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IT Focus: 5 discounted investment trusts in the spotlight

We take a look at the latest analyst comment on Fidelity Asian Values, International Biotechnology, Edinburgh Worldwide and Cambium Global Timber trusts.

by Caelainn Barr on Dec 06, 2012 at 10:13

Expect short term volatility with Edinburgh Worldwide

Edinburgh Worldwide’s performance has been lacklustre over the past year as its holdings in technology stocks gave volatile returns.

Its NAV rose 4.8%, lagging a 6.2% increase in the MSCI World in the past year as its holdings in a number of stocks were hit by risk adverse investors. Facebook and Chinese search engine Baidu made the biggest losses, down 45% and 25%. However the trust also benefited from a stronger performance from Ebay and Apple, up 52% and 48%.

Is has given share price total returns of 12% over the past year and 21% over the past five years, compared to the FTSE World total returns of 10% and 23% in the same time period.

Charles Cade, head of investment companies research at Numis, says: ‘You should expect some short term volatility when buying Edinburgh Worldwide given the focused portfolio of growth stocks. However, we regard the management team highly and believe that the unconstrained approach is likely to outperform market indices over the long term. Since Baillie Gifford took over as manager nine years ago, the share price has risen by 138%, and the NAV by 113%, compared with a rise in the benchmark of 87%.’

The trust is currently trading at 283p, a 13% discount to its NAV of 326p.

Cambium Global Timberland to wind down in next two years

Timber trust Cambium Global Timberland will wind down in the next two years as its NAV has disappointed investors since launch.

The trust has given share price total returns of -59% over the past five years and -22% over the past year and is currently trading at 43p, a 33% discount to its NAV of 65p.

Mark Ambrose, analyst at Jefferies added: ‘The target will be to complete the wind-down within 24 months. The existing manager, CP Cogent Asset Management - who will be retained to implement the realisation strategy - estimates that on a prudent basis, net proceeds after repaying outstanding loans, net of deferred taxes, will be 57p per share.’

Fidelity Asian Values: ‘More attractive options’ in sector

Analysts at Winterflood haven’t been won over by the performance of the Fidelity Asian Values trust as it gave a weak performance in 2007 and 2008, and has slipped to underperform the MSCI Asia Pacific ex-Japan index since June of this year.

The trust is currently trading at 184p, an 11.7% discount to its NAV of 208p and wider than its average discount of 9.6%. It has large holdings in Samsung Electronics, at 7%, and Taiwan Semiconductor Manufacturing, at 4.7%.

Innes Urquhart, analyst at Winterflood adds: ‘The performance of the fund has lagged the benchmark in recent years. The fund has significant active positions which will mean that performance is unlikely to move inline with the benchmark, particularly given the increased concentration of the portfolio. If there is a sustained recovery in risk appetite in the region then the fund should benefit.

‘As one of the smaller funds in the Asia Pacific sector, Fidelity Asian Values suffers from its relative illiquidity. While we do not have any particular issue with the management of the fund, we believe that there are currently more attractive options within the sector.’

The trust has given share price total returns of 4% over the past year and 21% over the past five years, compared to the MSCI Asia ex-Japan total returns of 10% and 21% in the same time period.

International Biotechnology Trust is ‘looking attractive’

Profit-taking in the healthcare sector has eased trusts in the sector to further discounts and the International Biotechnology Trust is trading at a 16% discount, wider than its average discount of 13.5%.

The trust focuses on biotechnology stocks and has top holdings in Amgen and Celgene. It has given total share price returns of 29% over the past year and 50% over the past five years, compared to the MSCI World Health Care index total returns of 19% and 53% in the same period.

Mick Gilligan, head of research, at Killik & Co, commented: ‘This investment trust provides exposure to a portfolio of both quoted and unquoted biotechnology and life sciences companies. The discount has widened materially in recent weeks on the back of profit-taking in the healthcare sector that has seen the shares fall back more markedly than the NAV and the shares are looking attractive again.’

Oriel keep Standard Life European Private Equity on ‘hold’

The Standard Life European Private Equity trust invests in a range of European private equity funds. The trust is currently trading at a 31% discount, despite a 36% increase in share price so far this year.

Iain Scouller, head of investment funds, at Oriel Securities explains: ‘We downgraded the shares to ‘hold’ in September, after the 20% rally in the share price over the previous three months. We like the diversified portfolio with exposure to over 500 companies and the balance sheet is in relatively good shape.

‘We are setting an NAV estimate of 225p to 235p at December 2012 and maintain a ‘hold’ recommendation. Our price target is reduced marginally to 160p from 165p and represents a 30% discount to prospective NAV.’

The trust has given share price total returns of 36% in the past year and shed -22% over the past five years compared to the sector average total returns of 15% and -4% over the same periods.

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Look up the investment trusts

  • Fidelity Asian Values (Ordinary Share)
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  • Edinburgh Worldwide (Ordinary Share)
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  • International Biotechnology (Ordinary Share)
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  • Cambium Global Timberland (Ordinary Share)
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  • Standard Life Euro Private Eq (Ordinary Share)
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