Ships, satellites and small caps
Ian Cowie reveals the trusts that gifted him the biggest gains in 2024
Investment trusts bring the world within reach, including many wealth-creating opportunities of which this small shareholder was previously unaware. Smaller companies brought my biggest gains during 2024, followed by new technology, marine transport and – perhaps most surprisingly – celestial satellites.
“Investment trusts bring the world within reach, including many wealth-creating opportunities of which this small shareholder was previously unaware.”
For example, I have been an investor in JPMorgan US Smaller Companies (stock market ticker: JUSC) for more than a decade but freely admit that none of its underlying holdings are household names on this side of the Atlantic. Even so, professional stock selection by Don San Jose, who has been the lead fund manager of JUSC since 2009, helped it deliver eye-stretching total returns of 45% over the last year, according to independent statisticians Morningstar.
Donald Trump’s election victory helped supersize the share price performance of smaller companies because they are expected to be big winners from his plans to cut taxes at home while increasing tariffs on foreign imports.
Corporate tiddlers tend to be most focussed on domestic demand and have least to lose from an international trade war. It would be totally impractical to attempt to access this sector from Britain independently and so I am happy to pay ongoing charges of 0.93% to gain exposure via dedicated, specialist fund managers.
Artificial intelligence (AI) is turning science fiction into commercial fact, creating real revenues and profits for big, blue-chip businesses backed by Polar Capital Technology (PCT). Once again, I have been a shareholder in this investment trust for more than a decade and am delighted to gain exposure to its biggest underlying holding, the graphics processing unit (GPU) company Nvidia (NVDA), as well as other top ten positions, including the iPhone maker, Apple (AAPL) and the AI to software giant, Microsoft (MSFT).
All the above contributed to a 44% total return from PCT over the last year, following 133% over the last five years and 508% over the last decade. Ben Rogoff, who has been lead fund manager since 2006, can take much of the credit and ongoing charges of 0.8% seem a fair price to pay for his skills. Despite sustained outperformance, this investment trust, with total assets of £4.7 billion, remains priced 12% below its net asset value.
It’s an ill wind that blows no good and climate change in the Caribbean plus bloodshed in the Middle East boosted marine freight rates, helping the investment trust Tufton Assets (SHIP) deliver buoyant total returns of 36% over the last year and 71% over five years. This ship leasing specialist gained indirectly from reduced transits via the Panama Canal, due to lack of water to operate its locks, and the Suez Canal, where Houthi rebels attacked merchant vessels.
More than 80% of international trade by volume is transported by sea and so SHIP’s underlying holdings fulfil a vital role in the global economy. Unlike JUSC or PCT, SHIP yields substantial income with a dividend yield of 7.6% that has risen by an annual average of 5.7% over the last five years, but remains priced at a 24% discount to its NAV.
“More than 80% of international trade by volume is transported by sea and so SHIP’s underlying holdings fulfil a vital role in the global economy.”
Far above the ocean waves, more than 6,000 Starlink satellites orbit the earth, bringing the internet and mobile telephony to many parts of this planet that were previously offline. The controversial billionaire, Elon Musk, controls them through his business, Space Exploration Technologies or SpaceX, which is not listed on any stock exchange.
Fortunately for ordinary mortals who would like to own a share in this future-facing technology, several investment trusts hold substantial stakes in SpaceX, including the global smaller companies specialist, Edinburgh Worldwide (EWI). No less than 12% of this fund’s £800m assets are invested in SpaceX, according to its factsheet.
“Fortunately for ordinary mortals who would like to own a share in this future-facing technology, several investment trusts hold substantial stakes in SpaceX, including the global smaller companies specialist, Edinburgh Worldwide (EWI).”
Other top ten holdings include the drone-maker, AeroVironment (AVAV), plus the body cameras and stun gun Taser maker, Axon Enterprise (AXON). Whether we like it or not, all three businesses look set to play key roles in the future. Here and now, EWI generated total returns of 39% over the last year, bouncing back from a loss of 2% over the last five years, after positive returns of 143% over the decade. Ongoing charges are 0.7%.
Finally, F&C Investment Trust (FCIT), the £6.4 billion global fund launched in 1868, deserves an honourable mention after delivering total returns of 31% over the last 12 months. This got shares I bought in July last year for my grandson, Charlie, off to a flying start and followed total returns of 71% over five years and 224% over the decade.
Once again, FCIT’s top ten holdings include NVDA, MSFT and APPL. So, despite its Victorian origins, this is very much a future-facing fund. Ongoing charges of 0.49% are a reasonable price to pay for sustained returns that include increasing dividends every year since 1971, without fail.
While it is important to be aware that the past is not necessarily a guide to the future - and dividends can be cut or cancelled without notice – a global portfolio of investment trusts may diminish risk by diversification. More positively, I hope these funds will continue to give me exposure to capital growth and income opportunities wherever they may arise.
