Interactive Investor

Ian Cowie: three ‘clangers’ I’ve sold at a loss – and a new holding

Our columnist takes stock of three investment trusts in one sector that have gone wrong, but makes the case for a new investment to turn his fortunes around.

24th August 2023 09:18

by Ian Cowie from interactive investor

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Its important to report the rough as well as the smooth of stock market investment, the losers as well as the winners. Risk is the price we pay in pursuit of profit and, sad to say, not every shareholders saga has a happy ending.

So please dont laugh when I tell you the tale of three recent Cowies Clangers - count em - and a new investment that I hope will blow a wind of change, with more positive outcomes for my life savings. First, though, lets look at three losers which each decimated my stake in them, or destroyed more than a tenth of the money I put in.

US Solar Fund (LSE:USF) is in the news this week because a new manager, Amber Infrastructure, has been named as the preferred option by its beleaguered board of directors. They hope this might restore the fortunes of a fund that has languished under a cloud of uncertainty since they put it up for sale last year but failed to find a buyer. I am past caring because, having paid 78.6p for the sterling-denominated shares (USFP) in November, 2020, I sold the lot at 47.5p last month.

That turned a paper loss into a real one of nearly 40%. Ouch! But, believe it or not, it could have been worse. Thank heavens I adhered to my first rule of investment - diminishing risk by diversification - and never put more than 2% of my money into this dud.

USF’s eye-stretching 9.1% yield helped ease the pain but going ‘green’ still left me seeing red. The shares are trading at a bid or sell price of 47.4p as I write and, while wishing ongoing shareholders the best of luck, I am glad it is no longer my problem.

Gore Street Energy Storage Fund (LSE:GSF) seeks to use industrial batteries to profit from fluctuations in the supply and price of wind-generated electricity. This was another attempt by me to do well by doing good and play a small part in funding the transition to renewable power.

On the same day I bought USFP in November 2020, I also paid 105p per share for GSF. It would have been better to have stayed in bed.

Despite an 8.9% yield, the share price persistently underperformed its nearest rival - Gresham House Energy Storage (LSE:GRID) - and I eventually decided the capital could be better employed elsewhere; more of which later.

So, earlier this month, I sold all my GSF shares at 93.4p, to crystallise an 11% loss. This unhappy experience demonstrates why investors should never fall in love with a share and end up becoming so committed we cannot let go.

After I did so, one acquaintance gently suggested that I had sold GSF at the bottom. Not so. The shares trade at 83.9p as I write, or 10% below the price at which I bailed out. Once again, I wish the ongoing shareholders the best of luck but I am glad it cant get any worse for me.

Digital 9 Infrastructure Ord (LSE:DGI9) invests in the so-called plumbing of the internet or data centres and sub-sea cables that are needed to make the World Wide Web work. This small shareholder hoped the fund might be a way to make good income from technology but never expected to see the yield climb to 11.7%, sounding alarm bells among even the most optimistic.

The explanation is that, after the original fund managers walked out, shares in DGI9 that I bought for 86p in December last year drifted 27% lower to the 63p. At that point, I blew a fuse and pulled the plug.

You can't say I only tell you about the winners. After all the above, you may feel it is a triumph of hope over experience when I say that I have just bought shares in another green investment trust that aims to generate income and growth from renewable power.

Greencoat UK Wind (LSE:UKW) is the self-descriptive investment trust where I paid 145p earlier this month and they have already slipped 7% lower to trade at 135p. However, I remain hopeful because this £4.9 billion fund is the top performer in its sector over the last five and 10-year periods, with total returns of 38% and 116% respectively. Despite trading at a premium to net asset value (NAV) for most of its decade on the stock market, UKW is currently priced at a 19% discount to NAV.

Recent setbacks include rising bond yields and scepticism about renewables’ profitability. Mechanical problems with some wind generators, albeit not those owned by UKW, have added to clouds of uncertainty in this sector.

As if to demonstrate that there is no situation so bad that political intervention cannot make it worse, an idiotic windfall tax on wind farms means they face bigger bills than oil rigs, despite Britain’s legal commitments to cut carbon emissions. You really could not make it up.

However, I suspect all these headwinds will prove temporary. UKW’s dividend yield of 6.6%, growing by 3.5% a year, looks sustainable over the medium to long term, and I note substantial buying of these shares by several directors, the fund managers and their wives. It might not be very scientific but that’s enough for me to renew my hopes of doing well by doing good.

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

Ian Cowie is a shareholder in Greencoat UK Wind (UKW) as part of a globally diversified portfolio of investment trusts and other shares.

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.

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