Discount Delver: the 10 cheapest trusts on 26 August 2022

Scottish Mortgage, Lindsell Train, Allianz Technology and Polar Capital Technology are among the biggest discount movers 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.

As part of a new weekly series, interactive investor is highlighting the 10 biggest investment trust moves over the past week. We will publish this article every Friday, using data up to the close of trading the previous day.

• Explore our: Free regular investing | Top Investment Trusts  | Transferring an Investment Account

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, Baillie Gifford US Growth (LSE:USA) has seen its discount widen the most – from 12% to 18.9%. The trust invests in growth shares (both listed and unlisted), which have been negatively impacted by the market rotation away from such companies since the beginning of the year in response to high inflation levels and interest rate rises. At the end of July, just under 40% of assets were in unlisted companies. Over one year, the trust’s share price is down 50.2%. Since IPO in March 2018, the shares have returned 73.9%.

Other investment trusts investing in growth shares have also seen their share prices come under pressure in 2022, resulting in discounts being much bigger than usual. Over the past week, discounts widened further for Scottish Mortgage (LSE:SMT), Lindsell Train (LSE:LTI), Allianz Technology Trust (LSE:ATT) and Polar Capital Technology (LSE:PCT). Over the past year, the respective share price losses are 39%, 30.5%, 20.7% and 18.1%.

Lindsell Train, managed by Nick Train, Michael Lindsell and James Bullock, usually trades on a high premium. The school of thought among some investors is that it is worth paying a premium for Lindsell Train Limited on the assumption that the unquoted fund management business’ valuation has been undervalued by the investment trust. However, following the growth style of investing being out of favour – which has impacted the performance of funds and trusts managed by Lindsell Train – investors are currently not prepared to pay over the odds.

Elsewhere, Tritax EuroBox Euro(LSE:BOXE), Tritax Big Box (LSE:BBOX) and abrdn European Logistics Income (LSE:ASLI) are among the biggest discount movers this week. The trio, along with other trusts that specialise in logistic assets, have seen their share prices dip since late April on the back of Amazon.com Inc (NASDAQ:AMZN) saying that it was scaling back investment in its delivery network. The return to offices and the rise in the cost of living is causing companies to cut back on warehouse space, prompting investors to take a closer look at the sector.

• Is the party over for warehouse and logistics REITs? 
• Top investors name reasons for investors to be cheerful 
• How the cost-of-living crisis is changing the way pros invest

Discount Delver: the 10 biggest discount moves over the past week 

Source: Morningstar. *Data from close of trading 18 August 2022 to close of trading 25 August  2022.