Like its biggest investment — Amazon — the Monks Investment Trust is not about dividends but capital growth. And why not, as the results have not been bad of late. Shares in the £1.4 billion trust are up 55 per cent for the past year, so who cares if the dividend yield on its portfolio is 0.2 per cent?
Managed by Baillie Gifford for much of its 88-year life, the trust is also cutting prices, saying yesterday it would be passing on the benefits of its good performance in the form of a fee reduction with the charge on all assets above £750 million. The fee will fall from 0.45 per cent to 0.33 per cent — saving clients £500,000 a year.
The fee cut highlights the pressure on active managers to demonstrate value for money to investors increasingly drawn by cheaper passive funds.
In a note yesterday on the North American Income Trust, analysts at Canaccord said that, while the fund had produced strong returns of late, they were concerned about its ability to maintain its performance as its portfolio is concentrated in what for the most part are “arguably the most efficiently researched collection of equities”.
A similar criticism might be levelled at Monks, with nearly half of its holdings in north America, where it also owns big stakes in Alphabet, Facebook and Royal Caribbean Cruises as a lot of its positions could be found elsewhere and more cheaply.
Monks would counter that it takes a different view of its investments as an active manager than a passive fund, with a 17 per cent annual turnover rate, equating to average holding periods for its stocks of about four to five years.
The way it hunts for growth takes four forms, with a mixture of long-established growth investments such as Prudential and Colgate; established mainstream plays such as Amazon and Tesla mixed up with recent laggards in the form of Samsung and cyclical growth stories such as Royal Caribbean.
With the US market hitting all-time highs in recent months, separating the impact on the fund of the change in its management over the past two years from a supportive backdrop is difficult, particularly given its sharp rise in 12 months.
For those looking for something different, Monks offers a range of more than 100 stocks that look like a good long-term bet. However, with fears of a market correction, there are certain to be bumps along the way, meaning a holding period to match the fund’s would be advised.
MY ADVICE Buy
WHY The trust has been a strong performer and has a good range of investments
Stagecoach
All good things must come to an end and so Stagecoach has lost its grip on the South West Trains rail franchise — and with it about £100 million of cash flow.
The loss is no great shock, the trade press had already signposted a win for FirstGroup a fortnight ago, which was reflected in the relatively muted response of the stock market to the news — the shares fell 1 per cent.
City concerns were more focused on the prospect of Stagecoach keeping the contract with an overly aggressive bid rather than losing a franchise it has run for more than two decades.
All of which provides a good point to take a look at the investment case for the transport operator. The shares have halved in the past 12 months, leaving Stagecoach as one of the higher-yielding stocks on the London market with a dividend yield of close to 6 per cent.
Released from managing SWT, the company has an opportunity to refocus on its East Coast rail contract, though hitting a compound annual growth rate of at least 8 per cent to ensure a return will be far from easy.
Away from trains, Stagecoach’s regional bus business is facing challenges of its own — London excepted — and with fears over the outlook for the wider economy, there is little reason to believe the situation will get better soon.
That said, given the lows that the shares are trading at, there is little reason to sell now.
MY ADVICE Hold
WHY The shares look relatively cheap but there is little to suggest much upside or downside
Spaceandpeople
Times are tough for Aim-listed Spaceandpeople. The retail promotions company that helps businesses, particularly restaurants, to find good spots to promote their products fell to a loss last year. To add to the pressure on the company, it also breached its banking covenants, although helpfully Lloyds Banking Group, its lender, said that it would not take any action.
An attempt to break in to the German retail market has also fallen flat and Spaceandpeople looks to be heading for its own Brexit from Europe’s biggest market. All in all, things do not look good.
Yet amid all the problems, some rays of sunshine can just about be seen. The winning of some significant UK contracts, including from Primesight to develop commercial sites in airports and railway stations, and more recently a British Land deal for space in the developer’s retail parks and shopping centres, are promising signs.
With the shares down more than 60 per cent for the year, even after yesterday’s rise of almost 30 per cent, there appears to be plenty of potential value.
However, for now investors might be better watching and waiting to see what happens.
MY ADVICE Hold
WHY Bad news could be behind it, but investors should wait a while
And finally...
It was a busy day for Shard Capital Partners, which as well as announcing the flotation of Path Investments, an energy investor, also oversaw the first day of trading for Falcon Acquisitions. It had raised £4 million through a main market listing to fund investment in video streaming. The business is focused on buffering, which aims to cut signal loss that hampers viewers’ enjoyment. With streaming set to become a $60 billion market within three years the opportunities — if its tech is up to scratch — could be good.
