Are you brave enough to buy these three bargain investment trusts? – Telegraph.co.uk

Posted: March 20, 2020 at 3:44 am


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Most investors know the old adages: Never waste a crisis andbe greedy when others are fearful. But acting upon them is a different challenge entirely, especially when markets are so volatile. But brave investors can find bargains by looking forinvestment trusts that have opened up unusually widediscounts.

Michael Lindsell, of fund groupLindsell Train, recently topped up his holding in his own Lindsell Train Investment Trustafter it hit a rare discount. For fellow bargain hunters, we have uncovered the trusts that seen some of the biggest discount increases as a result of the coronavirus-induced market fallsand are "cheap" compared to historic levels.

By investing in fast-growing biotechnology companies, this fund tries to find the next big medical breakthrough. But this is risky and its share price can fluctuate significantly onthe back of positive of negative tests from the stocks it owns.

Its discount, which measures the difference between the share price and the value of the underlying investment each share buys,fell ninepercentage points in the past three weeks, to 14pc. This means to buy 1 in the trust, investors would only need to spend 84p.

A trust is seen as cheap when its current discount is higher than the longer-term average. International Biotechnology Trust's one-year average discount is 1pc and three-year average is 2.5pc. This means it is extremely cheap compared to normal levels. It yields around 2.5pc which helps compensate for some of the stock market risk.

This giant 2bn trust invests in emerging economies around the globe but has been shunned by investors on the back of fears over poor economic growth and a crash in oil prices. Its discount fell by 7 percentage points in the past three weeks and it is now at 17pc. This iscompared with a 12pc three year average.

Investors that are positive about the long-termprospectfor Asian economies could view this as an attractive entry point. The fund has 25pc in China, 15pc in South Korea and 10pc in Taiwan.

Managed by Simon Barnard but part of famed fund manager Terry Smiths Fundsmith, this trust owns small and medium-sized companies from around the world.

Its discount has grown by around 9 percentage points in the past three weeks and it is now at 6.5pc. It has traded on an average premium of 3pc since it was launched in October 2018, reflecting the strong reputation of Terry Smith and the funds excellent performance to date.

Smaller companies are normally more vulnerable to economic shocks compared to larger firms, but come with greater growth prospects. Investors that have faith in Terry Smith's investment process could capitalise on the market sell off to buy high-growth companies at a rare discount.

Annabel Brodie-Smith, of the AIC, commented: Of the investment companies whose discounts have widened the most during the recent market sell-off, a large number invest in Asia and Emerging Markets, demonstrating investors anxiety about the threat of the coronavirus to the region.

"Other hard-hit sectors include those focused on growth, such as smaller companies and technology."

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Are you brave enough to buy these three bargain investment trusts? - Telegraph.co.uk

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March 20th, 2020 at 3:44 am

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