Many London-listed Investment Trusts are providing investors with the opportunity to capture attractive discounts to NAV, in some circumstances discounts that haven’t been on offer for many years.
In the article, we explore three Investment Trusts with not only attractive discounts but significant opportunities for NAV growth in the coming years.
Vietnam Holding
Vietnam Holding is solely focused on one of the most exciting economies on the planet. The trust invests in Vietnamese-listed growth shares with a portfolio spanning banks, real estate and companies considered integral to the digitalisation of Vietnam.
Not yet an emerging market, Vietnam is categorised as a frontier market by MSCI.
When Vietnam earns the coveted title of being an emerging market, the country and its equity market will experience a flood of capital inflows. It may take a couple of years or more for Vietnam to be included in MSCI’s Emerging Market index, but one would expect a melt-up in equity prices in preparation for inclusion.
Vietnam Holding is well-placed to benefit from these future capital flows and has the potential for significant gains as the Vietnamese equity grows.
Investors are able to pick Vietnam Holding up at a 15% discount to NAV. Vietnam Holding typically trades at a relatively tight discount and the current discount should be viewed as a rare opportunity.
Vietnam Holding is at the forefront of ESG in Vietnam and recently championed its portfolio companies’ progress at the inaugural Vietnamese ESG Investor event.
Listen to the latest Vietnam Holding Podcast with UK Investor Magazine here.
Scottish Mortgage Investment Trust
It has been a tough few years for Baillie Gifford’s flagship investment trust. After a bumper run during the pandemic, the trust has come under fire for underperformance and overlooking standout technology winners.
However, investors should never underestimate the ability of the Scottish Mortgage Investment Trust to get involved in a good old-fashioned risk-on rally.
US Tech stocks
The US tech rally so far this year has been concentrated on around 8 tech stocks, many of which are thought to provide exposure to artificial intelligence.
The Scottish Mortgage Investment Trust does not have significant holdings in all of these stocks and their investors have missed out. The trust does hold Amazon, NVIDIA and Tesla which have produced fantastic returns.
The trust’s largest holding is ASML which accounts for 8.6% of the portfolio. The stock’s 29% rise so far in 2023 lags well behind NVIDIA’s 180% gain and Meta’s 135% appreciation.
The decision to position the portfolio underweight Apple, Meta, and Microsoft has led to Scottish Mortgage’s underperformance of the tech-heavy benchmarks.
It goes without saying, Scottish Mortgage investors who have become accustomed to riding every tech-driven equity rally will be disappointed with recent performance.
Nonetheless, the trust’s portfolio is positioned in growth stocks primed for a run higher amid a general risk-on rally. Should equity returns become more dispersed across the wider market, Scottish Mortgage is well-placed to benefit. The catalyst for this rally may well be softer monetary policy later this year, or the avoidance on recession in major global economies.
Scottish Mortgage shares trade at a whopping 22% discount to NAV and provide investors with the opportunity to access world-leading tech names on the cheap.
JLEN
Describing the possible move higher in JLEN as explosive may be considered sensationalist.
The trust trades within a tight range representing around 20%-30% of the trust’s value and is currently trading towards the bottom of this range. Any explosion higher will be relative to this range.
From a technical perspective, the support line at 100p has held on three occasions since 2021 making recent price action particularly compelling.
JLEN has established a portfolio of renewable energy and green infrastructure projects located across Europe. The strength of this portfolio is demonstrated in the trust’s 6.8% yield.
The portfolio is well diversified with assets across the clean energy supply chain including generation, storage and distribution.
The trust secured its first green hydrogen asset this year and this week announced the acquisition of its second. The projects are both located in Germany and further diversify the portfolio into one of the most exciting areas of renewable power.
Ed Warner, Chair of JLEN, commented on the Green Hydrogen investments:
“Hydrogen has an important role to play in decarbonising heavy transport, industry, and other hard-to-abate sectors of the economy. Investing in this sector will remain an important near-term focus for the Company as we continue to assess opportunities to recycle capital within the portfolio.”
JLEN’s NAV stood at 123.1p as of 31st March 2023 and shares currently trade at a 15% discount to NAV.