Top performer

The Finsbury Growth & Income Trust (LSE: FGT) is one of the best performing funds in the UK equity space, having delivered total net asset value (NAV) returns of 81% over the past five years. This compares favourably to the FTSE 100’s total return of just 36% in the same period.

Nick Train, who has been managing the fund since 2000, has achieved this success by investing in a concentrated portfolio of durable, cash generative businesses that are under-priced on its valuation analysis. With just 26 holdings altogether, he is able to keep portfolio turnover as low as possible, while keeping most of his exposure to his highest-conviction picks.

The fund’s five biggest positions are Diageo (9.5%), Unilever (8.9%), RELX (8.7%), London Stock Exchange (8.6%) and Hargreaves Lansdown (8%).

Concentration risk

A concentrated portfolio can be a double-edged sword though, as it can increase your exposure to a small number of winners but does this by reducing diversification, which can increase the overall risk level of the portfolio. It’s all fine when your best investments are doing well, but when things turn sour, you could suffer major losses even if just a few of your top positions implode.

There are countless examples of companies that have ended up in serious trouble, and even the best stocks can suffer huge losses, sometimes abruptly, taking overly concentrated investors down with them.

Contrarian investing

Fidelity Special Values (LSE: FSV) is another fund that has massively outperformed the FTSE 100. It’s an actively managed investment trust that aims to deliver attractive long term capital growth for investors by investing in unloved companies in sectors that are out of favour.

Over the past five years, the trust has beaten the FTSE 100 by a whopping 68 percentage points, after having achieved a cumulative performance of 104% — almost three times the Footsie’s return over the same period.

Long-term view

Alex Wright, who has been managing the fund’s portfolio since 2012, has demonstrated considerable skill in picking under-valued stocks. He’s a value contrarian investor who looks for companies which have potential for share price growth that has been overlooked by the market. Alex has a long-term investment view and only seeks to invest in companies where he understands the potential downside risk to limit the possibility of losses.

Alex’s portfolio typically has a heavy bias towards medium-sized and smaller companies, which is a major factor in the fund’s outperformance against the Footsie. In contrast, however, it is more diversified, with typically between 80-120 stocks held in the portfolio. It also has greater geographical diversification, with up to 20% invested in overseas stock markets.

The post These investment trusts have been crushing the FTSE 100 appeared first on The Twelfth Magpie.

More reading

• This FTSE 250 fund’s manager has significant skin in the game
• 2 FTSE investment trusts to consider for passive income in 2026

Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, and RELX. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Finsbury Growth & Income Trust

Finsbury Growth & Income Trust (LSE: FGT) invests in the shares of predominantly UK-listed companies, with the objective of achieving capital and income growth. It aims to generate absolute returns in excess of that of its benchmark, the FTSE All-Share Index. Shares in the trust yield 1.9% and benefit from relatively low costs, with an AIC annual ongoing charges ratio of just 0.74%.

The trust is one of the top-performing UK equity funds, having outperformed its benchmark over the past three years, with an NAV total return of 54.8%, against the benchmark performance of 25.4%.

Portfolio manager Nick Train uses a bottom-up stock-picking approach and looks to invest in a quality companies that appear to be undervalued. Unusually for a fund of its size, its portfolio is relatively concentrated, with a total of just 26 stocks as of 31 July. And this is because the fund aims to keep portfolio turnover as low as possible and focus on long-term holdings, which helps to reduce stamp duty and commissions expenses for investors.

However, its important to be wary of the downside of concentration risk. The Finsbury Growth & Income Trust has a great deal of exposure to the consumer goods sector, with big positions in Unilever (10.3%), Diageo (10.1%) and Burberry Group (6.7%). Along with holdings in foreign-listed groups, such as Dutch brewer Heineken and US snacks giant Mondelez, its total exposure to the sector added up to 48.1% as of 31 July.

Edinburgh Investment Trust

The £1.4bn Edinburgh Investment Trust (LSE: EDIN), formerly run by Neil Woodford until 2014, might be a better pick for income-minded investors. In addition to its aim to produce index-beating absolute returns, the trust seeks to deliver dividend growth that exceeds the UK inflation rate.

The fund is now co-managed by Mark Barnett, who has 24 years of experience in the industry, and James Goldstone, who joined the company in 2016. And although the new team has not run the fund for very long, they have demonstrated considerable skill in picking large-cap dividend-paying stocks.

Over the past three years, the trust has beaten the average UK equity income investment trust by nearly five percentage points, with a cumulative performance of 29.3%. Encouragingly, the investment trust also managed to beat Neil Woodford’s CF Woodford Equity Income fund, which gained 24.7% in the period.

Like the Finsbury Growth & Income Trust, the Edinburgh fund invests primarily in UK-listed companies. Large-cap stocks dominate the Edinburgh Investment Trust, with 55.6% of portfolio value represented by FTSE 100 companies as of 31 July. Top holdings include British American Tobacco (7.9%), BP (4.6%), Legal & General (3.6%), BAE Systems (3.5%) and Imperial Brands (3.5%).

FTSE 250 companies represent another 25.6%, while international equities and small-caps account for a further 8.3% and 6.8%, respectively.

With shares in the investment trust currently trading at a yield of 4%, the Edinburgh Investment Trust seems a great pick for investors looking for income through equities. What’s more, with shares in the trust trading at a modest discount to its net asset value of 8%, investors can effectively purchase its assets for less than the sum of its parts at today’s price.

The post 2 top investment trusts for long-term investors appeared first on The Twelfth Magpie.

More reading

• This FTSE 250 fund’s manager has significant skin in the game
• 2 FTSE investment trusts to consider for passive income in 2026

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The following three big names have been around for decades with a proven track record of success. All three are now numbered among the top five most traded investment trusts, according to Interactive Investor, and once you see how they’ve performed, you’ll understand why.

Scottish Mortgage Trust

And the winner is… Scottish Mortgage Trust (LSE: SMT). This £4.5bn mega trust, launched more than a century ago in 1909 when Edward VII was on the throne, has delivered stunning growth of 176% over the past five years, according to Trustnet.com. That’s three times the return on the iShares FTSE 100 exchange traded fund (ETF), which delivered 49% over the same timescale. Sometimes active management is worth paying for.

Not that Scottish Mortgage Trust is particularly expensive, with no initial fee and an ongoing charges figure (OCF) totalling just 0.51% a year (iShares FTSE 100 charges 0.07%). The trust invests in a global spread of equities, with 46% exposure to the booming US market. Top US holdings include Amazon, Tesla Motors and Facebook. It’s roughly 25% invested in Europe, including a stake in Ferrari, and 18% in China, where it holds Baidu and Alibaba. This top quartile fund trades at a premium of 2.3% to net asset value, but that’s the price you pay for success.

Witan Investment Trust

Scottish Mortgage Trust isn’t the only big beast out there. Witan Investment Trust (LSE: WTAN) was also launched in 1909 and now manages assets totalling nearly £1.6bn. Manager Andrew Bell has forced through a successful turnaround plan, adopting a multi-manager approach with 12 investment managers following six different mandates. The result: a whopping 120% return over five years.

Witan is 41% invested in the UK, with holdings such as the London Stock Exchange, spirits giant Diageo and, ahem, BT Group. It’s 25% invested in the US, 16% in Europe and the rest in international stocks. It’s slightly more expensive than Scottish Mortgage Trust, with a total expense ratio of 0.87% a year, but few will be complaining given recent performance, and it trades at a 4.63% discount. However, its UK focus could make it vulnerable to any Brexit slowdown.

Finsbury Growth & Income Trust

Finsbury Growth & Income Trust (LSE: FGT) is a relative minnow with £968m under management, and a parvenu upstart to boot, launched in 1926. While the first two trusts have a roaming international remit, Finsbury is 100% invested in UK stocks, and that has done it no harm at all, with a total blockbusting return of 116% over the past five years.

The fund is run by alpha manager Nick Train, the man behind the hugely popular CF Lindsell Train UK Equity fund (which is up 113% over five years). He has a proven track record in rising and falling markets. Top holdings include RELX, Diageo, Unilever, London Stock Exchange, Burberry and Schroders. Its OCF is 0.8% a year, the premium is 0.36%, yield is 2.02%. Again, it will take a hit if the UK market dips, but right now Train is on a roll.

The post 3 investment trusts thrashing the market appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon.com, Facebook, Tesla Inc, and Unilever. The Motley Fool UK has recommended Burberry and Diageo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

GlaxoSmithKline

I believe pharmaceutical giant GlaxoSmithKline (LSE: GSK) should deliver resplendent returns thanks to surging healthcare demand in emerging and developed markets alike.

The company was famously dragged over the coals in China for bribing doctors and hospitals to promote its products, and was eventually fined £297m for the scandal late in 2014. And the fallout of the crisis continues to smack product sales. But there is no doubt the Brentford company, like industry peers AstraZeneca and Hutchison MediTech, will reap the rewards from new markets like China thanks to surging wealth levels and rising populations.

The City expects the enduring problem of patent losses to push earnings 20% lower in 2015, although an 11% rebound is anticipated for next year. A subsequent P/E rating of 17.7 times for the current period may represent a slight premium to the benchmark of 15 times that indicates reasonable value, but I believe GlaxoSmithKline’s growing position in emerging regions, combined with a hot product pipeline, fully merits this marginally-heady reading.

easyJet

As economic conditions across the continent continue to recover, I believe that budget flyer easyJet (LSE: EZJ) should also enjoy solid earnings growth as traveller numbers head to the skies.

As well as benefitting from rising holidaymaker numbers, the Luton-based business is also seeing increasing demand from business commuters. And easyJet is expanding aggressively to latch onto these encouraging trends — last week announced plans to take on a further 1,140 cabin crew and pilots during the next year as it boosts the number of flights it operates and expands its routes.

With the airline also benefitting from low fuel costs, easyJet is expected to have clocked up yet another earnings increase in the 12 months to September 2015, this time by a chunky 19%. And a further 9% advance is chalked in by the number crunchers for fiscal 2016, resulting in a very attractive P/E ratio of 11.6 times. I reckon the flyer is a great bet for those seeking dependable bottom-line growth at low prices.

Britvic

Like GlaxoSmithKline, I believe that drinks darling Britvic (LSE: BVIC) should reap the rewards of rising product demand across the globe.

The Hertfordshire firm pulled off a coup earlier this month after securing the purchase of Brazilian drinks manufacturer ebba, giving it a chance to build its presence in one of the world’s largest soft drinks markets. Britvic is looking increasingly towards international markets to drive beverage volumes, a strategy the firm is hoping to exploit through further acquisitions and the roll-out of top-brand drinks like Robinsons and J2O in new geographies.

Britvic is anticipated to have enjoyed an 8% earnings advance in the year to September 2015, and an extra 9% rise is forecast for the current year. As a result the business sports a P/E ratio of just 13.9 times, a figure I consider very attractive given the firm’s ambitious growth strategy.

The post Why You Should Invest In Growth Greats GlaxoSmithKline plc, easyJet plc And Britvic Plc appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Britvic and GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

I always try to learn from investors who have performed consistently over the years: Mr Train has an impressive track record, so he certainly fits the bill.

The burning question is: how does he do it?  In short, he holds a concentrated portfolio of excellent companies, trades rarely and aims to receive an above-average dividend yield from the companies in which he invests.  Sounds simple, doesn’t it?  Well, let’s see what we can learn from his top three holdings.

Unilever

At 8.9% of the trust, Unilever is the top holding.  It is a global fast-moving consumer goods company.  Indeed, it would be difficult not to find one of its products around your house — think Cif, PG Tips and Persil.  It operates under four segments: Personal Care, Foods, Refreshment and Home Care. In short, this company sells its goods in 180 countries.  Whilst it is easy to become fixated on the lofty forward P/E of nearly 22 times earnings, I would suggest that you look at the quality measures:

• Return on capital: 28.1% (Best in sector);
• Return on equity: 36.9% (Best in sector);
• Operating margin: 16.5% (3rd in sector).

I believe that these are the metrics focused on by Mr Train, together with the growing dividend yield, currently over 3%.

Diageo

Currently the second largest constituent of the trust at 7.9%, Diageo is engaged in drinks business, with brands in spirits, beer, wine and ready-to-drink products. It owns manufacturing production facilities across the globe, including maltings, distilleries, breweries, packaging plants, maturation warehouses, cooperages, vineyards, wineries and distribution warehouses. The company’s brands are also produced at plants owned and operated by third parties and joint ventures at a number of locations internationally: think Johnnie Walker, Smirnoff, Guinness and Bushmills.

Again, don’t be put off by the forward P/E of nearly 20 times earnings: it’s quality that we’re using to assess the company.  The metrics stack up well with return on capital of 11.1%, return on equity of 27.3% and an operating margin of 22.8%.  The interim dividend was also hiked by 9%

These are qualities that fit the bill perfectly for the manager of the trust.  He believes that, amongst other drivers of growth, the fall in the price of oil will see billions of consumers across the world with a few extra pounds, euros, dollars or yuan in their pockets.  He believes that this will bode well for these quality acts.

Reed Elsevier

Reed Elsevier is a Netherlands-based company holding shares in RELX Group. RELX Group is a global provider of information solutions for professional customers across industries. The company operates in four market segments: Scientific, Technical & Medical, providing information and tools to help customers improve scientific and healthcare outcomes; Risk and Business Information, providing data services and tools that combine proprietary, public and third-party information with technology and analytics to business and government customers; Legal, providing legal, regulatory, and news & business information to law firms and to corporate, government and academic customers; and Exhibitions, organising exhibitions and conferences.  At 7.3% of the trust’s portfolio, it is the third largest position.  Here, we have a global company with sector-leading quality metrics that show that it boasts a strong moat.  Combine that with a modest forward P/E of 13 times earnings, supported by a 3.5% yield and a £500 million share buyback planned for 2015 and it is easy to see the attractions here.

Is There Still An Investment Case?

Personally, I tend to agree with Mr Train that there are several factors that mean that equities in general could rise further from here:

• Inflation remains low, meaning that interest rates could stay lower for longer that people believe;
• The full impact of the oil price fall is yet to fully impact company results, meaning improved sales and operating profits;
• Quality companies will continue to profit whatever the weather and raise their dividends above the rate of inflation, and this will make them attractive to investors seeking an income in a low-interest rate environment.

The post 3 Stocks Comprising A Quarter Of Nick Train’s Top Investment Trust: Unilever Plc, Diageo Plc & Reed Elsevier plc appeared first on The Twelfth Magpie.

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Dave Sullivan has no position in any shares mentioned. The Motley Fool UK owns shares of Unilever. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.