Markets look “greedy” so here’s where to take investment company profits and look for value

Stifel is recommending investors take some profits on their investment company positions after an impressive rebound from the panic over US tariffs in early April

The broker said 42 investment companies had risen more than 25% in the wake of President Trump’s sweeping “reciprocal” tariffs on “Liberation Day”, which saw markets fall but then recover as the US administration showed a more pragmatic, if erratic, approach to negotiations.

With discounts narrowing across the sector to around 13% from 16% at the end of December, Stifel analysts said 50 London-listed funds traded at gaps of 5% or less to net asset value (NAV), while around 100 stood at, or within, 3% of their one-year share price highs.

For context, the Association of Investment Companies, the sector’s trade body, has 295 members.

Analyst Iain Scouller said the big advance in US, UK and Europe and the renewed enthusiasm for many sectors and asset classes made him nervous ahead of the summer when thin trading can leave markets vulnerable to “wobbles” or “flash crashes”, such as the 12% one-day slump in Japan last August.

Mindful of Warren Buffett’s advice to “be fearful when others are greedy and greedy when others are fearful”, Scouller said: “We believe investors will also start focusing on the outlook for company earnings in 2027 and the risks around that. For contrarian investors, we think there is certainly a good case to take some potential profits and increase cash weightings and wait for more attractive valuations in the months ahead.”

Examples of where profits are there to be taken include Manchester & London (MNL), the £332m tech-laden global investment trust that as of Tuesday 15 July had shot up 66% since 8 April and stands 14% below NAV compared to its average one-year discount of 17%.

Seraphim Space (SSIT) has rocketed 59%, good for anyone who has jumped aboard since it hit all-time lows two years ago. However, at just below 82p, the £188m company is still well below the 128p peak reached shortly after launch in 2021. Nevertheless, the extent of its re-rating is shown by a discount that has more than halved its 42.5% one-year average to 20%.

Other big gainers include: Baker Steel Resources (BSRT), a £73m mining fund, up 49%; Geiger Counter (GCL), the £52m uranium fund, up 48%; and £173m Downing Renewables Infrastructure (DORE), up 46% after being bid for by its largest shareholder.

Less impressive, but equally noteworthy, are the group of UK equity trusts dominating the bottom of Stifel’s list of risers. Lowland (LWI), Shires Income (SHRS), Henderson Smaller Companies (HSL), Aberdeen Equity Income (AEI), Odyssean (OIT) and Aberforth Geared Value & Income (AGVI) leaped 25%-27% as the domestic stock market breaks from four years in the doldrums.

Investors looking for value could cast their eye over investment companies whose shares have either fallen modestly or risen less than 10% in the past three months. Castelnau Group (CGL), the £265m special situations fund run by Phoenix Asset Management Partners, which is also behind UK-focused Aurora (ARR), has fallen 8%, the discount widening to 21% discount versus a 12-month average of 8%.

Majedie (MAJE), a defensive £128m multi-asset “liquid endowment fund” that eschews private equity, has slipped 3% with shares close to a 12% discount, slightly wider than their 11% one-year average.

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