There was a great deal to write about in this year's big round-up from across the sector, meaning that we had to truncate or cut some copy. Here are the extra sections from the editing process.
We know that 2024 was not a good year for Bellevue Healthcare Trust (BBH, 141.8p), losing 5.7% of NAV, but we can probably accept that the trust’s idiosyncratic portfolio will blow hot and cold. What perturbs us more is the messy structure and governance. Having proposed changes to its annual redemption facility, the board announced on 6th December that shareholder feedback had changed and that it was abandoning the proposals (which we thought were sensible moderations of a clunky mechanism that could threaten the future of the trust). Should BBH suffer another tough year this could signal the end for the trust in its current form, so the pressure is on the managers to turn this around.
Both of the shipping trusts also performed very well, with a total return of 18.8% from Tufton Oceanic Assets (SHIP, US$1.20) and 17.1% from Taylor Maritime Investments (TMI, US$0.99), and we feel the wide discounts on these two trusts offer great value. There is mixed news from TMI though. The good news is that the trust is proposing a US$0.04 special dividend in the first quarter of this year, on top of its already high dividend, as it has some spare cash from asset sales. The much less welcome news is that TMI is leaving our sector and reclassifying as a commercial company. Since the acquisition of the Grindrod shipping business TMI has become much more of an operational company, so this probably makes sense, particularly when it is given such a low rating in the investment companies sector (the current discount is 33.1%). The switch implies significant accounting changes, which will in future be based on normal operating metrics such as turnover and pre-tax profit, and there will no longer be a NAV calculation. We imagine some traditional investment trust investors will sell out, but we will be interested to see how the company’s rating changes with this switch. We would be inclined to HOLD the shares for now.
We do not always write a great deal about the small hedge fund sector, which can be of limited interest to most investors more focused on traditional trusts and sectors. This year though it seems clear that Third Point Investors (TPOU, US$25.10) deserves more than a passing mention for its strong NAV total return of 28.7%, earning the trust a place in the overall top ten across the whole investment trust industry. TPOU is a feeder fund for Third Point’s principal fund, which is run by Daniel Loeb. It is primarily a long-short equity fund that has holdings in well-known companies including Amazon, Meta Platforms, and Siemens. The trust would be worth considering on this basis alone, but there is some special sauce here as well for potential investors prepared to look beyond the mainstream. TPOU has been unable to control its discount rating despite a 25% tender offer in the spring, and the trust has not been willing to sit on its laurels and wait for its performance to be recognised. A review process was due to report by the end of 2024, but shareholders will need to wait a little longer now. The review committee has said that it plans to report in early April and has explained it is conducting due diligence into “one particular strategic option”, which sounds intriguing. We do not know whether this will prove the sort of corporate landmark moment to deal decisively with the discount, still wide at 22.8%, but something is in the works here and we think shareholders could well be in line for an uplift. We rate the shares a BUY.
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