Baillie Gifford-run investment trust Monks (MNKS) smashed its FTSE World benchmark in the year to 30 April, delivering a total return of 55.5% compared to 33.9% for the index.
While they have since fallen back a bit as the market rotation into value stocks continues, key contributors to performance during the period included growth stocks such as electric carmaker Tesla, whose share price rose four-fold, and Chinese ecommerce platform Meituan Dianping, which jumped three-fold.
Most of these companies are beneficiaries of the shift to digital, as were a number of the other contributors. However, the trust’s managers believe many of their holdings are still at the early stages of penetration and therefore expect strong growth to continue.
They said: ‘We think the pace of change will not abate and our objective is to stay ahead of change in technology, data, cultural shifts, consumer behaviour and many other factors. We seek to invest in strong and flexible companies capable of navigating, driving, or benefiting from change.
‘Returns will not be linear - we should expect greater volatility as policy responds to economic recovery - but it is during just such periods that many opportunities come to light.’
Analysts at Numis believe the trust is an ‘attractive vehicle’ for investors seeking exposure to long-term growth stocks, and point out that it is differentiated from its stablemates at Ballie Gifford, with Scottish Mortgage (SMT) more concentrated and including unquoted firms, while Edinburgh Worldwide (EWI) focuses on smaller companies.
As of the end of March, only 17 of the 106 investments in Monk’s portfolio are also held by Scottish Mortgage, representing an overlap of 15% by value, according to Morningstar. Since the team took over management on 27 March 2015, Monks’ NAV has risen 185%, compared with 111% for the FTSE World Index.
The trust’s discount has narrowed from 14% to 2%, resulting in share price gains of 218%, and the Numis analysts think such a rerating is ‘sustainable as Monks benefits from a low expense ratio, and we believe it is an attractive vehicle to gain exposure to a diversified global portfolio of growth stocks.’