Investment trusts are just at the beginning of what could be a 25-month recovery cycle, according to a research piece from Peel Hunt, which has sifted its selections into good, bad and ugly.
“These are still some of the wildest discounts that we have seen in a long time” it says, but with an average recovery period is 25 months there is a long way to go and investors have plenty of opportunity to participate.
Interest rates will be the catalyst, the broker adds, especially among the alternatives sector and particularly the yielding strategies in renewables and infrastructure.
In Peel Hunt’s cheap list is RIT Capital Partners (LSE:RCP) with a current portfolio relatively defensively positioned with 41% quoted equities, 36% private investments and 25% uncorrelated strategies.
Chrysalis Investments, meanwhile, is notable for its stake in buy now pay later giant Klarna and having just passed its continuation vote a discount of 41% offers value, suggests the broker.
Schiehallion (MNTN) stands on a 35% discount to end-February 2024 NAV.
If the view held by outside parties is that the private company holdings are undervalued, then MNTN is the purest version of Baillie Gifford’s private equity holdings.
Around 42% exposure is in the top-10 holdings, which include SpaceX, Wise, ByteDance, Bending Spoons and Affirm.
Tufton Oceanic Assets (SHIP) published interim results last month and posted a robust plus 10% NAV TR for the six-month period.
SHIP’s annual dividend target also saw a 17.6% increase to US$0.10 and currently trades on a 23% discount to end December 2023 NAV with a prospective yield of 9%.
Cordiant Digital Infrastructure (CORD) on a 42% discount is another potentially interesting opportunity, according to Peel Hunt.
“CORD has made steady progress towards increased portfolio diversification.
“However, the portfolio remains centred around two central Europe broadcast businesses. Portfolio performance since launch in early 2021 has demonstrated the strategy’s ability to deliver both organic and inorganic value opportunities.”
Pershing Square Holdings (LSE:PSH) (PSH) also continues to look interesting to Peel Hunt on a 27% discount. This concentrated, long-only portfolio of 10 holdings is known for its high-conviction style under the leadership of Bill Ackman.
Among the expensive screen are heavyweights 3i Group (III) and HgCapital Trust (LSE:HGT) (HGT), which has moved in from a 12-month average discount of 18% to 4%.