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Bargain Hunter: cheapest equity investment trusts revealed

Bargain Hunter: cheapest equity investment trusts revealed
by Kyle Caldwell from interactive investor | 4th August 2020 12:53

Research in the equity investment trust universe highlights the biggest potential bargains…

Research for interactive investor by QuotedData screened the equity investment trusts with assets of at least £10 million for potential bargains. The data (as at 3 August) shows some trusts trading close to their lowest rating over the past year, including two UK smaller company focused trusts: Invesco Perpetual UK Smaller Companies (LSE:IPU) on a discount of -14.6%, and Acorn Income Fund (LSE:AIF) on a discount of -21.9%.

James Carthew, head of investment company research at QuotedData, explains: “I think there is a perception that smaller companies are less well placed to cope with the pressures of Covid-related lockdowns. Couple this with the additional uncertainty of a no-deal Brexit and investors are running scared of this part of the market.”

Two other UK trusts trading on wider than normal discounts versus their 12-month averages are: Fidelity Special Values (LSE:FSV) (current discount of -9.5% versus a 12-month average discount of -1.4%) and Strategic Equity Capital (LSE:SEC) (-23.3% versus a 12-month average discount of -17.3%).

The former is managed by contrarian fund manager Alex Wright and, in line with other UK-focused portfolios, performance has been lacklustre of late. On a one-year view, the trust’s share price has slumped just over 30%.

Strategic Equity Capital, meanwhile, adopts a highly concentrated approach of just 20 holdings, with no exposure to FTSE 100 businesses. Its managers Jeff Harris and Adam Khanbhai use private equity valuation techniques to find economically resilient businesses. Over the past year, its share price has fallen 20%…

Carthew says: “Henderson International Income has a broad geographic remit, which makes it easier for the manager to go looking for attractive income-generating stocks. Polar Capital Global Financials has committed to maintain its dividend even though regulators stopped many of the banks it holds from paying a dividend.”

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