Managed by James Anderson and Tom Slater, the duo is on the lookout for companies that have the potential to disrupt industries. This objective has led it to invest in tech giants such as Tesla and Amazon before many other managers here in the UK cottoned on to the potential of these businesses. 

These astute investments have helped the trust produce a return of 164% for investors over the past five years compared to the Investment Trust Global benchmark return of 74%.

On a discount 

Until recently, investors had been clamouring to buy into Scottish Mortgage, paying a premium to do so. Over the past five years, the trust has traded at an average premium to the underlying net asset value of around 5%. 

However, over the past few weeks this discount has narrowed, and today, the shares in the trust are trading at around net asset value.

There have only been a few occasions in the past five years when investors have been able to buy the shares without having to pay a premium. With this being the case, I think it could be worth snapping up a few shares in this winning, globally diversified investment trust for 2019. 

Small-cap exposure 

Another investment trust that’s recently caught my eye is the Mercantile Investment Trust (LSE: MRC). 

While Scottish Mortage has a global focus, Mercantile aims to “achieve capital growth through investing in a diversified portfolio of UK medium and smaller companies.” Recently, Brexit concerns have weighed on the shares wiping out almost 12 months of gains at the trust. Nevertheless, I’m confident that over the long term, Mercantile can recover. 

The trust has been managed by Martin Hudson since 1994 and does have an impressive track record. Over the past five years, it has beaten its benchmark by 13.2%. On top of this remarkable performance, it also offers a dividend yield of 3.3%, and the shareholder-focused management has pushed down the average annual management fee to a modest 0.45%. 

Right now, shares in Mercantile are on special offer. They are trading at a discount to net asset value of 11.9%, a considerable gap and one that management is trying to moderate with share buybacks. Over the past five years, the discount to net asset value has averaged 10.4%.

If you’re looking for a way to invest in beaten-down UK small-caps, I think this could be the best investment to do so. You’re getting a diversified portfolio of companies, managed by a seasoned investment manager who is committed to producing the best returns for investors. 

So overall, I reckon these two investment trusts are a sensible buy for 2019 considering their current valuations and record of creating value for shareholders.

The post 2 deeply discounted investment trusts I’m buying for 2019 appeared first on The Twelfth Magpie.

More reading

• As SpaceX stock plunges below its opening price, is it time to dump Scottish Mortgage shares?
• An AI beast just racked up 80-fold growth and is now a top holding in this FTSE 100 trust
• SpaceX doesn’t pay a dividend. So how come it may help these investors earn passive income?
• Scottish Mortgage shares are now even cheaper after SpaceX’s amazing stock market debut!
• Most Britons miss out on the first 20 years of investment compounding. Here’s how a Junior ISA or SIPP can change that

Rupert Hargreaves owns shares in the Mercantile Investment Trust. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. 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.

Mercantile has a solid record of achieving this goal. Over the past decade, the trust’s net asset value has grown by 205%, outperforming its benchmark by 15% over the same period. This return shows portfolio manager Martin Hudson, who’s been at the helm since 1994, knows a thing or two about picking stocks. 

And one of the primary reasons why this trust, rather than any of its peers, occupies a significant percentage of my portfolio is the fact that it only charges 0.45% per annum to manage investors’ money — that’s less than half of the UK average fund fee of 1.13%.

What’s not to like? 

Unfortunately, the one downside about the Mercantile trust is its current lack of yield. The stock supports a dividend yield of 2.3%, paid quarterly. Still, a low yield is more reflective of the company’s high allocation to small-caps, which tend to reinvest cash back into the business rather than paying it out to investors. What’s more, with capital growth averaging 17% per annum since 2009, I’m not overly concerned about the lack of yield. 

At the time of writing, shares in the Mercantile trust are trading at a 9.5% discount to net asset value. 

If it’s dividends you’re after, Merchants Trust (LSE: MRCH) could be the perfect investment for you. Merchants is focused on providing the best dividend possible for investors. Today, the trust supports a dividend yield of 5.3%, and some of its most substantial holdings include FTSE 100 income champions such as HSBC and BP. 

Dividend Hero 

Merchants has a long history of dividend investing. The company has increased its dividend yield to investors for 36 consecutive years, a record that has earned the firm ‘Dividend Hero’ status from the Association of Investment Companies. To be awarded this status, investment trusts must have a record of dividend increases for at least two decades. 

Just like Mercantile, Merchants is also low-cost compared to its sector peers. Specifically, the trust currently charges only 0.6% per annum, around the same level as other passive income-focused funds. The company trades at a 4.5% discount to net asset value. 

If you’re looking for a dividend champion to add to your ISA, Merchants certainly deserves your attention. Today the company reported, alongside its full-year results, that net asset value increased 14.5% for 2017, outperforming the FTSE 100’s return of 11.3%. Over the longer term, the trust has outperformed as well, producing a NAV return of 49.1% over five years, compared to the FTSE 100’s performance of 45.9% over the same period. The income distribution has exceeded the wider index’s by more than 1.2% over this period. 

The post 2 millionaire-making investment trusts I’d buy and hold for the next decade appeared first on The Twelfth Magpie.

More reading

• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

Rupert Hargreaves owns shares in the Mercantile Inv Trust. The Motley Fool UK has recommended BP and HSBC Holdings. 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.