logo-loader
viewThe Brunner Investment Trust

Brunner Investment Trust says look long-term to get through coronavirus crisis

Pharmaceutical giant Roche is one of the trust’s largest holdings

The Brunner Investment Trust -
Roche is currently producing a COVID 19 test 10 times faster than current standard

Brunner Investment Trust PLC (LON:BUT) has advised investors to stay focused on the long-term to get through the current coronavirus-inspired market volatility.

Formed in 1929, Brunner has seen its share of global crises and the advice remains to be wary of too close a focus on short-term performance

Lucy Macdonald from Allianz Global Investors is the trust’s manager and in an update said people should take a long-term view when navigating the current volatility.

“Periods like the present can be disconcerting. Keeping a more meaningful time horizon in mind can help distinguish between facts and noise.

“Experience tells us that even the most dramatic declines in global equity markets have been outweighed in the long-run. 

“What’s more, long-term investment in a focused portfolio of excellent companies can deliver meaningful capital growth above those markets.”

Go for companies with lower levels of borrowings, stronger balance sheets and more resilient cash-flows than their peers as these are best placed to weather an extended period of suppressed economic activity.

Longer-term structural trends are also likely to speed up due to the virus crisis, believes Macdonald.

Enforced working from home is already boosting companies delivering on digitalisation while a need for economic self-sufficiency and reduced global travel can accelerate the move towards a high-tech, low carbon economy. 

“Promises of both central bank and fiscal support around the world are now starting to remove questions about the survival of large, listed companies.

“As a result, valuations in some well-managed, consistently high-returning businesses with solid balance sheets are becoming more attractive.

“Yet until corporate earnings expectations – and therefore valuations – can appropriately reflect the disruption, some caution is warranted. “

The trust’s performance has been helped by its stakes in Microsoft, Iberdrola and the Cooper Companies and especially pharmaceutical giant Roche, one of the trust’s largest holdings.

The pharmaceutical giant is a quality long-term holding, says Macdonald, with a safe dividend.

Roche is also currently producing a COVID 19 test 10 times faster than current standard and recently has accelerated trials of its ACTEMRA drug for use in COVID 19 patients with severe pneumonia.

Macdonald adds the trust has used the volatility to top up its positions in ITV, National Grid and Redrow as all three are on low multiples that materially underestimate the long-term ability to generate sustainable cash-flows.

Kitchen specialist Howden Joinery, life assurer Prudential and property group Sirius have been sold.

Macdonald added that over the past year, Brunner had taken steps to increase the portfolio’s underlying income generation, which has included analysing the potential for each stock in the portfolio to cut or cancel its dividend.

“Under our current predictions, any income deficit should easily be coverable with the Trust’s long-accumulated revenue reserves,” she said.

Brunner is valued at £328mln at 674p, a 6.3% discount to NAV of 719p.

Quick facts: The Brunner Investment Trust

Price: 792 GBX

LSE:BUT
Market: LSE
Market Cap: £338.13 m
Follow

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events

NO INVESTMENT ADVICE

The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...

In exchange for publishing services rendered by the Company on behalf of The Brunner Investment Trust named herein, including the promotion by the Company of The Brunner Investment Trust in any Content on the Site,...

FOR OUR FULL DISCLAIMER CLICK HERE

Watch

Brunner Investment Trust watching to see how market fundamentals recover...

Brunner Investment Trust PLC's (LON:BUT) Lucy Macdonald tells Proactive London that given the market has largely recovered following the crisis they're now watching to see how the fundamentals play out. ''As far as the market's concerned we're not expecting it to do much more in the short...

2 weeks, 2 days ago

3 min read