Mark Barnett has had a stinker of a year. The manager of Pigit (Perpetual Income & Growth Investment Trust) reported a 9.6 per cent net asset value total return for this UK-focused investment vehicle for the year to the end of March — which sounds fine. Except that his benchmark, the FTSE All-Share, notched up a 22 per cent return over the same period. Worse still was Pigit’s actual share price total return — a measly 4.2 per cent.
This was a very poor year by Pigit’s normally strong standards. The main problem was Mr Barnett’s reluctance to hold commodity stocks. This served him well in the previous couple of years as the mining bubble deflated, but was a serious headwind this time as raw materials had a bit of a bounce.
A second problem was the absence of two blue-chip giants in the portfolio, Shell and HSBC, which both turned out stellar years. A third was the Brexit vote and companies exposed to sterling.
And then there were rather too many individual company picks that went wonky. Capita, the outsourcing business, has been a horror story. BT has underperformed because of the accounting scandal in Italy and Openreach worries. Circassia, the company behind a promising cat allergy drug that failed, was another big blow.
Of the 22 trusts in the UK equity income sector, Pigit languished in 20th place by net-asset-value performance over the year.
The question is, has Mr Barnett lost his touch or does he have too much on his plate? As well as Pigit, he runs Edinburgh Investment Trust as well as heading UK equities for Invesco, taking over that role from Neil Woodford.
He was unavailable for comment yesterday but his chairman, Bill Alexander, is sure that this is just a passing wobble and that his policy of avoiding cyclical stocks such as banks and miners is a long-term winner. Over ten years Pigit is the sector’s third best performer, turning £1,000 into £2,328.
Investors should keep the faith. Fans might even be tempted to top up holdings while the shares trade at an 8 per cent discount to net assets.
Anyone queasy about holding tobacco stocks should pass, however. Three of Mr Barnett’s biggest five holdings are cigarette companies. The shares rose 1¼p to close at 407p.
MY ADVICE Buy
WHY Good track record over the long term and an 8 per cent discount to net assets represent a buying opportunity
Watkin Jones
Watkin Jones’s recent decision to enter the build-to-rent sector was a natural one. The company specialises in building university accommodation and the two sectors have similar characteristics. Most students now expect university halls that more closely resemble a modern rental apartment complex than the stereotypical dingy student digs.
The company has completed its first scheme in Leeds with 322 apartments managed by its Five Nine Living business, but its pipeline for future developments is also gathering momentum, with three sites secured in London, Belfast and Leicester.
It continues to benefit from expanding demand for student beds, as universities focus on lecture halls, libraries and laboratories rather than accommodation. The group has sold seven student developments since October 1 and is fully forward sold for the financial year. For 2018, it has 3,400 beds due for delivery, more than half of which are forward sold.
This makes for a solid investment case, especially after the 10 per cent increase in the interim dividend.
Pre-tax profits grew by 27 per cent to £21.2 million, while its balance sheet is ungeared with net cash set to be £60 million by the end of the year.
MY ADVICE Buy
WHY Demand for student beds provides strong base
Ascential
Itmay be the bible of the fashion industry, but yesterday Drapers was one of 11 UK-based trade titles to be offloaded by Ascential — formerly Emap — for £23.5 million. The lower-margin assets were put up for sale in January and their disposal to Metropolis International, the owner of Property Week and Packaging News, marked a quick sale of what scribblers at Shore Capital called “unwanted orphan assets” at an unspectacular multiple.
The deal follows the sale of Health Service Journal in January to Wilmington, an education and networking company, for £19 million and leaves only one so-called heritage brand to be sold — Meed, the Middle East business intelligence publication.
The 11 titles generated revenue of £32.1 million last year, down from £34.6 million in 2015, and underlying earnings of £6.9 million compared with £8 million the year before. The sale is part of Ascential’s strategy of focusing its attention and investment on its higher-growth exhibitions, festivals and information services business. This includes the Cannes Lions advertising festival,which starts on June 17. The deal underlines the squeeze on print journalism in the digital age. Ascential, founded as East Midlands Allied Press (Emap), was floated in February last year at 200p a share by Guardian Media Group and Apax, the private equity group, and both have since sold out. The shares, off 4¼p at 350½p, have performed strongly since listing. With analysts forecasting earnings of 17.3p this year, it puts the company on a multiple of about 20.3 times.
MY ADVICE Hold
WHY Shares may pause after a strong run since flotation
And finally . . .
This year’s AGM trading statement from Hostelworld was in contrast to last year’s warning of weak bookings after terrorist attacks in Europe. Shares in the hostel booking company have recovered from that wobble and, before yesterday’s update, had reached almost double the 185p at which it floated in October 2015. While current trading reassured, one or two analysts decided that it was a good time to take profits, and the shares lost 2.85 per cent at 350p. The longer-term growth story remains intact, however.
