With the UK suffering more than most at the hand of the COVID pandemic – and watching its GDP shed 19.8% during the second quarter – it appears only natural that investors are chomping at the bit, and trying to climb aboard the British economic recovery train. Having displayed some optimism following Pfizer and Moderna vaccine news, global equities ended last week in something of a consolidation phase. With that in mind, here are three fund picks to help you capitalise on any prolonged UK recovery – if and when vaccines are successfully rolled out.
BlackRock’s UK Trust remains hungry for growth
Our first offering is the BlackRock Throgmorton Investment Trust (LON:THRG), which offers less on the value-for-money and income side but offers plenty in the way of growth potential.
Delivering less on the cost-effectiveness side, BlackRock Throgmorton’s price versus NAV trades at a 2.7% premium, while its yield is the most modest of our picks at 1.49% and its ongoing charges figure middles at a rate of 0.59%.
What this fund really does deliver on, though, is aggressive and highly active equities trading. Indeed, as the company states in its bio:
“The BlackRock Throgmorton Trust looks to back the UK’s strongest emerging companies. An unusual feature of the Trust is its ability to ‘short’ companies that we find unattractive, enabling us to profit if the share price falls. This gives the Trust’s manager the opportunity to back investment ideas with real conviction, within a strong risk framework.”
Trading 212 describes the investment trust as having around 30% of its assets held in CFDs or comparable equities derivatives at any one time, allowing it to both enjoy the rallies of its constituent stocks, and profit by hedging against their dips.
With this tactic, the fund has enjoyed consistent and impressive over every timeframe. Over the last year, its stock has posted a 11.6% jump; following a 55.3% bounce over the past three years; and a 128% hike over a five-year period.
At present, the company looks to be among the more attractive candidates in the IT UK Smaller Companies sector. Their shares are trading for 688.00p apiece, and their top holdings are Gamma Comms (2.8%), YouGov (2.6%), Games Workshop (2.6%), Avon Rubber (2.5%), Watches of Switzerland (2.5%).
JP Morgan-advised veteran offers good value
At the other end of the spectrum, the JP Morgan-advised Mercantile Investment Trust (LON:MRC) offers decent price growth and earnings and value potential.
Launched back in 1884, the veteran investment trust offers a price to NAV discount rate of -2.10%, a yield of 2.86% and an ongoing charges figure of 0.44%. All of these fundamentals are the best for income and value out of our three picks – and while not the best you’ll find on the IT UK market as a whole, they’re respectable among funds that rank within the upper echelons of most factors taken into consideration.
With the income and cost potential in mind, you’d almost consider riding out some rough equities valuations in the near-term, as Mercantile Investment Trust says in its commentary:
“Geopolitical concerns are likely to drive continued market volatility as the closely contested US election draws to a protracted conclusion and as Brexit negotiations intensify.”
“From a valuation viewpoint, the case for equities remains compelling. Short-term hits to profitability need to be balanced against the potential for medium-term recoveries.”
With that being said, the fund hardly boasts weak growth. With its price up by 3.2% over the last twelve months, Mercantile has also seen its share price rise 20.9% in the last three years, and a healthy 53.2% in the last five years.
At present, the trust’s shares are trading for 229.00p. Its holdings are topped off by pandemic victors Games Workshop (3.4%), alongside Computacenter (3.3%), Bellway (3.1%), Softcat (2.8%), Intermediate Capital (2.6%).
The fund with the inviting equities picks
Receiving a five-star rating from trustnet and a risk score of 95 (meaning it has a lower risk profile than the UK’s top 100 shares), the FTSE 250-listed Finsbury Growth and Income Trust (LON:FGT) boasts decent income alongside an impressive roster of investments.
Though costly with a 0.66% ongoing charges figure, the fund boasts a -0.70% discount rate, a 1.93% yield and 65.7% growth over the last five years.
More impressively, though, Finsbury may be perfectly positioned to capitalise on the recoveries of some of the hottest UK companies. For instance, its top holding is in the London Stock Exchange (11.70%), followed closely by Unilever (10.80%), which is currently trading at a bargain price, while being described by The Motley Fool and Yahoo Finance as a ‘world class company’. Similarly, 6.40% of its holdings are in The Sage Group, which suffered a 13% hammer-blow at the end of last week.
Further, as the UK exit lockdown in the new year, the hope is that housebuilding and hospitality (as well as industrial activities) will have scope for a resurgence. Should the former two sectors manage to expand on their current activity levels, this would benefit the company’s holdings in property developers, Schroders (6.80%), and alcoholic beverage conglomerates, Diageo (9.50%) and Remy Cointreau (5.40%), respectively.
Starting the week at a ten-day low and down by 0.8% during the last twelve months, the Finsbury Growth and Income Trust could position investors well to capitalise on the hopeful (if gradual) UK recovery, and return to normality.
