Henderson Opportunities Trust (LON:HOT) shares are trading at an 18% discount to NAV. This is remarkable given the portfolio consists mainly of liquid UK companies with excellent growth potential.
Henderson Opportunities Trust’s top ten holdings include FTSE 100 companies Barclays, NatWest and Rio Tinto. The trust also holds Tesco, Prudential, Standard Chartered and HSBC.
In addition to FTSE 100 stalwarts, HOT provides access to a range of UK growth shares, including Vertu Motors, Next 15, Jersey Oil & Gas, and Serica Energy.
Not only is the trust comprised of UK-listed stocks, but they are also companies which largely operate in the UK. There are of course exceptions.
The trust has six criteria for stock selection which are employed to achieve diversification across the portfolio:
- Early stage companies
- Small and medium-sized ‘compounders’
- Fast-growing smaller companies
- Large companies
- Natural resources
- Companies that are in recovery
Portfolio Manager James Henderson has previously alluded to a contrarian approach to selecting UK stocks which can lead to periods of disappointing performance.
By selecting stocks which are out of favourable, you naturally expect them to be unloved by the market and underperform for periods. However, this is where the opportunity lies as unwanted shares bounce back and provide significant returns.
James Henderson has recently highlighted Serica Energy as an example. Labour’s decision to halt all new licenses for North Sea oil and gas licenses if they came to power hit Serica shares hard.
Henderson chooses to look past this and focus on the need for gas and the North Sea’s close proximity and world-class infrastructure. This underpins Serica’s business model.
Indeed, the entire UK equity market could be viewed as a contrarian play. Politics have cast a shadow over the UK, and we trade at a discount to other global markets.
Henderson looks for shares with a discounted valuation. These discounted shares are included in the Henderson Opportunities Trust, which trades an eye-catching 18% discount to NAV.
It’s hard to think of a better trust for a rebound in UK equities.