What investment trusts did investors buy in February?

Stock markets got into their stride in February, as the fourth quarter results season gave investors another chance to consider the considerable possibilities opened up by artificial intelligence (AI). Positive signals from the US economy further allaying fears of a recession provided the required supportive backdrop.

Results from Nvidia in February were hailed as a pivotal event, and so they turned out to be. The company reported record quarterly revenues of $22 billion, up 265% on a year ago¹. After an initial bout of indigestion, Nvidia shares continued on their parabolic way to fresh highs.

There were signs too of a broadening of the bull trend to some formerly unpopular areas. Japan’s Nikkei 225 Index finally beat its 1989 record high, driven by strong earnings reports and tech-inspired optimism. In the UK, banks rallied on news of profit gains driven by higher interest rates.

Investment trusts across the growth-income spectrum continued to attract support. Expectations of interest rate cuts by the middle of this year emboldened investors in growth strategies. Meanwhile, trusts investing in the UK and China also fared well and a trust specialising in corporate bonds made the top-10 for the first time.

Scottish Mortgage returned to the top in February as the upward trend in technology stocks persisted. The trust lagged its asset value a little, although the broader picture remains one of a gradually narrowing discount since June last year. Today the trust trades at a discount of 13.9%, compared with around 12.8% this time a month ago¹.  

The trust’s weighting in ASML – the Dutch company that supplies chipmakers with the lithography technology to inscribe silicon wafers – continues to grow. It accounted for 8% of the trust at the end of January. Nvidia (6.5%) was the second largest holding. Together these positions demonstrate the trust’s continuing commitment to highly positive dynamics in the semiconductor chip industry, which is struggling to keep pace with demand.

JP Morgan Global Growth & Income also gained a place compared with January. This highly popular trust aims to beat the MSCI All Countries World Index over the long term, which it has done since stock markets bottomed in 2020. The trust currently trades at a 2.2% premium to its asset value with a prospective dividend yield of around 3.6%². Please note, this yield is not guaranteed.

While the trust’s management remains cautious about the macroeconomic environment in 2024, it is staying positive about the outlook for corporate earnings. It sees positive structural changes, a weaker dollar, governance improvements and narrowing growth differentials between the US and other countries as beneficial to the outlook for international markets this year.  

Fidelity China Special Situations was February’s strongest riser, gaining seven places to third. The trust no doubt benefited from signs of China’s stock market breaking out of its yearlong downtrend, even as the economy remains weak. Various directives from the government to encourage support for the stock market appear to be bearing fruit.

The trust, which currently trades at a 9.6% discount to its net asset value, agreed to a merger with the smaller abrdn China Investment Company last November.

Our second tech-focused trust of the month – Polar Capital Technology Trust – stayed in fourth place. While Microsoft remains the trust’s largest holding at 10.2% of the portfolio, semiconductor and semiconductor equipment companies account for the largest sector weighting at 30.4%.

Manager Ben Rogoff reports the trust as being fairly fully invested currently, due largely to the management team’s conviction in the powerful secular tailwind associated with generative AI. The trust’s discount has decreased over the past month, from around 13% to 9.6%³.

Meanwhile, Allianz Technology Trust rose one place to fifth. This trust’s managers also report a continued high level of conviction in secular growth trends within the tech sector, from AI and machine learning through the “Internet of Things”, cyber security and digital assets.

City of London Investment Trust in sixth was two places higher compared with its January ranking. Like the aforementioned JP Morgan trust, this trust aims for a combination of long-term income and capital growth, only this time from a portfolio of mostly UK shares.

Even so, the trust says over 60% of the revenues of the companies it is invested in come from overseas. In effect therefore, and like many other trusts that invest in the UK, it offers a global exposure.

Given the UK stock market’s low valuation compared with international markets, this is a trust that may interest contrarian investors. The trust has now chalked up 57 years of unbroken dividend growth and currently yields 5.1%. Please note this yield is not guaranteed⁴.

In seventh, Fidelity European Trust remained the top pick for a European exposure. This trust continues to emphasise large businesses differentiated by virtue of their resilience and pricing power and counts Nestlé, Novo Nordisk and ASML as its top three.

The Wegovy weight-loss drug maker Novo Nordisk moved relentlessly higher in February, as the company continued to wrestle to meet demand. The trust currently trades at a discount of about 6.8%, down a little from around 8% a month ago.

F&C Investment Trust was the first of two new entries last month. Like City of London, the world’s oldest investment trust has consistently grown its dividends over the long term – 53 years in this case.

Where this trust differs is that it is currently invested in more than 400 companies globally, so individual stakes tend to be smaller than in other trusts (Microsoft is the largest holding accounting for 3.1% of the portfolio). The trust’s objectives are to achieve dividend growth that beats inflation over the long term and to smooth out the highs and lows of stock markets⁵.

The other new entry was TwentyFour Select Monthly Income. This trust invests in fixed income credit – for example, bonds issued by companies, asset backed securities or bank capital – and is targeting a dividend of at least 6% per annum. Please note this income is not guaranteed. The trust capitalises on its closed ended structure by investing in less liquid debt securities that generate higher returns⁶. 

Finally, another income specialist Alliance Trust rounded out the list. This trust has achieved a dividend increase every year since 1966 and draws on several stock pickers with varying investment styles to get results.

The trust is currently funding overweight positions in the UK, Europe and emerging markets by having an underweight exposure to the US. Among the trust’s more unusual top-10 holdings currently are the Brazilian oil giant Petrobras and MercadoLibre (Latin America’s version of eBay)⁷.  

Dropping out of the top-10 in February were two UK focused trusts – Fidelity Special Values and Murray Income Trust.

Top 10 best-selling investment trusts on Fidelity’s Personal Investing platform in February 2024

1. Scottish Mortgage Investment Trust
2. JPMorgan Global Growth and Income PLC
3. Fidelity China Special Situations PLC
4. Polar Capital Technology Trust
5. Allianz Technology Trust PLC
6. City of London Investment Trust
7. Fidelity European Trust PLC
8. F&C Investment Trust PLC
9. TwentyFour Select Monthly Income
10. Alliance Trust 

Source: Fidelity Brokerage, 1-29 February 2024

Source:

¹ Scottish Mortgage, 12.03.24
² JP Morgan, 31.01.24
³ Polar Capital, 11.03.24
⁴ Janus Henderson, 11.03.24
⁵ F&C, 31.01.24
⁶ TwentyFour, 12.03.24
⁷ Alliance Trust, 31.01.24

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Before investing, please read the relevant key information document which contains important information about each investment trust. The shares in these investment trusts are listed on the London Stock Exchange and their price is affected by supply and demand. Investment trusts can gain additional exposure to the market, known as gearing, potentially increasing volatility. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.