Fund Profile

Edinburgh Investment Trust 01 November 2022

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Edinburgh Investment Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

James de Uphaugh and Chris Field took over the management of the Edinburgh Investment Trust (LON:EDIN) in March 2020 when the management contract was awarded to Majedie Asset Management. They have refreshed the portfolio using bottom-up fundamental analysis to focus on companies whose medium-term earnings’ growth has been underpriced by the market. So far, their performance record has been excellent, the trust having returned NAV total returns of 44.6%, outperforming both the FTSE All-Share Index and the average of the Morningstar Equity Income Peer Group (see Performance section).

Majedie was acquired by Liontrust Asset Management in April 2022, but there remains total continuity with the way the portfolio is managed. The vast majority of the investment team that works on EDIN came over from Majedie and now can leverage the greater resources of Liontrust. James and Chris target a 40 to 50-stock portfolio, aiming to find companies whose earnings’ potentials have been mispriced by the market and which can grow their dividends sustainably from cash flows. While the portfolio has some value plays and growth exposure through mid-caps, we believe that there is no overriding style bias. The managers see a variety of underlying themes in the market which they are trying to benefit from (see Portfolio section).

EDIN pays dividends quarterly and these amounted to 24.8p for the last financial year, equivalent to a 4.3% yield.

The trust is benefitting now from the retirement of an old, expensive debt facility with a rate of 7.75%. The new borrowing costs are much cheaper at approximately 2.4% (see Gearing section). EDIN is modestly net geared at just 4.5%, trades at a discount of approximately 8.1% and has an OCF of 0.51%.

Analyst's View

We believe that James and Chris have done an excellent job to turn around the performance of the portfolio. While their stock picks have been the key drivers of the outperformance achieved, going forward we believe the cheaper borrowing costs they have locked in will also prove beneficial when the market turns and the managers are ready to deploy less-expensive gearing. The widening of EDIN’s discount has clearly been driven by market conditions, as discounts have widened across the board. However, we note that the managers’ three-year anniversary on the trust is coming up early next year and, if numbers remain strong, this could be supportive of a narrower rating once the immediate economic volatility has settled.

We believe EDIN is well positioned to be a core holding for investors seeking a balance between capital growth, current income and income growth. The managers do not take aggressive style biases and we believe this is likely to remain so, given their balanced total-return approach. This should help reduce the risk of the portfolio and is appropriate given the highly uncertain nature of the current economic backdrop. Whilst we believe it is unlikely over the short term that the dividend growth will match current inflation levels, we remain confident that the short-term conditions will give way to a brighter outlook in time, for which investors could be well rewarded from EDIN’s total return approach.

Bull

  • Managers have track record of long-term outperformance
  • Focus on dividend growth should lead to attractive long-term income generation
  • Low OCF, so offers low-cost access to UK equities

Bear

  • Structural gearing can enhance losses in falling markets as well as gains in rising markets
  • The UK market has little in some structural growth areas such as technology
  • Its dividend yield will no longer be as high as in the past
Continue to Portfolio

Fund History

17 Jul 2024 Balancing act
We ask why trusts with a more flexible approach have outperformed…
24 Jun 2024 Fund Analysis
EDIN’s new manager is off to a strong start…
19 Jun 2024 None in, one out
We ask why companies are disappearing from public markets, and if it matters…
05 Jun 2024 Fast and FTSErious
With the FTSE 100 reaching record highs, is there still value on offer?
29 May 2024 Results analysis: Edinburgh Investment Trust
Stock selection has driven EDIN’s excess returns versus the FTSE All-Share…
22 Nov 2023 Results analysis: Edinburgh Investment Trust
EDIN continues to deliver impressive outperformance versus the FTSE All-Share…
25 Oct 2023 Fund Analysis
EDIN has delivered strong outperformance in its first three years under a new manager…
31 May 2023 Results analysis: Edinburgh Investment Trust
EDIN has delivered impressive outperformance since the new manager took over in March 2020…
24 May 2023 Five alternatives for income investors
Watch the presentations from our event focused on trusts delivering income via a diverse range of strategies…
16 May 2023 Edinburgh Investment Trust
James de Uphaugh
Rewatch this webinar from our online series in May 'Alternatives for income investors' hosted by the team at Kepler Trust Intelligence 15-19 May…
Watch Recording
30 Mar 2023 What I’m doing with my allowance this tax year
Two of our analysts debate whether to invest in punchier funds for the long term or take a more cautious view…
25 Nov 2022 Results analysis: Edinburgh Investment Trust
EDIN has outperformed over three years, doing particularly well under the new management team…
23 Nov 2022 Guns n’ roses
A sustainable future for the free world may depend on investments in weapons and oil as well as traditional ESG friendly assets…
16 Nov 2022 Bottom fishing
What can history tell investors about calling the bottom of a market?
01 Nov 2022 Fund Analysis
A new look, better-balanced EDIN portfolio has delivered strong performance…
31 May 2022 Five alternative trusts for income investors
Slides and audio from our event last week, featuring five trust managers discussing different strategies to deliver income for shareholders in challenging market conditions...
31 May 2022 Results analysis: Edinburgh Investment Trust
EDIN looks prepared to deliver during a tough economic period…
27 May 2022 Slides and Audio: Edinburgh Investment Trust
Download the presentation and listen to the audio from our 'Alternatives for income investors' virtual week from 26 May...
29 Apr 2022 Five trusts to diversify your portfolio income
Join us next week for one live webinar with a different manager every day of the week – including the chance to ask questions - focused on different solutions for those seeking a decent income…
23 Feb 2022 Fund Analysis
EDIN looks leaner and meaner under its new manager and has outperformed since the takeover…
08 Jul 2021 London Calling
UK equities represent a ‘once in a generation’ opportunity for investors according to the managers who joined us to discuss the outlook at our event last week…
07 Jul 2021 Slides and Audio: Edinburgh Investment Trust
Download the presentation and listen to the audio from our 'Cool Britannia' Summer conference on 01 July...
07 Jul 2021 Slides and Audio: Roundtable - The outlook for UK plc
Download the presentation and listen to the audio from our first roundtable discussion with James Henderson, James de Uphaugh and Rory Bateman...
23 Jun 2021 Time to back Britain?
After a challenging period for the United Kingdom, we wonder if it could be the most exciting market on a five-year view…
09 Jun 2021 Cool Britannia?
Join the team at Kepler Trust Intelligence and six leading UK fund managers as we examine the prospects for UK equities with COVID in retreat and Brexit uncertainty finally behind us…
13 Apr 2021 Fund Analysis
EDIN’s new management team continue to identify individual stock opportunities in the UK..
29 Jan 2019 Mark Barnett: the outlook for UK equities in 2019
With uncertainty over Brexit clouding the view, Mark Barnett, Invesco’s Head of UK Equities based in Henely-on-Thames, provides his investment outlook for 2019...
05 Nov 2018 Do politics matter?
With the pivotal US mid-terms looming, politics are front of mind for many investors - but should they be?
03 Oct 2018 We can be heroes
Our analysis has uncovered the trusts which have generated a solid income through thick and thin - without compromising other aspects of performance...
26 Jul 2018 Is the UK keeping this investor awake at night?
Over a year on from taking over his UK equities trust mandates, Invesco's James Goldstone discusses his outlook for UK markets...
18 Jul 2018 Fund Analysis
A large UK focused investment trust with a strong long-term record trading on a deep discount thanks to an out-of-favour style...
08 Jun 2018 Mark Barnett: Business as usual?
Invesco Perpetual’s head of UK equities Mark Barnett examines the sectors where he is finding opportunities...
09 Mar 2018 Keep calm and carry on...
We examine the reaction of investment trust discounts amid recent market volatility...
20 Nov 2017 Thin ice...
Our analysis shows the extent to which funds in the UK equity income sector are concentrated on just a few dividend paying stocks…
07 Nov 2017 Fund Analysis
A large, well resourced UK equity income trust with a highly experienced manager and a clear focus on total return...
21 Jun 2017 Keystone Investment Trust
A top-performing UK equity trust that has recently undergone a change in managers...
12 Jun 2017 MAYDAY!
As the Conservative party founders, we examine the impact of last week’s disastrous election on trusts...
07 Jun 2017 Omnishambles...
Given the huge levels of political-induced uncertainty, we analyse recent drivers and themes within the UK equity market ahead of the upcoming election
30 May 2017 Income funds in focus
We introduce a new rating system designed by us to identify trusts which generate a real, dependable income without sacrificing capital....
11 May 2017 Storm proofing...
Our research shows dividend cover among UK equity income trusts is at its highest level in decade...
07 Dec 2016 Video: City Merchants High Yield Trust Limited
Rhys Davies discusses high yield bond opportunities, looking at what has been driving performance, alongside his approach and outlook.
06 Dec 2016 Video: Invesco Perpetual Select Trust Global Equity Income Share Portfolio
Nick Mustoe shares his thoughts on the Global Equity Income Share Portfolio of the investment trust, and gives his views on the regions and sectors he currently favours.
10 Sep 2016 Video: UK equities investment trusts update
John Richards, product director, UK equities, discusses the implications of the UK's referendum on membership of the European Union
09 Sep 2016 Video: Invesco Income Growth Trust
Fund manager Ciaraon Mallon discusses the portfolio and his approach to asset allocation...
06 Sep 2016 Video: Invesco Asia Trust
In this video Invesco Perpetual's Ian Hargreaves provides an economic outlook, and explains his approach to managing the portfolio...
05 May 2016 Mark Barnett: Two distinct routes to a sustainable income
Contrasting portfolio construction of The Edinburgh Investment Trust plc and Perpetual Income and Growth Investment Trust plc offers choice to income-seeking investors
03 May 2016 Video: Nick Mustoe
Invesco CIO Nick Mustoe explains his strategy on global equities...
11 Feb 2016 View from the top: Jim Pettigrew
We meet the chairman of one of the UK's largest investment trusts...
03 Feb 2016 Sector report: What lies beneath
Amid growing unease over the security of dividends we highlight a number of equity income trusts for a harsh environment...
View all

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