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Get cheap global growth with Edinburgh Worldwide

Selected companies continue to do well despite economic concerns, so a global growth investment trust on a discount to NAV such as Edinburgh Worldwide (EWI) is a good value way to access them
December 5, 2012

Despite economic concerns about regions such as the US and China, many companies continue to do well, so a portfolio of selected equities is likely to be a good investment option. To get the best you need to search as widely as possible and a global equities fund is a good way to do this. We already include global funds in our IC Top 100 Funds, including Murray International (MYI) which is a great holding if you already have it, but it trades at a high premium to net asset value (NAV) of more than 6 per cent.

IC TIP: Buy at 283.25p
Tip style
Growth
Risk rating
High
Timescale
Long Term
Bull points
  • Good long-term performance
  • Discount wider than average
  • Emerging markets exposure
  • Diversified portfolio
Bear points
  • Volatility potential

An alternative entry point to global equities is Edinburgh Worldwide Investment Trust (EWI), which currently trades on a discount of around 15 per cent, wider than its 12-month average of 13 per cent. The widening of the discount "has been driven by strong NAV performance in November while the share price has remained relatively flat," say analysts at Investec, and "this could represent a buying opportunity for investors looking for global growth company exposure".

The investment trust has a good long-term track record, with its share price up 138 per cent over the nine years that current manager Baillie Gifford has run the trust, against 87 per cent for its benchmark, the MSCI All Countries World Index. The investment trust's NAV total return also beats the average global growth trust over one, three and five years, and the share price over one and five years. If the trust continues to do well the discount could tighten.

IC TIP Rating
Tip style:GROWTH
Risk rating:HIGH
Timescale:LONG TERM

The trust's investment team aims for growth via a long-term approach usually of five to 10 years. They seek companies they think have above-average growth prospects unconstrained by the need to match benchmark composition. They ignore market sentiment and only trade when they feel their original investment case was mistaken, the market has caught up with their assessment of the stock or they find a new idea.

Although Edinburgh Worldwide is a global trust it seeks to tap the millions of emerging consumers from countries such as China, for example taking a position in Burberry on the grounds that the expanded luxury goods market in non-western regions is a long-term growth opportunity.

The trust has a concentrated portfolio of around 40 shares, although it achieves diversity by always having exposure to at least six countries and six sectors. The trust's manager, Mark Urquhart, says the majority of the companies in the portfolio have been performing well at operational level over the past year, with many seeing sales and earnings growth of more than 15 per cent, and some considerably more.

"These are businesses enjoying secular growth opportunities from the many exciting changes occurring in how we and millions of newer consumers live their daily lives," he said in the trust's annual report. "Moreover, macro concerns mean that we are not being asked to pay very high valuations for companies that appear to have sustainable growth opportunities."

Not matching benchmark composition means that performance deviates significantly from this at times, resulting in under- as well as over-performance. Having a concentrated portfolio can also add to volatility. But if you have a long-term investment horizon and are looking for diversified global equity growth, this trust is currently a cheap way in. Buy.

 

EDINBURGH WORLDWIDE (Ticker: EWI, ISIN: GB0002916335)

PRICE:283.25pGEARING:116%
AIC SECTOR:Global GrowthNAV:334.63p
FUND TYPE:Investment trustPRICE DISCOUNT TO NAV:14.91%
MARKET CAP:£138.8mONGOING CHARGE:1.03%
No OF HOLDINGS:43*YIELD:0.71%
SET UP DATE:09-Jul-98MORE DETAILS:www.bailliegifford.com

Source: Morningstar, *Baillie Gifford.

 

Edinburgh Worldwide share price (%)MSCI All Countries World Index (%)
1-YEAR PERFORMANCE20.6710.32
3-YEAR PERFORMANCE28.8226.95
5-YEAR PERFORMANCE20.7616.7

Source: Morningstar as at 29 November 2012

 

Top 10 holdings as at 31 October 2012

Apple7.7%
Amazon.com7.4%
eBay5.1%
Tencent4.9%
PPR4.3%
Whole Foods4.2%
Google4.0%
Intuitive Surgical4.0%
Baidu3.9%
Inditex3.8%

 

Geographic breakdown

North America47.8%
Continental Europe23.2%
Asia Pacific19.3%
Emerging Markets3.3%
United Kingdom2.8%
Japan1.8%
Net Liquid Assets & Bonds1.8%