New manager off to a strong start: Edinburgh Investment Trust

EDIN’s new manager is off to a strong start…by Josef Licsauer

Overview

 
In October 2023, James de Uphaugh and Chris Field announced their retirement, and Imran Sattar, an experienced manager at Liontrust whom they have worked closely with over the years, assumed the role of lead portfolio manager on 06/02/2024.

Moving forward, the message is one of continuity. Imran, much like his predecessors, determined early on in his career that a flexible investment style is crucial to perform in varying market environments, and this is something he has consistently applied to portfolios he has managed in the past. As such, the plan is to continue managing Edinburgh Investment Trust (EDIN) with the same approach, balancing quality stocks that he deems best placed to deliver strong total returns to shareholders over time. Despite his brief tenure, Imran has already made his mark on the Portfolio, by making several changes, including initiating a new position in a US-listed firm, Verisk Analytics. He believes Verisk offers good long-term growth prospects, filling a gap not met by UK companies in the data space.

However, Imran’s current optimism about his home market means that the portfolio’s exposure to overseas businesses, c.6%, is one of the lowest allocations in his career. He argues that specific UK headwinds are gradually abating, and UK equity valuations are at historically low levels. This has presented numerous opportunities on home soil and prompted him to add several new names to the portfolio, such as Autotrader and Rotork, and bolster some existing positions in the portfolio on weakness, including Dunelm.

Currently, EDIN trades at a 10.3% Discount, slightly above its five-year average and also wider than the AIC sector’s average of 5.9%.

Analyst’s View

 
Imran Sattar, who was appointed manager officially in February of this year, worked closely alongside his predecessors for several years and has managed portfolios with the same focus over most of his career. As such, we would expect him to take a very similar approach with EDIN as the previous managers took. Having looked over Imran’s track record, it’s clear to us that this way of investing is his bread and butter, with the changes he’s made to EDIN’s portfolio so far falling into alignment with his total return ethos, i.e. identifying quality companies and blending those offering both capital and dividend growth together.

A six-month stewardship isn’t long, so we think it’s reasonable to expect some investors will need more time to gain confidence in the new manager’s ability. That said, we think Imran has made a strong start.

The Portfolio changes he’s implemented continue to make EDIN a compelling proposition for investors seeking exposure to quality UK companies across diverse sectors and his focus on investing in companies with strong earnings growth potential should continue feeding into rising dividends over time.

Overall, we think EDIN is well-positioned to be a core holding for investors and note that the board has made good efforts to reduce the management fee, making EDIN more competitively priced within the UK equity income space (see Charges). Moving forward, we also see the potential for the discount to narrow further, particularly if Imran continues to outperform the index and deliver growing Dividends year-on-year, which would also provide an additional boost to shareholder returns.

Bull

• Managers apply a total return ethos, balancing income and capital growth
• Low OCF offers investors low-cost access to UK equities
• No dogmatic style bias could mean the trust won’t be as impacted in periods of sharp style rotations

Bear

• Structural gearing can magnify losses in a falling market, as well as gains in rising ones
• EDIN’s dividend is lower than the sector average
• The UK market offers little exposure to certain high-growth sectors, like technology

 
See the full research on EDIN here >
 

 

Disclaimer

 
Disclosure – Non-Independent Marketing Communication
 
This is a non-independent marketing communication commissioned by Edinburgh Investment Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.