, of China.
It also took advantage of weaker share valuations to take initial positions in companies that it has long regarded as being of high quality, but always thought just a bit too expensive. They include Estée Lauder, Standard & Poor’s and Adidas — “starter positions”, in the words of Charles Plowden, the fund manager.
Luck has played its part. Monks jumped ship from Royal Caribbean Cruises last year and so dodged the near-sinking of the cruise industry. It wasn’t so lucky with a new investment in January in Hoskizaki Corp, the commercial kitchen equipment maker that has been hit since then by the mass closure of restaurants.
One area it is investing in is healthcare, particularly doctoring at a distance. It recently backed Teladoc Health, the $14 billion New York-listed group whose shares have soared amid the view that patients increasingly will want, or at least will tolerate, consultations by smartphone.
There’s a bit more management uncertainty than usual. James Ferguson, the chairman, is handing over to Karl Sternberg, while Mr Plowden retires next April. His two colleagues on the mandate will remain, with Spencer Adair taking the lead. Analysts at Investec expect the transition to be seamless.
The shares are not cheap, trading typically at a 2 per cent to 4 per cent premium to net assets in recent years. The dividend is tiny, so this is not a stock for income investors. Charges are relatively modest at 0.48 per cent and have been coming down. Shares in Monks rose 16p, or 1.6 per cent, to £10.26.
ADVICE Hold WHY Good investment team with bags of ideas but the shares are not cheap
Wincanton
Britain’s biggest logistics company conceded yesterday that it was difficult to provide reliable guidance for the year ahead (Callum Jones writes).
Wincanton emphasised, however, that transportation remained “crucial” for its clients, “so we do not expect persistent and widespread major falls in the demand for our services”. In other words, for all the disruption that the coronavirus pandemic has caused for companies nationwide, the demand for logistical services remains consistent, if not strengthened.
There has been short-term pain for Wincanton, with business down about a tenth on last year by the end of last month. Yet revenues had already started to recover, increasing by about 7 per cent between April and May. Annual results to March 31 point to strong fundamentals, with sales up 5 per cent and underlying profits up 7 per cent.
New and renewed contracts in the retail sector have been a key driver of this growth. Revenues from its grocery business rose by 26 per cent and its general merchandise unit increased by 5.8 per cent. While the temporary shutdown of building sites knocked sales in construction by about 70 per cent in April, this business represents only 11.5 per cent of its overall revenues. Of its £1.14 billion revenues from external customers, £782.3 million came from its retail and consumer products unit.
Under last summer’s five-year deal with Morrisons, Wincanton transports goods from three of the supermarket’s distribution centres to its stores. Other clients in the grocery sector include Sainsbury’s, Waitrose and the Co-op. The lockdown triggered a surge in online grocery deliveries. While it remains unclear whether consumers will revert to old habits or maintain this level of digital demand as restrictions are lifted, recent months have forced retailers to take a step back and look to the future. A company such as Wincanton, with a strong foothold in the industry, could be a beneficiary as grocers scrutinise supply chains and build up their online operations.
Wincanton’s shares rose 4.6 per cent, or 8½p, to 193½p after yesterday’s preliminary results, but are still down by more than a pound since the turn of the year.
ADVICE Buy WHY Retail contracts support growth despite Covid-19
