Love at first buy: investment trust managers on long-held investments

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “For investment trust managers some investment relationships last decades. Investment trusts’ structure and benefits support a genuinely long-term approach to investment. Their managers are never forced sellers and many hold stocks over different economic and market cycles, reflecting their patience and commitment to these companies.  While markets can be fickle, some holdings have remained integral to managers’ portfolios for decades.”

Managers on their long-term commitments

Jean Roche, Manager of Schroder UK Mid Cap, said: “We first bought Cranswick for Schroder UK Mid Cap in 2016. Since then, the company has grown into a major player in the pork, poultry and convenience food sector, with chicken – a relatively inexpensive and high yielding protein – a key growth driver. Also underpinned by demand for pork, the business has seen margins expand, with significant cash flow generation that has been both reinvested as capex and paid back to shareholders through dividends.

“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.

“Our mid cap strategy at Schroders is about choosing stocks at the sweet spot of their growth trajectories and which may, ultimately, be the FTSE 100 stocks of the future. We believe Cranswick has the hallmarks of such a company, and we continue to hold a significant position in it. And yet, this Valentine’s Day, we are also mindful that while we can love a stock, it can’t love us back. So, even with this one, our sell discipline will ultimately apply.”

James Henderson, Co-Manager of the Lowland and Law Debenture investment trusts, which each 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.

“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%.”

Samantha Fitzpatrick, Co-Manager of Murray International Trust, said: “One company we have held in Murray International for a very long time is Grupo Aeroportuario del Sureste (ASUR), the Mexican airport operator we first invested in 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. Special dividends paid in recent years underline ASUR’s strong cash generation and commitment to shareholder returns.

“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.

“Looking ahead, we see further growth supported by ongoing terminal expansions at Cancún, a potential new terminal at Mérida, and incremental contributions from recent acquisitions across Brazil, Ecuador, Costa Rica and the US airport retail market. While ASUR trades around sector average valuation multiples, we believe its strong balance sheet, diversified revenue mix and long concession life position the company well for the future.”

Sam Morse, Portfolio Manager of Fidelity European Trust, said: “Roche is a compelling long-term investment, supported by its strong financial profile, leading market products and substantial growth potential. As one of the world’s largest biotechnology companies, Roche is focused on improving standards of care across areas such as oncology, immunology, infectious diseases, ophthalmology and neuroscience.

“Roche’s diversified product portfolio, deep and innovative pipeline, disciplined risk management and strong shareholder returns mean the company is well positioned to deliver sustained growth and value creation through to the end of the decade and beyond, with limited downside from patent expiries and meaningful upside from pipeline innovation. Roche now has one of the longest duration growth profiles in pharma after recent surprise drug trial successes in the areas of Alzheimer’s, breast cancer and MS.”

Guy Anderson, Manager of Mercantile Investment Trust, said: “One company we’ve held for a long time is Games Workshop, which we first invested in back in 2017. It has proved to be a strong long-term investment, with the shares returning around 1,500 per cent for Mercantile Investment Trust investors since our initial investment.

“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.”

James Harries, Manager of STS Global Income & Growth, said, “A longstanding holding in STS Global Income & Growth is CME Group. We like this company as it is the world’s largest derivatives exchange, operating a dominant marketplace for futures and options across interest rates, equity indices, foreign exchange and commodities.

“Its scale and deep liquidity create strong network effects, making CME a core venue for global risk management and hedging. The company benefits from a largely fee-based revenue model, earning income from trading activity, clearing services and market data sales, which supports high margins and strong cash generation. Ongoing product innovation, including growth in crypto-related derivatives, adds further optionality. Overall, CME offers a high-quality, defensive exposure to financial market infrastructure with attractive shareholder returns.

“CME often performs well during periods of volatility, when demand for hedging rises and trading volumes increase. Global equity markets are highly concentrated, correlated and dependent upon the ongoing enthusiasm for all things AI-related. Should this falter, and within the context of an uncertain economic and geopolitical backdrop, volatility may be structurally higher in the future to the benefit of this company.”

Spencer Adair, Manager of Monks Investment Trust, said: “One of our longest-held investments is Moody’s, which we’ve owned since the launch of our Global Alpha strategy in 2005 and since we began managing The Monks Investment Trust in 2015. Since 2005, it has delivered a return of more than 900%.

“Moody’s operates two complementary businesses. Its ratings division assesses the creditworthiness of debt issued by governments, companies and institutions, while Moody’s Analytics packages proprietary ratings data with a suite of research and risk-analysis tools.

“Scale and trust matter enormously in this market: alongside S&P Global, Moody’s commands around 80% share in ratings. 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. If that plays out, it could remain a core holding for many years to come.”

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Notes to editors

1. The Association of Investment Companies (AIC) represents a broad range of investment trusts and VCTs, collectively known as investment companies. The AIC’s vision is for closed-ended investment companies to be understood and considered by every investor. The AIC has 278 members and the industry has total assets of approximately £266 billion.
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