Brunner (BUT)

Brunner (BUT) aims to provide investors with an ‘all-weather’ Portfolio, seeking to balance quality, growth, and valuations. This is an approach that has enabled the trust to outperform its average peer in the AIC Global sector over the past five years, adapting better to rapidly changing market environments, although the concentration of market returns in a handful of AI-related stocks has been a challenge since 2023.

This year, managers Julian Bishop, Christian Schneider, Simon Gergel, and James Ashworth have been building positions in companies embedded into the physical world, noting that such businesses offer consistency, especially at a time when the digital world is experiencing disruptions driven by AI. An example of a ‘physical world’ stock introduced in the portfolio is Federal Signal, a manufacturer of specialised vehicles such as street sweepers and road-marking lorries, with the team highlighting the company’s capacity to deliver strong returns and margins, as it is a dominant player in niche end markets and innovates in ways that are useful to its customers.

On the other hand, they remain cautious about AI-related stocks, given the currently low monetisation of AI products relative to the vast amount of investment spending being made. As a result, they have trimmed their positions in semiconductor-related names such as ASML and TSMC since the start of the year. They have also exited positions in companies whose business models could be threatened by AI, adhering to their rule of avoiding businesses facing structural decline. One example of such a stock is Adobe, whose growth and pricing power may be endangered by progress in generative AI.

In addition, BUT aims to increase its Dividend each year. So far in its current financial year, the trust has paid two interim dividends of 6.25p and announced a third of the same amount to be paid in December, representing a c. 6% year-on-year increase in the amount of the interim dividend. As such, BUT is on track to deliver a 54th consecutive year of dividend increase. The trust’s 12-month yield was c. 1.8% at the time of writing.