Portfolio & Performance

ISINGB0005800072
SEDOL0580007

Share Price is the price of a single ordinary share, as determined by the stock market. The share price above is the mid-market price at market close.
Share Price
343.0p


Net Asset Value (NAV) per Share is calculated as available shareholders’ funds divided by the number of shares in issue, with shareholders’ funds taken to be the net value of all the company’s assets after deducting liabilities. The NAV figure above is based on the fair/market value of the company’s long-term debt and preference shares (known as debt at market value). This allows for the valuation of long-term debt and preference shares at fair value or current market price, rather than at final repayment value (known as debt at par).
NAV per Share
354.2p


Premium/Discount. Since investment company shares are traded on a stock market, the share price that you get may be higher or lower than the NAV. The difference is known as a premium or discount.
Premium/-Discount
-3.2%


Dividend Yield is calculated using the latest full year dividend divided by the current share price.
Dividend Yield
7.9%

Data source DataStream and Allianz Global Investors as at 28.09.2020 based on market close mid price.

Awards & Ratings

X
RSMR Rating: The Merchants Trust has been awarded RSMR’s ‘R’ rating, widely recognised as a mark of quality for funds, ranges and investment trusts that receive this seal of approval. The RSMR research process results in a list of investment trusts which are the trusts that RSMR feel have a robust, repeatable process and the ability to deliver strong performance in the future.
X
Association of Investment Companies (AIC) Shareholder Communication Awards 2020: The Merchants Trust won the award for ‘Best Report and Accounts – Generalist’. The judges praised the winning entry for the quality of its case studies and investment report, its use of language that was easy to understand, and the level of detail provided on the portfolio.
The RSMR rating is designed for use by professional advisers and intermediaries as part of their advice process. This rating is not a recommendation to buy. If you need further information or are in doubt then you should consult a professional adviser.
Association of Investment Companies (AIC) Shareholder Communication Awards 2020: The Merchants Trust won the award for ‘Best Report and Accounts – Generalist’. The judges praised the winning entry for the quality of its case studies and investment report, its use of language that was easy to understand, and the level of detail provided on the portfolio.

Portfolio

The data shown is not constant over time and the allocation may change in the future. Totals may not sum to 100.0% due to rounding. All data source Allianz Global Investors unless otherwise stated.

Top 10 Holdings (%)

GlaxoSmithKline
5.9
British American Tobacco
4.6
Imperial Brands
4.5
BAE Systems
4.5
IG Group
3.7
Scottish & Southern Energy
3.6
BHP Group
3.5
Tate & Lyle
3.4
National Grid
3.3
Barclays
3.3

Data as of 31.08.2020

Geographic Breakdown (%)

UK 97.2
Cash 2.8

Data as of 31.08.2020

Sector Breakdown (%)

Consumer Goods
20.5
Financials
20.3
Industrials
18.7
Consumer Services
8.7
Utilities
8.5
Oil & Gas
6.3
Health Care
6.0
Basic Materials
4.6
Telecommunications
3.6
Cash
2.8

Data as of 31.08.2020

Market Cap Breakdown (%)

FTSE 100 65.7
FTSE 250 20.3
Small Cap 11.3
Cash 2.8

Data as of 31.08.2020

Fund Manager Comments

August saw confirmation that the UK economy had officially entered recession earlier this year, with a record 20% fall in economic output recorded in the second quarter as many activities were halted under lockdown. However, there were also the first signs of a sharp economic rebound emerging from the depressed level, with June’s manufacturing production up over 10% compared to May and construction output up over 20%.

The stock market was less volatile in August than earlier in the year and registered a small gain, although most overseas stock markets were much stronger. Bond markets were weaker with the yield on the 10-year UK gilt trebling to 0.3% from its depressed level at the end of July. This resulted from hopes for improving economic activity, as well as comments from the chairman of the US Federal Reserve Board that they would target “average inflation” of 2% and allow inflation to run above their target level for some time.

The FTSE All-Share Index gave a total return of 2.4% in August, led by medium sized and smaller companies and several cyclical sectors. Among the larger sectors the strongest performers included travel & leisure, general retail and media. The weakest performing sectors produced negative returns and these tended to be defensive sectors including beverages, utilities and pharmaceuticals.

The portfolio outperformed the overall market benefitting from double digit gains at WPP, which announced a resumption of dividend payments along with reassuring results, GVC, which reported robust trading, and Inchcape, which benefitted from improving confidence as the automotive industry emerges from lockdown. Not owning Diageo also helped relative performance as that share fell back, and held back the index return, in response to poor trading news. On the other hand, utilities SSE and National Grid were poor performers. National Express disappointed the market with results and Hammerson fell back as it announced a rights issue and an asset disposal to shore up the balance sheet. The NAV also outperformed the benchmark, returning 3.2%, ahead of the 2.4% return of the benchmark

Investment activity was more limited in August. We reduced positions in two stocks, Standard Life Aberdeen and St James’s Place, which both have high sensitivity to market levels. Both have outperformed the broader UK stock market over the last 12 months and it seemed prudent to reduce large exposures to fund other investments.

We added to BAE Systems after the company announced robust interim results in July and reinstated its 2019 dividend, which had been deferred earlier in the year. The shares were trading on a very modest multiple, which we believe undervalues their defensive characteristics. We also added a small amount to several existing positions that have underperformed and trade on very depressed valuations. The most significant was housebuilder Redrow, where we are encouraged by reports of strong demand and robust pricing for new homes as the industry emerges from lockdown.

As we have noted several times, the stock market has been very polarised for some time now with a large gap between perceived quality and growth companies and many of the other companies. We find many compelling investment opportunities to buy fundamentally sound businesses trading on exceptionally low valuations, assuming quite a cautious economic scenario. We have actually been encouraged by the speed of recovery in several of the industries that the portfolio is exposed to such as housebuilding, construction, furniture retail, car sales, gambling and advertising. In some cases we are also seeing the reinstatement of dividends that had previously been deferred, or the resumption of dividend payments as at WPP this month.

Simon Gergel16 September 2020

We have actually been encouraged by the speed of recovery in several of the industries that the portfolio is exposed to

This is no recommendation or solicitation to buy or sell any particular security.

Performance

Performance (%)

Select period:

    Cumulative Returns (%)

    3M6M1Y3Y5Y
    Share Price-7.6-22.8-19.1-14.82.7
    NAV (debt at fair value)-4.1-18.7-16.6-16.84.0
    Benchmark0.3-7.6-12.6-8.218.9

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return to 31.08.2020.1

    Discrete 12 Month Returns to 31 August (%)

    2020 2019 2018 2017 2016
    Share Price-19.1-1.46.821.7-0.9
    NAV (debt at fair value)-16.6-7.37.517.36.7
    Benchmark-12.60.44.714.613.0

    Source: Thomson Reuters DataStream, percentage growth, mid to mid, total return as at 31.08.2020.1

    1Past performance is not a reliable indicator of future returns. You should not make any assumptions on the future on the basis of performance information. The value of an investment and the income from it can fall as well as rise as a result of market fluctuations and you may not get back the amount originally invested.This investment trust charges 65% of its annual management fee to the capital account and 35% to revenue. This could lead to a higher level of income but capital growth will be constrained as a result.

    Copyright 2020 © DataStream, a Thomson Reuters company. All rights reserved. DataStream shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

    © Allianz Global Investors GmbH 2020, Registered Office: Frankfurt am Main, Register: HRB 9340, Local court: Frankfurt am Main. All Rights Reserved. The Merchants Trust PLC is incorporated in England and Wales. (Company registration no. 28276). Registered Office: 199 Bishopsgate, London, EC2M 3TY. The Company is a member of the Association of Investment Companies - Category: UK Equity Income.