Discount Delver: the 10 cheapest trusts on 11 November 2022
11th November 2022 12:12
by Kyle Caldwell from interactive investor
We reveal the biggest investment trust discount changes over the past week.
Investment trusts, due to their closed-ended structure, offer investors the chance of picking up a potential bargain. Such an opportunity arises when a trust’s share price is lower than the underlying investments held by the trust (the net asset value, or NAV).
However, a trust trading on a discount to NAV is not necessarily a buying opportunity. There’s likely a good reason why the trust is cheap, such as subdued short- or long-term performance, or poor investor sentiment towards how it invests.
In our weekly series interactive investor highlights the 10 biggest investment trust discount moves over the past week. We publish this article every Friday, using data up to the close of trading the previous day.
In total, nearly 400 investment trusts have been screened, with the data sourced from Morningstar. Venture Capital Trusts (VCTs) have been excluded. We also strip out trusts with less than £20 million in assets.
This week six UK equity trusts have seen their discounts widen sufficiently to enter our table. The biggest mover is Aurora (LSE:ARR), which describes its investment approach as “using a value-based philosophy inspired by the teachings of Warren Buffett, Charlie Munger, Benjamin Graham and Phillip Fisher”. Over the past year it has limited losses more than rivals, down 8.9% versus a 19% decline for the typical UK All Companies trust. However, over one, three and six months it has lagged its average peer, according to FE Fundinfo.
Three other trusts in the UK All Companies sector have seen their discounts widen notably over the past week: Schroder UK Mid Cap (LSE:SCP), Baillie Gifford UK Growth Trust (LSE:BGUK), and Artemis Alpha Trust (LSE:ATS). The trio all have exposure to mid and small-cap companies, which typically generate more of their revenues domestically rather than overseas.
In 2022, mid and small-cap stocks have sold off notably. The FTSE 250 and FTSE Small Cap indices are both down around 17% year-to-date.
This has proved to be a headwind to performance for investment trusts fishing in this part of the market, including BlackRock Throgmorton Trust (LSE:THRG) and Montanaro UK Smaller Companies (LSE:MTU), which are both housed in the UK Smaller Companies sector. The duo have seen their discounts widen to 7.1% and 9.5%.
Discount Delver: the 10 biggest discount moves over the past week
| Investment trust | Sector | Discount/premium change over past week* (%) | Current discount (%) |
|---|---|---|---|
| Aurora (LSE:ARR) | UK All Companies | -6.18 | -7.73 |
| Martin Currie Global Portfolio (LSE:MNP) | Global | -5.92 | -6.76 |
| Baillie Gifford European Growth (LSE:BGEU) | Europe | -5.86 | -18.66 |
| BlackRock Throgmorton Trust (LSE:THRG) | UK Smaller Companies | -5.85 | -7.12 |
| Smithson Investment Trust (LSE:SSON) | Global Smaller Companies | -5.83 | -10.96 |
| Montanaro UK Smaller Companies (LSE:MTU) | UK Smaller Companies | -5.79 | -9.52 |
| Atrato Onsite Energy (LSE:ROOF) | Renewable Energy Infrastructure | -5.73 | -8.28 |
| Schroder UK Mid Cap (LSE:SCP) | UK All Companies | -4.80 | -16.34 |
| Baillie Gifford UK Growth Trust (LSE:BGUK) | UK All Companies | -4.72 | -18.12 |
| Artemis Alpha Trust (LSE:ATS) | UK All Companies | -4.66 | -12.79 |
Source: Morningstar. *Data from close of trading 3 November 2022 to close of trading 10 November 2022.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.