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Murray International Trust - ignoring the crowds

Jonathon Curtis, Investment Analyst, reports on Murray International Trust after it released its annual results to 31 December 2018.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • Bruce Stout thinks some share prices have been driven too high by investors following the crowds
  • The share price fell 6.8% over the 12 months to 31 December 2018
  • NAV fell 7.5% compared with a 5.2% fall for the benchmark
  • Declared annual dividend of 51.5p per share

Bruce Stout invests in companies from around the world he thinks will grow their earnings and dividends over the long term. If they're successful, their share prices could follow.

He’ll rigorously research a company before investing in it, looking at things like its financial strength and how well the company’s run. Once he feels positive about a company’s prospects, he’ll invest if he thinks the shares can be bought at an attractive price. Sometimes he’ll invest in some smaller companies, which have more growth potential than larger ones but are higher risk.

The manager doesn’t tend to invest much in any single country. While the US accounts for around half the global stock market, it only makes up around 14% of the trust. That’s because many US companies pay low or no dividends.

Nearly a third is invested in Asia, although there’s no investment in China for the same reason as the US – a lack of dividend paying companies. There’s a significant amount invested in higher-risk emerging markets like Mexico, Brazil, and Indonesia. Around 10% of the trust's invested in UK companies. That’s among the lowest exposure to the UK it’s ever had.

During 2018 Stout made several new investments. These include Schlumberger, the world’s largest oil services provider. He thinks the company will increase growth by ploughing more of its profits back into the business. He also made new investments in Korean giant Samsung Electronics, Polish bank Bank Pekao, and Swedish industrial companies Epiroc and Atlas Copco.

Stout also invests in international bonds to add diversification. And he borrows money to invest (gearing) to try to increase returns. Gearing will increase any losses though, so it’s a higher-risk approach. He has the ability to use derivatives which, if used, also adds risk. Details of the risks and charges can be found in the trust’s annual reports and accounts.

How’s the trust performed?

The 12 months to 31 December 2018 were disappointing for the trust. Net asset value (NAV) fell 7.5% and the share price dropped 6.8%. The benchmark fell 5.2%. More recent results have been positive, although still behind the benchmark, and this is over a very short time frame. Past performance doesn’t guarantee future returns.

A total of 51.5p dividend per share will be paid, which will be 3% more than the previous year’s payment. This isn’t a reliable indicator of future dividends though, and income isn’t guaranteed.

Annual percentage growth
Mar 14 -
Mar 15
Mar 15 -
Mar 16
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Murray International Trust 2.1% -8.7% 43.2% 2.6% 2.8%
Benchmark* 14.5% -1.7% 29.4% 1.6% 9.7%

Past performance is not a guide to the future.Source: Lipper IM to 31/03/2019

* The trust uses a blended benchmark of 40% FTSE World UK Index and 60% FTSE World ex UK Index.

Tobacco companies like British American Tobacco and Philip Morris were a big part of the weak performance. They normally hold up well during downturns but didn’t this time around. Chilean chemical company Quimica Y Minera, consumer goods company Unilever Indonesia, and Japanese construction company Daito Trust also hurt the trust’s recent performance.

Other companies did well though. US Financial market company CME Group, Malaysian bank Public Bank, and US telecoms conglomerate Verizon made the biggest gains for the trust.

Manager’s outlook

Stout thinks investors are increasingly ‘following the crowds’. In his view this has funnelled too much money into popular markets and sectors, pushing up their prices beyond sensible and sustainable levels. He thinks sticking to an investment philosophy and ignoring the crowds is essential to successful long-term investing.

He sees a lot of challenges on the horizon – companies with lots of debt, governments with not enough money, and industries being rapidly disrupted. With such an unfamiliar environment, he thinks looking to the past could become less and less effective at forecasting the future. That’s why he thinks diversification and discipline is the best way to deal with whatever the market throws at us in the future.

Key Information Document

More on this trust, including charges

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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