Results analysis from Kepler Trust Intelligence

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Alliance Trust PLC

29 July 2022

 

Alliance Trust (ATST)

29/07/2022

Results analysis from Kepler Trust Intelligence

Alliance Trust (ATST) has reported its half year results for the period ending 30 June 2022. Over this six-month period ATST has generated a NAV total return of -10.5%, ahead of both the -11% return of its benchmark, the MSCI ACWI, and the -13.5% median NAV total return of its peers. ATST generated an -11.3% share price return over the same period.

Over the six-month period ATST traded on an average discount of 6.3%, above the 5.9% average for the 2021 financial year.

One of the major developments during the current financial year has been the pay-out of a higher dividend. The board have paid two quarterly dividends totalling 12p for 2022 so far, a 62% increase on the first two dividends paid in 2021.

The other major change to ATST has been the loss of one of its delegated stock picking managers, the team at River and Mercantile.

Kepler View

Alliance Trust's (ATST) recent six-month performance is, in our view, a reminder of the benefits of a diversified approach to investing. While ATST's highly diversified approach had once caused it to lag its benchmark, due to the dominance of a concentrated handful of mega cap stocks, it is by the same merit that ATST has also outperformed over 2022 as the mega cap stocks, primarily the high growth names, have felt the brunt of the selloff.

We believe that ATST offers a core, 'one stop shop' option for an investor's global equity portfolio. Thanks to WTW's strategy there is less chance of investors being caught on the wrong side of a market downturn, as the team ensures that ATST has no style biases which are one major source of potential underperformance.

While offering a diversified, on benchmark stylistic exposure, ATST offers a highly active approach to stock selection. WTW highlights GQG partners, as being one of the noteworthy examples of success over the last six months, having been one of its major return contributors.

Though the selloff in equity markets has been largely indiscriminate, WTW are happy with the fundamental performance of their underlying holdings. In their view, once the broad-based selloff alleviates, fundamentals will become the primary driver of stock returns. They note that if we enter an era of structurally higher inflation, it may mark the end of the growth-style trend which had previously acted as a headwind against ATST's performance.

We believe that the higher dividend is a clear benefit to shareholders, making the trust a more attractive investment vehicle, which could increase the demand for its shares. This, in combination with ATST's ongoing resilience in tough markets, may make its current discount of 6.4% an attractive entry point (as of 27/07/2022).

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