Results analysis from Kepler Trust Intelligence

Edinburgh Investment Trust PLC

31 May 2023

 

Edinburgh Investment Trust (EDIN)

31/05/2023

Results analysis from Kepler Trust Intelligence

Edinburgh Investment Trust (EDIN) has delivered strong outperformance of the benchmark in the year to 31/03/2023, with a NAV total return of 7.9% comparing to a 2.9% total return for the FTSE All Share Index. EDIN's share price return was 8.4%.

EDIN has outperformed the FTSE handsomely since James de Uphaugh was appointed manager in March 2020, with a NAV total return of 65.9% and share price total return of 75.5%, both well above the 47.4% total return of the benchmark.

During the year the board refinanced EDIN's long-term debt at much more attractive terms, the new borrowings being taken out at 2.44% p.a. compared to the rate of 7.75% on the previous debt.

Kepler View

These are good results which contribute to a strong track record since the change of management in March 2020. Pleasingly, the drivers of return have been diverse at the stock level in the period under review, with BAE Systems, Natwest and Centrica amongst the biggest contributors, along with Greggs, Standard Chartered and Weir. James has positioned the portfolio to have exposure to multiple themes. While holdings in banks and energy-related names, sectors benefitting from high inflation or high rates, have helped returns in the recent past, the portfolio is also exposed to an improving picture for the UK consumer, with James arguing a peak in inflation and interest rates is likely to relieve the pressure on households over the coming year. Meanwhile, the UK remains cheap versus international peers, after being out of favour for a number of years. This could provide further impetus behind Edinburgh Investment Trust's (EDIN) returns, with the potential for an improving economic backdrop to see that valuation differential close.

One major supportive factor for the trust going forward is the improved gearing position. The trust had suffered in the past thanks to having very expensive long-term debt. The board arranged cheaper debt to replace it in late 2021, locking in a highly advantageous rate before the cost of debt rose once more over 2022. This means James has plenty of cheap cash to put to work in the market, which should be supportive of returns over the course of a cycle as markets rise. NAV returns of the trust have benefitted over 2022 as rising interest rates cut the fair value of this newly rearranged debt, adding 4 percentage points to NAV total returns.

CLICK HERE TO READ THE FULL REPORT 

Visit Kepler Trust Intelligence for more high quality independent investment trust research.

Important information

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

Kepler Partners is not authorised to make recommendations to retail clients. This report has been issued by Kepler Partners LLP, is based on factual information only, is solely for information purposes only and any views contained in it must not be construed as investment or tax advice or a recommendation to buy, sell or take any action in relation to any investment.

The information provided on this website is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation or which would subject Kepler Partners LLP to any registration requirement within such jurisdiction or country. In particular, this website is exclusively for non-US Persons. Persons who access this information are required to inform themselves and to comply with any such restrictions.

The information contained in this website is not intended to constitute, and should not be construed as, investment advice. No representation or warranty, express or implied, is given by any person as to the accuracy or completeness of the information and no responsibility or liability is accepted for the accuracy or sufficiency of any of the information, for any errors, omissions or misstatements, negligent or otherwise. Any views and opinions, whilst given in good faith, are subject to change without notice.

This is not an official confirmation of terms and is not a recommendation, offer or solicitation to buy or sell or take any action in relation to any investment mentioned herein. Any prices or quotations contained herein are indicative only.  

Kepler Partners LLP (including its partners, employees and representatives) or a connected person may have positions in or options on the securities detailed in this report, and may buy, sell or offer to purchase or sell such securities from time to time, but will at all times be subject to restrictions imposed by the firm's internal rules. A copy of the firm's Conflict of Interest policy is available on request.

PLEASE SEE ALSO OUR TERMS AND CONDITIONS

Kepler Partners LLP is authorised and regulated by the Financial Conduct Authority (FRN 480590), registered in England and Wales at 70 Conduit Street, London W1S 2GF with registered number OC334771.

 

END