Ian Cowie: find your true north in this trust sector

Never mind all the Davos drama swirling around Donald Trump and NATO.

Can you name the top-performing investment trust in the Association of Investment Companies (AIC)’s all-important North America sector, in a world where the US represents around two-thirds of global equities by value, whether we like it or not?

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Let me give you some clues. This fund has assets of more than £1 billion and delivered share price total returns of 28% over the last year. Bigly!

That included nearly 2.2% dividend income, but the shares are still priced an eye-stretching 42% below their net asset value (NAV).

Better still, bargain-hunting buyers today don’t need to worry about their money going to support - in however small a way - the acquisitive president of the US, Donald Trump.

This fund owes more to former Bank of England governor and current Canadian prime minister Mark Carney, and is based in the Americans’ larger neighbour to the north.

So, no, it’s not JPMorgan American Ord (LSE:JAM), which is the sector leader over the last decade and five-year periods, with total returns of 396.5% over 10 years and 101.2% over five.

Those impressive gains were followed with a disappointing loss of 2.4% over a year after JAM’s exposure to the artificial intelligence (AI) boom made investors worry that its top holdings in the chipmaker NVIDIA Corp (NASDAQ:NVDA), and software giant Microsoft Corp (NASDAQ:MSFT) might leave them looking stupid.

Even JAM’s other top 10 holdings in relatively “steady Eddie” stocks including the iPhone-maker Apple Inc (NASDAQ:AAPL) and Berkshire Hathaway Inc Class B (NYSE:BRK.B) were unable to prevent this investment trust suffering an atypical down year.

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But its shares are scarcely in the bargain basement, trading at a modest discount of 1.6% below NAV with a meagre yield of just 0.7%.

Nor is it North American Income Trust Ord (LSE:NAIT), which stands second in its sector over five years and has a dividend yield of just over 3%. Neither is NAIT much of a bargain, trading at a discount of 5.8% below its NAV.

Even so, contrarians might fancy this trust for diversification away from the AI theme with NAIT’s biggest asset being energy company Chevron Corp (NYSE:CVX), followed by CVS Health Corp (NYSE:CVS). The maker of the first pacemaker, Medtronic (NYSE:MDT), is also among the top holdings.

Sad to say, seekers after healthy returns from doing good may feel such hopes are stubbed out by another top 10 holding in the tobacco giant Philip Morris International Inc (NYSE:PM).

So, which trust is it?

That’s enough teasing about the American top performer over the last year. Step forward Canadian General Investments Ord GBP (LSE:CGI), whose total returns amount to 27.8% over a year, 60.5% over five and 299.1% over a decade.

Unusual - if not unique - underlying holdings are led by a relatively low-profile electronics manufacturer, Celestica Inc Ordinary Shares (Subordinate Voting) (TSE:CLS), which is benefiting from selling digital kit to higher-profile AI businesses, in much the same way that suppliers of picks and shovels gained from the gold rush.

While the ubiquitous Nvidia stood second in CGI’s line-up at the end of September (its last point of portfolio disclosure), the gold royalties group Franco-Nevada Corp (TSE:FNV) was also in the top 10, benefiting from the “flight to safety” in bullion.

Then there’s the online retailer, Shopify Inc Registered Shs -A- Subord Vtg (TSE:SHOP), that is sometimes called “the Canadian Amazon” and the copper miner First Quantum Minerals Ltd (TSE:FM), which is gaining from soaring demand for this conductive metal, prompted by electrification.

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Other interesting holdings include Canadian Pacific Kansas City Ltd (TSE:CP), the freight railway operator and Cameco Corp (TSE:CCO), the uranium company whose fuel powers nuclear reactors.

Both businesses can be regarded as contributing to lower carbon emissions because trains create much less pollution than lorries, per ton transported, and nuclear power is the only form of renewable energy that will keep the lights on when the sun don’t shine and the wind won’t blow.

Against all that, Canada lacks any equivalent to the W-8BEN form that enables British investors in American shares to reduce the impact of withholding taxes.

So, this CGI shareholder reckons its advertised yield of 2.2% turns out to be worth nearer 1.75% by the time it hits my self-invested personal pension (SIPP), albeit rising by an annual average of 5.2% over the last five years.

Income-seekers might prefer BlackRock American Income Trust Ord (LSE:BRAI), which yields 5%, rising by 7.9%; or NAIT, yielding 3.1%, rising by 5.1%. However, the most rapidly rising payouts were delivered by JAM, where its admittedly low yield of 0.7% follows average annual increases of 11.1% over a five-year stretch.

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Either way, these funds demonstrate that there is much more to the North America sector than the Magnificent Seven technology shares - including its current top performer, that is based over the border.

CGI offers British investors access to a variety of businesses that few of us could access directly and has done so since its launch in 1930, during the Great Depression. At its current discount to NAV, it might prove to be overlooked and undervalued.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in Apple (AAPL), Canadian General Investments (CGI) and Microsoft (MSFT) as part of a diversified portfolio of investment trusts and other shares.