James Carthew: Three 2020 trust winners I like for 2022

Our columnist picks three investment companies in commodities, private equity and a single emerging market that will enter 2022 on a strong wave of momentum from this year.

The past 12 months may have been eventful, but they have also produced some impressive share price gains for many investment companies.

Top of the list is the uranium-focused Geiger Counter (GCL ) which has produced a stunning 197% total shareholder return over the past 12 months. I wrote about the investment company in August 2020 when I said that the growing demand for uranium was not being met by new supply. This has bolstered the uranium price and GCL’s portfolio. The discount has been eliminated and the shares have moved to trade on an 18% premium. That means what was a Jersey minnow with a market value of just £16m is now almost four times larger.

Today, on the demand side of the equation, we have new power stations planned for China, India, Russia and the Middle East; about-turns in plans to shrink capacity in countries such as France, South Korea and Taiwan; the reopening of Japanese plants; and US plans for small modular reactors. In addition, trusts backed by physical uranium, such as the Sprott Physical Uranium Trust and Yellowcake (YCA) have been expanding.

On the supply side, after years of curtailing production, Kazatomprom, the largest global producer, has just announced plans to develop new capacity within its Budenovskoye joint venture. However, this wouldn’t be producing meaningful volumes of ore until 2024 at the earliest. Covid-19 constrained output last year and there is a risk that omicron could have an effect as we head into 2022. Cameco, which has suspended mining at its McArthur River project, has not yet said if it will resume production, and even when it does it will take many months to ramp up.

GCL’s managers Keith Watson and Robert Crayfourd think the uranium price and hence the profitability of the companies in GCL’s portfolio could climb a long way from here. GCL could be a winner in 2022 too.

Schiehallion’s mountainous premium

Next, with a share price gain of 110% this year, is Schiehallion (MNTN ), the Baillie Gifford private equity fund named after a Scottish mountain.

That impressive share price move has not been matched by the underlying growth in net asset value and, according to Morningstar, Schiehallion is now on a whopping 55% premium.

The £1bn closed-ended fund’s website bears the warning ‘investors should bear in mind that shares bought at a high premium to net asset value can quickly lose substantial value if the premium is eroded.’ I would echo that but understand the hype around this fund.

I have been banging on about the unjustified discounts that many private equity funds trade on over 2021. Here is a fund where investors grasp that the portfolio of technology disrupters is probably conservatively valued. I worry that the investment approach is long-term in nature and designed for a world where exits through flotations may never happen. There may be periods where investor sentiment switches against Schiehallion. If it goes to a discount, it is probably a bargain.

Vietnam fund’s no-one holding

The third-best performer is Vietnam Holding (VNH ), whose shares are 93% higher than a year ago. Fund managers Vu Thinh and Craig Martin have put enormous effort into marketing the Guernsey investment company, yet it still trades on a 14% discount. I think that this is unjustified and, with the market value knocking on £100m now, interest in it may grow.

The Vietnamese economy has been transformed over the past few years as it has become the go-to destination for many manufacturers. From relatively simple plants assembling components made elsewhere, the trend is towards higher added value and higher-tech products. The country is blessed with strong agricultural and tourism sectors too. However, Covid-19 has hit the latter hard. New variants permitting, 2022 could be the year when that important sector recovers and the Vietnamese economy fires on all cylinders. If there’s a hint of an upgrade from frontier market to emerging market status, the stock market could soar.

VNH should also get credit for its strong commitment to sustainability. The environment has been a big theme of 2021 and it’s good to see that the managers’ high-conviction portfolio has passed their tough tests on this and social and governance issues.

Pleasingly, their stocks are still reasonably valued even after the gains of this year – at the end of October, the average price-to-earnings ratio on the portfolio was 14 times, falling to a multiple of 11.4 next year. That gives a clue as to how fast these companies are growing. I think VNH may be another decent pick for 2022.

James Carthew is a director at Marten & Co. The views expressed in this article are his and do not constitute investment advice.

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