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Scottish Mortgage remains a top performer since value rally began, but bargain hunter City of London is now delivering stronger returns

Investors need not be too worried about what the rotation into value could mean for some of the most popular investment trusts geared towards growth names.

Some of the trusts that invest almost exclusively in growth names are still delivering a decent performance, showing there are some good fund managers despite what the critics of active management might say.

Naturally more value-orientated trusts have done well since Pfizer’s vaccine announcement in November sparked a rally in value stocks and a sell-off in some growth names, with a visible rotation into previously unloved value stocks developing. The FTSE All-Share has returned 21.2% in the period from 2 November 2020 to 21 January 2021.

Despite the value rally however, Baillie Gifford-run Scottish Mortgage (SMT), one of the most growth-orientated funds in the investment trust universe, is still delivering a strong performance.

According to FE Fundinfo, Scottish Mortgage has delivered a return of 27.6% in the period.

The trust’s holdings have been big beneficiaries of lockdowns and structural changes as a result of the pandemic, none more so than Amazon, while Tesla – its top holding and accounting for 8.9% of its total assets – has been the standout performer, rising more than sixfold in 2020.

In the last three months Tesla has continued to do well, fueled by its inclusion in the S&P 500, despite ever growing fears about its valuation and its share price has doubled since November.

And in a blow to the theory that growth stocks will underperform in a value rally, the second best performing trust since November has been another in the Baillie Gifford stable, Monks (MNKS), which has returned 22.7%.

Its top holdings include Amazon, Tesla and Google owner Alphabet, as well as Japanese tech conglomerate Softbank and South African equivalent Naspers.

But the trust is more diverse than Scottish Mortgage and other top holdings include the likes of budget airline Ryanair (RYA), a stock generally considered in the value bracket and one which has rallied 22% since the start of November with the vaccine rollout potentially saving the crucial summer season for airlines and holiday firms.

Veteran manager Charles Plowden twice added to his holding in Ryanair in the six-month period to 31 October, believing it will take market share as other operators retrench, and has initiated new positions in a number of companies where near-term demand appears bleak but the long-term growth could be compelling.


New holdings in Monks include online travel agency Booking Holdings and car sharing company Lyft, where the manager sees growth potential in the transportation-as-a- service market.

New positions were also added in sports apparel company Adidas and cosmetics firm Estee Lauder, both brands which Plowden believes will endure the current challenges to emerge stronger.

While the two growth-orientated trusts have performed well since the value rally started, the value-tilted City of London Investment Trust (CTY) has also done well, returning 21.1% between 2 November and 21 January as it finally starts to meaningfully claw back some of the losses it has suffered as a result of the pandemic-induced sell-off, though the trust is still down 10.5% on its pre-pandemic level.


Its top 10 holdings are all FTSE 100 stalwarts and some of them have bounced back strongly in the value rally, most notably multinational bank HSBC (HSBA), which has rallied over 20% since the start of November ahead of what could be a strong economic recovery in 2021.

Another top holding in the trust to have enjoyed a strong couple of months has been miner Rio Tinto (RIO), which has soared 26.5% since the start of November on the back of rapidly rising iron ore prices – another sign the global economy could be in for a big bounce back this year.

During November and December, fund manager Job Curtis sold holdings in steam engineer Spirax-Sarco Engineering (SPX) and safety products group Halma (HLMA), on valuation grounds.

The proceeds were switched into other holdings in the portfolio, such as supermarket WM Morrison (MRW) and Direct Line Insurance (DLG), both of which have risen markedly in the past two-and-a-half months, as well as US hardware firm Cisco Systems, another previously beaten down stock whose share price has jumped from $36 at the start of November to around $45 in mid-January.

Elsewhere among popular trusts is F&C Investment Trust (FCIT) with a 16% return since the value rally began in November. The trust, which is highly diversified and marketed for a beginner investor looking for their first investment or a ‘building block’ holding for their portfolio, has steadily risen since the March sell-off and thanks to the value rally is now back at its pre-pandemic level.

Its top holdings include big tech stocks such as Amazon, Alphabet, Apple, Microsoft and Facebook, which collectively make up 10.5% of the portfolio. Amazon and Facebook have remained relatively flat since the value rally took off, but Apple’s stock has risen 20% in that timeframe in a sign that investors are still keen on growth names with the iPhone maker expected to have reported record earnings for the first quarter of its 2021 financial year as Shares went to press.


Healthcare stocks in general have been a big beneficiary of the pandemic, providing a tailwind for Worldwide Healthcare Trust (WWH). By May it had recovered from the March sell-off to go above its pre-pandemic level.

Despite the high ratings of some of its holdings, the trust has continued to perform strongly and has returned around 15.6% since the start of November.

In the trust’s factsheet for November, portfolio managers Sven Borho and Trevor Polischuk said two of its top performers were Novartis and Takeda Pharmaceuticals, two highly-rated large cap pharma stocks which rebounded in November despite no news at all, showing that not all growth stocks sold off in the value rally.

Another strong performer was diagnostics company Natera, which rallied on ‘positive fundamentals and the belief that a COVID-19 vaccine should allow for other parts of the healthcare utilisation spectrum, such as routine diagnostic testing, to rebound,’ says Worldwide Healthcare Trust.


Meanwhile three of the most popular investment trusts on the market, Smithson (SSON), Polar Capital Technology Trust (PCT) and Finsbury Growth & Income (FGT), have all returned roughly 12% since the value rally began, lagging the FTSE All-Share’s 21.2% return.

To be expected with manager Fundsmith’s ‘do nothing’ strategy, there wasn’t much in the way of buying or selling for Smithson during the period.

Its top performers included Fevertree Drinks (FEVR:AIM), which has seen its share price bounce back on the expectation of the hospitality sector opening up again for good later this year, as well as credit reference agency Equifax, the American equivalent of Experian (EXPN), which has rallied hard since the start of November.

As for Polar Capital Technology, manager Ben Rogoff highlighted the trust’s decision not to own Twitter, whose shares have taken a big hit since mid-December after suspending former US president Donald Trump.

The trust recently reduced its overall video game exposure and sold a position in CD Projekt Red, the video game developer badly hit by botched released of its highly-anticipated Cyberpunk 2077 video game.

It also lowered exposure to several large internet stocks including Alibaba as regulation and politics remain a focus area for large tech firms. But regulatory changes could be a boon to other internet stocks, Rogoff believes. The trust participated in the recent IPOs of both Airbnb and Doordash.

DISCLAIMER: Shares’ editor Daniel Coatsworth owns shares in Smithson Investment Trust

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