Trust managers' longest held stocks

Managers highlight the investments they bought and held onto for the longest time.

The most fundamental edge of the investment trust structure, its backers say, is its permanent capital.

Unlike open-ended funds, the closed-end model’s fixed pool of capital frees managers from the tyranny of daily flows, letting them focus on years and decades rather than quarters.

In an era of heightened scrutiny over discounts, tensions have emerged between activists with short-term visions for the trusts they hold and managers with a  marathon mindset.

Recent analysis from the Association of Investment Companies (AIC) highlights instances where this long-term thinking has paid off.

Cranswick

Schroder UK Mid Cap (SCP) first bought Cranswick in 2016. Since then, the food producer has become a major player in pork, poultry and convenience foods, with chicken a key growth driver. Strong demand and expanding margins have supported significant cash generation, reinvested in the business and returned via dividends.

Manager Jean Roche said: ‘Supplying firms from Lidl to McDonalds, Sainsburys and M&S, Cranswick has grown to represent a key component of the food security complex in the UK. Its shares have reflected this, achieving multi-bagger status with a total return of 185% since we invested, or 11.4% per annum.

‘This is especially impressive as profit margins, whilst strong for the industry, are still in the single digits.’

The £250m trust aims to identify companies at the ‘sweet spot’ of their growth, poised to become future FTSE 100 constituents. It believes Cranswick has further to go, and as of December the stock continued to be the trust’s top holding, at 3.9% of net assets.  

Games Workshop

Mercantile (MRC) invested in Games Workshop in 2017, with shares returning a stunning 1500% for investors since. 

Guy Anderson, who manages the trust’s £1.8bn portfolio of medium and smaller companies in the UK, said: ‘We continue to hold the company because of its innovation, strong intellectual property and consistent ability to deliver robust profits and cash generation. Games Workshop owns Warhammer, a fantasy world that has grown into a global brand with a deeply loyal fan base, allowing the business to grow regardless of short-term market conditions.

‘Looking ahead, that audience is set to expand further following the agreement with Amazon to bring Warhammer stories to film and television. With global recognition on the rise and dependable finances, it remains the kind of business we’re happy to back for the long term.’

Moody’s

The £2.4bn Baillie Gifford trust Monks (MNKS) has owned US ‘Big Three’ credit rating agency, Moody’s since the launch of its Global Alpha strategy in 2005.

Since then, it has delivered a return of more than 900%.

‘Scale and trust matter enormously in this market,’ said manager Spencer Adair, noting alongside S&P Global, Moody’s commands around 80% share in ratings.

He added: ‘Its customers are willing to pay a premium for the most trusted ratings. In Analytics, its competitive advantage lies in its data and a growing ‘one-stop-shop’ offering, with more than 90% of its revenues recurring.

‘The durability of this franchise was evident in how Moody’s emerged from the global financial crisis as a stronger business. AI presents new challenges, but we believe it remains well placed to benefit from the structural growth of capital markets.’

Grupo Aeroportuario del Sureste

Murray International (MYI) has held the Mexican airport operator ASUR since shortly after its listing in 2000.

The position has delivered a total return, in sterling, of over 17% per year on average for more than two decades for the trust – special dividends paid in recent years underlining its strong cash generation.

Samantha Fitzpatrick, co-manager of the £2.1m global equity income strategy, said: ‘ASUR has evolved from operating a small network of airports in southeast Mexico to a diversified platform spanning Mexico, Colombia and Puerto Rico. Its regulated aeronautical revenues provide a stable foundation, while its commercial activities add higher margin growth.

‘Over the years, the company has demonstrated remarkable resilience through hurricanes and global health crises, maintaining a long-term focus while preserving a robust balance sheet.’

Hiscox 

James Henderson, co-manager of the £389m Lowland (LWI) and £1.5bn Law Debenture (LWDB) investment trusts, which both have an income focus, said: ‘We don’t believe in forever stocks. But one stock we’ve held a long time – since it came to the market in 1997 – is Hiscox.

‘It’s had its ups and downs because that’s the nature of insurance. Hiscox was insuring both aerospace and property when the 9/11 terrorist attacks struck so it was badly affected financially. There was a rescue rights issue,’ he said. 

‘But we then had the best years ever, because the rest of the industry was also hard hit and short of capital. Thanks to that capital raise, Hiscox was able to force rates up dramatically and that led to some very profitable years. 

‘We held throughout this and supported the fundraising. For a while it was a large holding in both trusts. We don’t own a huge amount of it today. But it’s a well managed company we know well and watch closely. It’s not on a stretched valuation at the moment and gives a solid dividend of just over 2%.’