Monks Investment Trust (MNKS) has trimmed some of its investments in big technology names such as Google-owner Alphabet and online shopping giant Amazon in favour of early stage companies.
The FTSE 250-listed company aims to deliver long-term capital growth via a portfolio of global quoted stocks.
In the year to 30 April, the company’s net asset value total return was 15.8%, significantly beating a 7.5% total return of its benchmark, the FTSE World Index.
Amazon remains the trust's single largest holding and its biggest contributor to returns last year.
Monks has reduced its portfolio holding to 4.1% as its earnings growth rate was depressed from investment for growth. Last year, Amazon delivered 26% reported earnings growth.
Its holding in TripAdvisor was sold after the investment trust lost confidence in its long-term potential, while diabetes treatment leader Novo Nordisk was given the boot amid pricing pressure on its products.
HIGH VALUATION RISK
High valuations in the US have become problematic, leading to a reduction in Monks’ cyclical growth holdings from 29% to 22%.
This change in strategy was blamed on ‘unwarranted excitement’ stemming from President Donald Trump’s ‘Make America Great Again’ campaign.
The investment trust sold its holdings in some of US holdings, including welding equipment supplier Lincoln Electric and second-hand car retailer CarMax, benefiting Monks’ latent growth portfolio.
Latent growth companies generally have a poor track record, but the investment trust argues a ‘potential trigger’ could help spark growth.
‘Our theory is that there is little, if any, growth priced in to such investments, so any improvement can have a disproportionate effect on valuation,’ comments investment trust manager Charles Plowden.
New investments in this area include Japanese bank Sumitomo Mitsui Trust and Dutch conglomerate Phillips’ spin-out Signify.
