It is almost three years since Monks Investment Trust had a change at the top. After a period of underperforming against its peer group the trust’s manager, Baillie Gifford, brought in a new team led by one of its veterans, Charles Plowden. Since then performance at the £1.7 billion trust has been encouraging.
Monks was founded in 1929 by a group of investors led by Sir Auckland Geddes, an academic, soldier and politician. Baillie Gifford took over managing the trust in 1931 and has been in charge for much of the time since then.
Today Monks typically holds a portfolio of about 100 global stocks.
Mr Plowden and his team have not varied from that model but their influence in reshaping the portfolio, particularly in broadening the exposure to emerging markets, is showing signs of solid progress.
After an initial sale of 50 per cent of the trust’s holdings, the annual rate of turnover in stocks is now about 16 per cent.
The Monks share price was trading at close to 400p when the change of management took place in March 2015 and the long-serving Gerald Smith stepped down.
There has been a steady upward path since then. The stock has not dipped below 700p since last October and in recent days the shares have been changing hands for more than 800p. Looking at the three years to November the share price has risen by more than 99 per cent compared with 48.6 per cent for the FTSE World Index.
The last annual dividend paid by Monks was a modest 1.25p and it appears unlikely to raise that significantly as it targets capital growth above payouts to shareholders.
The portfolio is diverse. Financial stocks make up 28 per cent, consumer services almost 21 per cent and there are other big plays in industrials, technology, healthcare and consumer goods.
The Monks portfolio also has a concentration in North America, where more than 44 per cent of the companies are based. Some 21.2 per cent of the portfolio is classed as being in emerging markets, with 17.3 per cent in Europe, 11.2 per cent in Japan and developed Asia, and just 5.6 per cent in the UK. The trust tries to place its holdings into four categories to give it the best possible mix. There are stocks offering rapid growth, ones with cyclical growth opportunities, durable companies with strong long-term prospects and out-of-favour businesses that have a catalyst to grow.
The trust normally expects to keep each of its holdings for at least five years and Mr Plowden has often talked about how any company that is picked would need to have the potential to double the trust’s money in half a decade.
Its top ten stocks contain familiar names including the online retailers Amazon and Alibaba and Alphabet, the parent of Google. There is also Naspers, the South African media and internet conglomerate, which is the largest overall holding.
Financial services are represented through the insurers Prudential, AIA and Anthem while consumer services are covered by Royal Caribbean Cruises.
Recent additions include Banco Bradesco, a Brazilian bank, 58.com, a Chinese provider of online advertising for small businesses and individuals, and AP Moller-Maersk, the container shipping group that the managers believe will benefit from its exposure to emerging markets.
The Baillie Gifford team do not just sit in their Edinburgh offices but spend time on the ground in markets around the world. The recent investment in Banco Bradesco, for example, followed a trip to Brazil.
ADVICE Buy
WHY Performance has risen since the management shift. Further gains look possible as the trust’s five-year cycle has more than two years to run
TP ICAP
A year ago this month, TP Icap became the world’s biggest interdealer broker. The complex break-up and merger between Icap and Tullett Prebon, industry peers and fierce rivals, created two new companies. Nex took the digitally focused parts of the companies, while TP Icap merged the two interdealers’ voice broking businesses.
Such a deal had been long seen as impossible, but this overplayed some of the personal feuds that lay behind the groups’ enmity and the change has proved to be far from the disaster that had been feared. Nex stock is up by nearly a fifth since the deal, while shares in TP Icap have advanced by 13 per cent, admittedly in line with its index, but not bad, either.
In a world where everyone is looking for The Next Big Thing, Michael Spencer at Nex has had an easier job of selling a company that looks far more “unicorn-like” than the old-fashioned broking business of TP Icap. Just don’t write off the latter as some 20th century throwback. As yesterday’s latest bolt-on acquisition of a commodities broker shows, TP Icap is not sitting still while it continues a business merger that, according to its latest targets, could produce annual cost savings of about £100 million.
Even in its core voice broking division, the idea that the business is dependent on barrow boys shouting into phones is a decade out of date. Today, less than 10 per cent of revenues come from the pure voice business. Instead, the game is more about the company’s proprietary systems and how these link with other operations. The charity days with celebrities manning the phones are largely for show.
The idea is that TP Icap could become a one-stop shop for institutional money, with the broker matching trades, providing price data and giving clients a clean audit trail to show regulators that they have done everything required to achieve the best possible price for their clients.
With industry consolidation likely to continue, TP Icap’s scale makes it an obvious player in any further tie-ups. And with market volumes showing signs of rebounding, helped by interest rates continuing to rise, it looks a good bet for now.
ADVICE Buy
WHY Strong business with good growth opportunities
