Shares magazine 27 March 2025

05 EDITOR’S VIEW

The big story of 2025 isn’t the one you thought it was NEWS 07 Investors get comfortable with Liberation Day

08 BYD steals Tesla’s thunder with its 2024 sales

1 0 Lloyds shares play catch-up with Big Four rivals in 2025

1 0 Greggs shares plunge to two-year lows

12 Can Moonpig achieve its targeted double-digit revenue growth?

13 ‘Category killer’ Costco has a lot riding on this month’s trading update

GREAT IDEAS

15 Schroder AsiaPacific Fund offers a passport to Asia’s best quality companies

18 Time to take advantage of the wide discount at quality compounder Scottish American Investment Trust

21 We’re hungry for more from bid target Bakkavor

23 Iconic sporting brand Nike runs into trouble with cut to guidance FEATURES

25 Small World: A look at recent goings-on in the UK small-cap market 34 COVER STORY

FOREVER STOCKS FOR YOUR ISA Picks to commit to for the long run 30 INVESTMENT TRUSTS

Why Alliance Witan is well positioned to outperform

Discover more about the big listed Indian consumer names / Emerging markets: China plays catch-up and Indian consumer stocks rebound

Different ways to earn a living from your investments

ISA savers pocket billions in tax relief 51 ASK RACHEL

How much will my state pension increase by in April? 54 INDEX Shares, funds, ETFs and investment trusts in this issue

Bonus report included on energy, renewables & resources

Three important things in this week’s magazine

Six stocks for your ISA

Having covered funds and trusts, in the third part of our ISA special the Shares team selects six ‘forever’ stocks which offer a combination of solid long-term growth and attractive valuations.

The

Big Interview: Alliance Witan

The merger of Alliance Trust and Witan last October created a global investment trust giant with £5.8 billion assets. James Crux sits down with manager Craig Baker to talk about the 2024 results and his vision for the future.

Visit our website for more articles

Did you know that we publish daily news stories on our website as bonus content? These articles do not appear in the magazine so make sure you keep abreast of market activities by visiting our website on a regular basis.

Over the past week we’ve written a variety of news stories online that do not appear in this magazine, including:

How to earn a living from your investments

AJ Bell investment analyst Dan Coatsworth presents five options for investors looking to generate a steady income stream from their portfolios.

hit a six-month high on promise of increased

The big story of 2025 isn’t the one you thought it was

The conventional wisdom was that 2025 was going to be the year of the US market and the dollar as President Trump pushed ahead with his ‘America First’ policy.

The promise of tax cuts and deregulation won the support of the business community, while investors bought into the concept of ‘US exceptionalism’ and dismissed some of Trump’s wilder policy aims such as starting a tariff war or annexing Canada as simple negotiating bluff.

Take these things ‘seriously, but not literally’ was the advice.

Three months into the year, the hard reality is setting in – Trump does actually want those things, even if it means burning trillions of dollars of household wealth in the stock market and sending inflation expectations to a 30-year high in the process.

Chart:

Journal put it, investors who were once ‘all-in on US stocks’ are starting to look elsewhere.

The result is that, as Saturday’s Wall Street

US-listed funds which are mostly invested in European equities are no longer seeing net fund outflows, but sizeable net inflows. At the same time, US stocks have underperformed the rest of the world by a visible margin in the last month as investors have clearly decided they need to hedge their bets.

The global strategy team at Bank of America flagged this shift in perceptions in their monthly Global Fund Manager Survey, which takes responses from over 170 managers with $426 billion of assets.

The latest survey shows the biggest ever drop in allocations to US equities from one month to another between February and March, in what the analysts term a ‘bull crash’ driven by fears of stagflation, a trade war and the end of US ‘exceptionalism’.

At the same time, the allocation to European, UK and emerging market equities (and cash) rocketed this month with the Eurozone jumping to its highest weighting in global portfolios since July 2021.

The March survey also noted a big shift towards investors ‘parking’ money in consumer staple stocks, which reached their highest weighting in 18 months, and the biggest ever rotation into highdividend stocks versus low-dividend stocks.

We’re not suggesting anyone should write the US off as an investment, but as we have always said it pays to diversify so this would be a good time to make sure you aren’t overly-exposed to a single geography,

or theme.

Capturing

Investors get comfortable with Liberation Day

‘Not everybody cheats us on trade, just a few,’ says the director of the National Economic Council

As global trade tensions continue to test investor’s patience, uncertainty is set to move up a notch as we approach what Donald Trump has christened ‘Liberation Day’ on 2 April.

‘April 2nd is going to be liberation day for America. We’ve been ripped off by every country in the world, friend and foe,’ said Trump speaking from the Oval office on Friday (20 March).

Trump is planning to impose reciprocal tariffs which he believes will generate tens of billions of dollars.

Arguing Trump’s case, Stephen Miran, chair of the Council of Economic Affairs, said: ‘I do think it’s perfectly reasonable to expect that we could raise trillions of dollars from tariffs over a 10-year budget, using those revenues to finance lower rates on American workers, on American businesses.’

The latest salvo represents a retreat from Trump’s original idea to impose a flat rate global tariff across the board.

As ever with Trump, the situation remains ‘fluid’, with uncertainty around how the current programme might be implemented. It is also not clear which countries will be targeted although the usual suspects include the EU, Mexico, Japan, South Korea, India and China.

These form part of a group of the worstoffending nations, according to Treasury secretary Scott Bessent who has branded them the ‘Dirty 15’. ‘It’s 15% of the countries, but it’s a huge amount of our trading volume,’ said Bessent.

It’s likely the hardest tariffs will be aimed at these countries with more modest tariffs applied elsewhere. The only countries likely to escape tariffs are those which do not impose tariffs on the US and those which run a trade deficit with the US.

The White House had previously considered a three-tier system of high, low and medium tariffs before rejecting the idea according to the Wall Street Journal.

US Trade deficit ranked by partner

Country Deficit ($bn) Staus

China

EU

Mexico

Vietnam

Taiwan

Japan

South Korea

295 Tariff Imposed

236 Tariff Threatened

172 Tariff Imposed

Not Speficically targeted

Not Speficically targeted

Not Speficically targeted

Not Speficically targeted

Canada Tariff Imposed

Table: Shares magazine • Source: Bloomberg

A more focused approach appears to have initially calmed investor nerves with US stock markets gapping higher on Monday (24 March), helped by confirmation from the administration that separate tariffs on specific industries like autos and semiconductors would not be announced on 2 April.

Economists have questioned the assumption that tariffs would meaningfully impact the deficit, especially given the risks of higher inflation and slower economic growth.

A flash reading of the S&P Global US PMI (Purchasing Managers index) data on Monday showed a revival of growth in March with the composite index rising to 53.5 from 51.6, driven by a marked upturn in services.

However, business expectations for the year ahead fell to their second lowest since October 2022 as companies grew increasingly cautious about the economic outlook. [MG]

BYD steals Tesla’s thunder with its 2024 sales

BYD vs Tesla

BYD 'A' TESLA

BYD 'A' TESLA

Just over a year ago, we predicted investors and car buyers would be hearing a lot more about Chinese manufacturer BYD (1211:HKG) over the coming months.

Fast-forward and the Chinese EV maker has seen its annual revenue top the $100 billion mark for the first time, beating estimates and leaving its big rival, Elon Musk-owned Tesla (TSLA:NASDAQ), eating its dust.

Sales rose 29% last year to $107 billion against Tesla’s $98 billion, while net income rose 34% to $5.56 billion, below the US firm’s $7.1 billion but above the consensus.

BYD’s strong results stem from increased demand for plug-in hybrids in its domestic market and its recent development of a new battery charging system which allows customers to charge their vehicles within minutes.

At the time of writing, BYD shares were up more than 50% year-to-date while Tesla’s shares were down 32% on the year and down 50% from

their highs.

After Tesla saw its unit sales drop for the first time last year, analysts have lowered their forecasts for first-quarter 2025 deliveries with US bank JP Morgan slashing its estimate by 20% from 444,000 to 335,000, way below the mean estimate of 430,000 vehicles.

That would represent an 8% year-on-year decline and would be the lowest level of quarterly deliveries since the third quarter of 2022.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘So much for Elon Musk having the magic touch thanks to his new-found friendship with Donald Trump. Telsa is facing significant competition and an electric vehicle market that’s hit a speedbump with its growth.

‘Europe has been problematic for Tesla due to a brand backlash, potentially linked to Musk spending more time on politics than looking under the bonnet of a car.

‘Rival car companies have also been pushing their electric models hard, reminding drivers they’ve got plenty of choice. In China, data restrictions have hindered Tesla’s progress.’ [SG]

Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Sabuhi Gard) and the editor (Ian Conway) own shares in AJ Bell.

THIS IS A MARKETING COMMUNICATION. PLEASE REFER TO THE KEY INFORMATION DOCUMENT (KID) BEFORE MAKING ANY

The Merchants Trust PLC

The Merchants Trust aims to provide an above average level of income that rises over time. So whilst we focus on investing in large UK companies with the potential to pay attractive dividends, you can focus on travel, family, home, retirement – whatever really matters to you. Although past performance does not predict future returns, we’ve paid a rising dividend to our shareholders for 42 consecutive years, earning us the Association of Investment Companies’ coveted Dividend Hero status. Beyond a focus on dividends, Merchants offers longevity too. Founded in 1889, we are one of the oldest investment trusts in the UK equity income sector. To see the current Merchants dividend yield, register for regular updates and insights, or just to find out more about us, please visit us online.

www.merchantstrust.co.uk

INVESTING INVOLVES RISK. THE VALUE OF AN INVESTMENT AND THE INCOME FROM IT MAY FALL AS WELL AS RISE AND INVESTORS MAY NOT GET BACK THE FULL AMOUNT INVESTED.

A ranking, a rating or an award provides no indicator of future performance and is not constant over time. You should contact your financial adviser before making any investment decision. For further information contact the issuer at the address indicated below. This is a marketing communication issued by Allianz Global Investors UK Limited, 199 Bishopsgate, London, EC2M 3TY, www.allianzglobalinvestors.co.uk. Allianz Global Investors UK Limited company number 11516839 is authorised and regulated by the Financial Conduct Authority. Details about the extent of our regulation are available from us on request and on the Financial Conduct Authority’s website (www.fca.org.uk). The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors UK Limited.

Lloyds shares play catch-up with Big Four rivals in 2025

Banking group was left behind in 2024 but has made up lost ground since

So far this year shares in banking group Lloyds (LLOY) have closed the gap which opened up between it

and peers like Barclays (BARC) and NatWest (NWG) in 2024.

That the stock has advanced year-to-date is even more impressive when you consider the company has significant exposure to the ongoing motor finance mis-selling scandal.

While this remains a source of uncertainty, elsewhere the business is very much firing on all cylinders, as was evident in the company’s fourth-quarter and full-year results on 20 February.

While the headline numbers were a touch disappointing, the outlook was brighter, with the bank committed to returning excess cash, including a 15% increase in the total ordinary 2024 dividend to 3.17p per share and a new £1.7 billion buyback.

There was a promise of more to

come, too, as Nunn forecast the bank would generate a return on tangible equity of 13.5% in 2025 and greater than 15% in 2026, meaning it will generate more excess capital than expected, which could be set aside for further buybacks. [TS]

Greggs shares plunge to two-year lows Greggs

Pressure on margins and weak guidance hit sentiment

Food-on-the-go retailer Greggs (GRG) has endured a miserable start to 2025, with its shares down more than 35% year-to date to their lowest levels since 2022.

A warning in January from chief executive Roisin Currie of lower consumer confidence, which ‘continues to impact high street footfall and expenditure,’ constituted an early negative catalyst.

That was followed by downbeat guidance alongside the full-year results on 4 March. Like-forlike sales growth slowed to 2.5% in the final quarter of 2024 and trading remained subdued, with like-for-like growth

slowing to 1.7% in the first 9 weeks of 2025 impacted by a weatherblighted January.

Greggs said it expected costs to increase due to inflation, although it said they would be covered by the price increases introduced last year.

The firm also warned that in 2026 and 2027, higher costs from expanding its manufacturing and distribution operations would have an impact on margins, although in the longer-term profitability should recover, with return on investment expected to reach around 20%.

Berenberg remains relatively confident in the company’s

prospects: ‘We think Greggs’ longerterm opportunity remains intact despite the cyclical headwind to likefor-like sales growth at present.

‘The pressures that have driven a deceleration in Greggs’ like-for-like sales growth are both cyclical and industry-wide, rather than companyspecific issues associated with the store estate reaching or nearing saturation point, as bears are increasingly suggesting.’ [TS]

UK

UPDATES

OVER T HE NEXT 7 DAYS

FULL-YEAR RESULTS

31 March: Alfa Financial Software, Inspired, RTW Biotech Opportunities

1 April: Niox

2 April: Big Technologies, Norman Broadbent, Raspberry Pi

Can Moonpig achieve its targeted double-digit revenue growth?

Online greetings card seller will be looking to confound the sceptics with its latest update

The upcoming trading update on 3 April from online greetings card outfit Moonpig (MOON) needs to demonstrate it is on track with its ambitious medium-term targets.

Moonpig is the leading online designer, printer and retailer of greetings cards in the UK through its eponymous platform, and in the Netherlands (through Greetz), with close to 70% market shares in both markets. The company has boosted ancillary revenue from gifting to nearly 40% of revenue.

3 April: VH Global Energy Infrastructure FIRST-HALF RESULTS

31 March: James Halstead, SSP, YouGov TRADING ANNOUNCEMENTS

3 April: Moonpig

However, a target set in October 2024 for double-digit revenue growth could be difficult to achieve given a depressed consumer backdrop and relatively low growth in the wider greetings card market. It relies on new customer acquisition, retention and getting people to make purchases more frequently.

Investors will be looking for guidance on shareholder returns, as Moonpig generates large amounts of cash thanks to its high margins, low working capital requirements and disciplined approach to capital expenditure. This could support increases in the dividend and share buybacks. There may also be commentary on cost pressures, which Berenberg analyst Adam Tomlinson thinks should prove fairly manageable: ‘Moonpig faces a much more benign cost outlook than appreciated, in our view. National insurance

contribution rises from April will have a sub-£1 million per annum effect, while national living wage increases will be immaterial, as the group does not employ many entry-level workers.’

Broker Panmure Liberum’s consumer team comment: ‘While guidance is clear, we believe it is optimistic, as new customer acquisition is lower than needed and the market environment does not support an improved gift attach rate. Consensus estimates may be too high compared to our more conservative projections, which could impact sentiment.’ [TS]

‘Category killer’ Costco has a lot riding on this month’s trading update

Shares in the membership-based warehouse retailer are priced for perfection

After a string of warnings from consumer discretionary companies and big-box retailers in recent weeks, all eyes are on discount warehouse chain Costco (COST:NASDAQ) when it reports third-quarter sales and earnings on 29 March.

In the second quarter, which took in the 12 weeks to 16 February, the company posted total revenue of $62.5 billion up 9.1% on the previous year, with sales in the US up 8.6%, sales in Canada up 10.5% and online sales up 22%.

However, consumer confidence has fallen since February while inflation expectations have risen, and even lower-income households have been struggling according to other discount retailers.

Moreover, since February, President Trump has ramped up his rhetoric against Canada, where Costco has 109 of its roughly 900 stores, so investors need to brace themselves for some collateral damage to sales.

On the flip side, Costco imports around a third of the products it sells and of that figure around half come from Canada, China and Mexico, so at the same time there will be a

What the markets expects of

focus on tariffs and their impact on sales and earnings.

There is no question Costco has been an exceptional investment over the last five years, with its shares rising from around $200 to more than $1,000 earlier this year, and although there has been some profit-taking of late the shares still trade on 47 times 12-month forward earnings.

What that means is the stock is priced for perfection, so if there is any bad news either in the thirdquarter results or in the outlook we would not be surprised to see the shares punished by the market. [IC]

3 April: Conagra Brands, Lamb Weston Holdings

Table: Shares magazine • Source: Zacks, data correct

Schroder AsiaPacific Fund offers a passport to Asia’s best quality companies

This Asia Pacific-focused trust seeks out quality growth at the right price and offers value on a near-13% discount

Schroder AsiaPacific Fund (SDP)

532p

Market cap: £742 million

Risk-averse investors may rightly worry that a trade war between the US and China could crimp the performance of Asian markets, but with 85% of the globe’s population living in Asia and the emerging markets which are expected to generate the lion’s share of global growth in the decades ahead, this diverse continent is simply too big to ignore.

The stamping ground of many great companies with strong fundamentals and fortress balance sheets, Asia offers scope for double-digit earnings growth and exposure to exciting growth themes such as AI, while the region’s equities trade at discounts to comparable US peers.

One collective which looks compelling on a wide 12.6% discount to NAV (net asset value) is Schroder AsiaPacific Fund (SDP), the largest trust by assets among the quartet in the AIC’s (Association of Investment Companies) Asia Pacific sector.

The sector’s best one-year share price total return performer, Schroder AsiaPacific Fund has outperformed its benchmark, the MSCI All Country Asia Index excluding Japan, since launch in 1995, and is one of the 50 trusts which would have made investors more than £1 million had they invested their full annual ISA allowance in the fund from 1999 to 2024, according to recent AIC research.

Asia offers scope for double-digit earnings growth and exposure to exciting growth themes such as AI”

CASTING THE NET FAR AND WIDE

Investing in Asian equities is never plain sailing, but with the experienced hands of Richard Sennitt and Abbas Barkhordar on the tiller, Schroder AsiaPacific aims to achieve long-term capital growth by investing in a diversified portfolio of around 60 of the best quality companies across Asia. There were 56 rigorously-selected names in the fund at last count.

Bottom-up stock pickers Sennitt and Barkhordar principally invest in companies located in the continent of Asia excluding Japan and the Middle East, together with the Far Eastern countries bordering the Pacific Ocean.

They cast their net far and wide to find the region’s brightest corporate prospects, including in markets as diverse as India, Vietnam, Hong Kong, China, Singapore, Taiwan and Malaysia, not to mention South Korea, Thailand, the Philippines, Indonesia, Pakistan and Sri Lanka.

The managers seek to mitigate the risk of investing in Asia by focusing on quality companies, favouring firms with sustainable earnings, robust balance sheets, efficient capital allocation and good corporate governance.

The bull case for Asia remains strong, driven by a positive economic outlook, long-term growth

potential from favourable demographics and a growing middle class fueling strong domestic consumption. And, far from trailing the west, many companies in the region are global leaders in their fields.

FOLLOW THE LEADERS

Albeit London-based, the managers are able to draw upon the rich resources of Schroders’ Asia Pacific equities research team. They seek quality-yet-undervalued companies with the potential to sustainably generate returns above their cost of capital.

Exciting growth themes in the portfolio range from technology leadership and innovation to Chinese consumption and services and Indian finance.

Commonplace among Schroder AsiaPacific Fund’s holdings are technology hardware names, including semiconductor producers in Korea and Taiwan, consumer discretionary and financial stocks, including regional banks exposed to increasing credit penetration in the likes of populous India and Indonesia.

Shares believes investors can draw comfort from the fact the portfolio is spread over multiple countries and industry sectors without any major bias towards growth or value investment styles.

As at 28 February 2025, the fund’s top geographical allocation was to China at 23.3% of assets, though Schroder AsiaPacific is significantly underweight the index, which mitigates some of the country-specific risk, while the next largest allocations are to Taiwan, India, Hong Kong, Singapore and South Korea.

Top 10 holdings include the world’s leading chip manufacturer TSMC (2330:TPE), and fellow Taiwanese fabless semiconductor product

Share price total return (%)

Schroder AsiaPacific funds casts the net far and wide for growth

Schroder AsiaPacific funds casts the net far and wide for growth

3.3%

3.3%

2.6% Indonesia 1.8%

1.5%

Geographical breakdown (as at 28 February 2025)

Table: Shares magazine • Source: Schroders

Geographical breakdown (as at 28 February 2025) Table: Shares magazine • Source: Schroders

Geographical breakdown (as at 28 February 2025)

Table: Shares magazine • Source: Schroders

powerhouse MediaTek (2454:TPE), as well as Chinese technology conglomerate Tencent (0700:HKG) and South Korean memory chipsto-smartphone maker Samsung Electronics (005930:KRX).

Investors are also buying exposure to Indiabased financial services giant HDFC Bank (HDFCBANK:NSE) and the largest publicly-traded life insurance group in the Asia-Pacific region, AIA Group (1299:HKG).

Adorned with a five-star rating from research provider Morningstar, Schroder AsiaPacific Fund’s ongoing charge is a reasonable 0.9% and there is no performance fee to complicate cost considerations for investors. [JC]

Time to take advantage of the wide discount at quality compounder Scottish American Investment Trust

SAINTS has traded at a premium for most of the last decade and issued more shares than it has bought back

The Scottish American Investment Company (SAIN) 502.3p Market cap: £864 million

The Baillie Gifford-managed Scottish American Investment Company (SAIN), or ‘SAINTS’ for short, aims to be a core investment for investors seeking real dividend growth.

The focus of the portfolio is global equites, but the trust also invests around 10% of the portfolio in bonds, property and other asset types to generate income.

SAINTS has grown its dividend every year since 1938 at a compound rate of 8% per year, ahead of average consumer price inflation of 5%.

Since Baillie Gifford took over the mandate in 2003, the dividend per share has grown at an annualised 5% compared with average inflation of 2%.

After three years of moving sideways, the shares trade at a significant 11% discount to NAV (net asset value), reflecting the manager’s ‘quality compounders’ investment style moving out of favour as investors chased large-cap tech and AI themes.

The portfolio is underweight the frothy US market while giving shareholders access to highquality businesses with good prospects for capital and income growth.

We believe this attribute, alongside the wide discount to NAV which reached a new high in 2024, represents a great buying opportunity

Lead manager of the trust James Dow is Head of Global Income Growth at Baillie Gifford and has been at the firm since 2004. He is assisted by Ross

Mathison, who joined Baillie Gifford in 2019 and became deputy manager at SAINTS in 2023.

WHAT IS THE INVESTMENT APPROACH?

Dow and Mathison search for steady, long-term compounders which have resilient dividends supported by surplus cash flow.

‘Our ‘north-star’ is 10% compounding: we are looking for companies which can deliver 10% annual growth in earnings and dividends and keep doing so for long periods of time.

‘Inevitably not all the companies in which we invest will meet our expectations, so in practice we expect this approach to deliver a result that is a little lower: perhaps 6-9% growth.

‘But over time this level of growth would deliver excellent results to SAINTS’ shareholders,’ the managers wrote in the 2024 annual report.

The starting point is always a company’s potential to deliver earnings and cash flow growth above inflation. Importantly, the managers believe

share prices and dividends follow the trajectory of company earnings and cash flow over the long run.

The team focuses on companies whose dividends are likely to be dependable whatever the weather or state of the economy, and typically the portfolio consists of around 50 to 80 positions.

Companies fall into four broad buckets of opportunity which the managers describe as compounding machines, exceptional revenue opportunities, management acceleration and longcycle returns.

The first two buckets are characterised by companies with enduring competitive positions, strong balance sheets, pricing power, proven management and strong volume growth.

The latter two buckets comprise companies with margin potential accompanied by a catalyst for change, strategic development, a shift of asset allocation priorities and strong management teams with a clear strategy.

Over 90% of the portfolio is invested in the first two buckets, compounders and exceptional revenue opportunities.

Compounders include consumer goods giant Procter and Gamble (PG:NYSE) and fast food company McDonald’s (MCD:NYSE), while UK premium mixer specialist Fevertree Drinks (FEVR:AIM) falls into the exceptional growth bucket.

HOW HAS THE COMPANY PERFORMED?

The managers don’t aim to outperform the market every year, but have done so in eight of the last 10 years. 2024 was one of the underperforming years

Scottish

Data as at 28 February 2025

when the trust’s NAV grew 6.1% against the FTSE All World index return of 19.8%.

The managers point out that this reflects the fact quality compounders were deeply out of favour as investors instead chased big technology stocks and AI names such as Nvidia (NVDA:NASDAQ).

These types of company are never a good fit for SAINTS and tend to be highly cyclical dividend payers or they don’t pay dividends at all.

Commenting on Nvidia, the managers explain: ‘There is a significant risk of a sharp downcycle in earnings if customers find ways to pursue gains in AI through optimisation rather than ever-more hardware.

‘This cyclicality and the lack of a meaningful dividend makes Nvidia unsuitable as an investment for SAINTS, and recent news flow has done nothing to alter our view on its suitability.’

Over the last 10 years the trust has delivered an NAV total return of 206.8% or 11.9% per year compared with a 207.4% return for the FTSE All World index.

The share price total return of 191.9% reflects the widening of the discount to NAV (before the pandemic the shares traded at a 7% premium). The trust has an ongoing charge of 0.58% a year. [MG]

ADVERTISING FEATURE

THE CLOCK IS TICKING –MAKE THE MOST OF YOUR ISA ALLOWANCE WITH F&C

With the end of the financial year approaching, smart investors are looking to make the most of their £20,000 ISA allowance before it resets. If you haven’t yet used your full allowance, now could be the time to act.

One collective investment fund that has stood the test of time is F&C Investment Trust. Established in 1868, F&C has helped generations of investors grow their wealth while navigating market ups and downs.

Providing access to a strategically diversified global portfolio, F&C offers exposure to both established industry leaders and emerging market opportunities - helping investors position their portfolios for the future.

“We aim to deliver long-term growth in both capital and income,” says Paul Niven, Fund Manager of

F&C Investment Trust. This measured approach means that the trust aims to balance resilience with growth, making it a potentially rewarding choice for investors looking to the future.

F&C ranks in the top 6 of the Association of Investment Companies (AIC) table of dividend heroes. It has increased the dividend it pays to investors every year for the past 53 years* – a track record that reflects the strength of its portfolio and the disciplined approach taken by Paul and his team.

Learn more about F&C Investment Trust at fandc.com

We aim to deliver long-term growth in both capital and income.”

*There is no guarantee that dividends will continue to grow.

Capital at risk. Past performance is not a guarantee of future returns. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and tax rules may change in the future. The value of your investment may go down as well as up, there is no guarantee you will get back what you invest.

We’re hungry for more from bid target Bakkavor

Our ‘buy’ call on the convenience food maker has yielded a quick win, but we’re holding out for further upside

Bakkavor (BAKK) 170p

Gain to date: 13%

Shares highlighted Bakkavor’s (BAKK) attractions at 150.5p on 13 March, urging investors to buy the chilled prepared-food manufacturer for its cash generation, defensive qualities and positive trading momentum.

We noted the private label pizza-tohummus maker was rebuilding margins and reducing debt levels, a tasty combination which could drive a further re-rating of the stock.

Bakkavor, we noted, was wellpositioned should consumers cut back on dining out and spend more on food products which can be consumed at home, and could treat investors to additional forecast upgrades.

WHAT HAS HAPPENED SINCE

WE SAID

of the equity.

Greencore says it has identified scope for ‘substantial synergies’ resulting from a combination which would create a leading UK convenience food business with annual revenue of £4 billion and ‘strong commercial relationships and market-leading capabilities in attractive segments across the UK convenience food landscape’.

Significantly undervalued the company and its future prospects”

Greencore also said it would continue to evaluate all strategic opportunities, including Bakkavor, but ‘there can be no certainty that a firm offer will be made’.

WHAT SHOULD INVESTORS DO NOW?

TO BUY?

Our ‘buy’ call delivered a quick win with Bakkavor’s shares surging on the revelation (14 March) the ready meals-to-dessert maker had rejected two takeover offers from rival Greencore (GNC). Pitched at 189p, a 25% premium to the undisturbed share price, the latest offer was spurned by Bakkavor on 10 March on the grounds it ‘significantly undervalued the company and its future prospects’.

Under Greencore’s sweetened proposal, its shareholders would own roughly 59.8% of the enlarged group with Bakkavor shareholders holding sway over 40.2%

Investors who followed our advice might be tempted to sell shares in the market and lock in a quick 13% profit, but in doing so they could miss out on a much-improved offer from Greencore or even a bidding war, since Greencore is unlikely to be the only potential suitor to have spotted Bakkavor’s attractions.

Even if a takeover fails to materialise, Bakkavor offers tasty upside as a standalone business given its scale, close partnerships with retail customers and its long-run potential in the high-growth markets of China and the US. Keep buying. [JC]

STICK WITH ASIA

• Guinness Global Investors was established over 20 years ago

• We focus on identifying sustainable profitability which is under-priced by the market

• Our experienced team of senior employees and fund managers have worked together for many years

• The Fund seeks capital growth and income from companies in Asia Pacific

• We target the growing number and breadth of high-quality companies in Asia’s growing consumer economy

Visit guinnessgi.com/wsaei or call 020 7042 6555

• We invest in companies with consistent returns and the potential for sustainable dividend growth

Scan the QR code to find out the length of the largest tree frog in the world.

POSITIVELY DIFFERENT

Risk: Past performance is not a guide to future performance. The value of this investment and any income arising from it can fall as well as rise as a result of market and currency fluctuations. You may not get back the amount you invested. Guinness Global Investors is a trading name of Guinness Asset Management Ltd., which is authorised and regulated by the Financial Conduct Authority. Calls will be recorded.

Iconic sporting brand Nike runs into trouble with cut to guidance

$67.94 Loss to date: 16.9%

Shortly after we recommended the stock on 6 March, sportswear giant Nike (NKE:NYSE) warned its fourth quarter sales would fall by a steeper-thanexpected amount.

The company also forecast a 4% to 5% drop in gross margin as it looks to reduce excess inventory of styles which no longer resonate with its customers.

WHAT HAS HAPPENED SINCE WE LAST SAID BUY?

Nike’s shares hit a five-year low on 21 March as investors questioned the speed of the turnaround under new chief executive Elliot Hill.

The company reported a 9% fall in third-quarter revenue to $11.3 billion compared to the same period last year, and NIKE Direct sales were down 12% to $4.7 billion.

Also, chief finance officer Matt Friend said the company expected fourth quarter gross margins to be ‘down approximately 400 to 500 basis points’

Chart: Shares magazine • Source: LSEG

compared to the same period last year, including restructuring charges and the estimated impact from newly implemented tariffs on imports from China and Mexico.

WHAT SHOULD INVESTORS DO NOW?

We said at the outset getting the company back up to speed would be a marathon not a sprint, and the fourth-quarter downgrade is clearly a setback, but Nike remains an iconic brand and assuming Hill can make it desirable again there is plenty of ground to make up.

Analysts at US broker Jefferies remain upbeat about the stock, saying in a recent note: ‘Hill is delivering change inside and out. We sense an immediate improvement in company culture has already taken place on the inside, and on the outside, wholesale partners have expressed optimism around what’s to come from Nike ahead.’

With the shares trading at a 10-year low on price-to-sales, any recovery in demand is likely to translate into a V-shaped recovery in the share price, which is impossible to time, so we would continue to hold. [SG]

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Small World: A look at recent goings-on in the UK small-cap market

Covering the gamut from health and wellness to rare earth metals, fast fashion and engineering

We start this month’s round-up with news of not just one but three new faces, all of which joined the market recently.

First up is One Health Group (OHGR:AIM), a provider of NHSfunded medical procedures, which raised £7.8 million before listing costs through a placing of shares at 180p to fund its first surgical hub.

The site is expected to deliver revenue of £6 million to £9 million per year, and the company says it will be earnings-enhancing within its first year of operations.

Investors seemed to like the story, with the shares closing at 192.5p on their first day of trading. Also joining AIM was Wellnex Life (WNX:AIM), an Australian distribution company focused on consumer health and wellness products, which raised £5.2 million before expenses by placing shares in the UK and in Australia where the stock is listed on the ASX exchange.

Wellnex develops, licenses, markets and distributes its own consumer healthcare brands through leading retailers in Australia, with selected brands available in the UK through Superdrug and TK Maxx stores, while it also has a distribution deal with Haleon (HLN).

The stock was indicated at 32p on the first day of trading, slightly higher than the placing price of 31.75p per share.

Finally, we have Citius Resources, shortly to be renamed Harena Resources (HREE), which joined the main market and began trading last week with a market cap of £12.4 million.

The firm owns 75% of the Ampasindava rare earth project in Madagascar, one of the most significant deposits outside China, which controls 90% of rare earth refining, representing a supply-chain risk for Western companies.

Rare earth elements are used in military applications like parts for jet engines and nuclear submarines, in motors for electric vehicles and

robotics, and in renewable energy infrastructure such as wind turbines. On the first day of dealings, the stock lost 0.75p or 25% of its value to 3p per share which wasn’t the most auspicious of starts.

HANDBAGS AND GLAD RAGS Long-suffering shareholders in fast-fashion group ASOS (ASC) must have been rubbing their eyes after the stock price rose by more than a third at the end of last week.

After the market closed on 19 March, the company revealed Danish billionaire Anders Povlsen had raised his stake to just below the 30% threshold which would trigger a mandatory bid.

Povlsen already controls the Topshop brand and there has been a flurry of internet rumours it could return to the British high street, in the same way as Boohoo (BOO:AIM) has resurrected the Debenhams name.

ASOS followed this up on 21 March with a bullish trading statement and a prediction first-half EBITDA (earnings before interest, tax, depreciation and amortisation) would top estimates thanks to higher full-price sales and lower costs.

Analysts at Panmure Liberum noted the firm’s full-year EBITDA target relied on sales recovering to flat from down 13% in the first half, which they say seems unlikely, and cautioned ASOS still has over £500 million of debt to pay off.

Meanwhile, there were acrimonious exchanges this month between engineering consulting firm Ricardo (RCD)) and its second-largest shareholder Science Group (SAG) after the former responded publicly to the latter’s written proposal to replace the company’s chair, audit chair and a nonexecutive director or face a general shareholder meeting to approve the changes.

As the board of Ricardo pointed out, Science Group isn’t a long-term investor but opportunistically amassed a 15.2% holding over the course of a few weeks when the shares were trading at a 15-year low.

The board also noted Science Group had adopted ‘similarly aggressive tactics’ in connection with its takeover of TP Group, and at Frontier Smart Technologies before its subsequent takeover,

RIDING INTO THE SUNSET

We end this month’s round-up with the news that after 22 years as manager, Neil Hermon has decided to retire from investment trust Henderson Smaller Companies (HSL)

Indriatti van Hien, co-manager for the last nine years, will continue to run the fund ‘according to its fundamental ethos’ said the firm.

The trust, which was founded in 1887 and aims to find ‘overlooked treasures’ among UK smaller companies, is one of the AIC’s (Association of Investment Companies) ‘Dividend Heroes’ and has beaten its benchmark over 10 years.

and advised shareholders to take no action.

In response, Science Group accused Ricardo of deflecting attention from the company’s poor performance and ‘destruction of shareholder value’ and described the board’s response as ‘a breach of confidentiality’ which undermined trust between the two.

Far from backing down, the board of Ricardo criticised its part-owner’s ‘aggressive approach’ and said its attempts to engage in constructive discussions had been rebuffed ‘while Science Group has continued to build its shareholding to take advantage of the company’s low share price’, the same strategy it employed previously.

Shares is settling in with popcorn and fizzy drinks to see how this one plays out.

By Ian Conway Deputy Editor

Investing in an uncertain world: Is risk properly understood?

Iain Pyle, Lead Manager, Shires Income PLC

• If excessive risk collides with excessive optimism, stock markets can run into problems

• The UK’s domestic problems are well-understood: from weak economic growth to mounting inflationary pressures

• This is in contrast to the US, where optimism is high

Investors are navigating an increasingly risky world. Months into the new US administration, the tariff regime remains a looming threat, but details are scant. Inflation appears to be reviving, with a potential impact on the interest rate cycle. The new US administration is changing the geopolitical goalposts, with unpredictable results. It feels like a vulnerable moment for stock markets.

Shires was launched in 1929 and has amassed some institutional memory about periods of risk. For us, one of the most important points to assess in an environment like this is whether the risks are well understood and reflected in share prices. It is where excessive risk collides with excessive optimism that stock markets tend to run into problems.

The UK market reflects a variety of risks. In addition to global risks, the UK’s domestic problems are wellunderstood: weak economic growth,

poor productivity and mounting inflationary pressures. Those who invest in the UK market will be wearily familiar with the prevailing gloom. Nevertheless, the UK market is cheap as a result. There is no ‘irrational exuberance’. If anything, the pessimism has gone too far. There are times in markets when being cheap doesn’t matter very much. That has certainly been true for the UK in recent history, where investors have been far more focused on growth over price. However, there are times when it is an advantage. We believe the current environment may be one of them.

If markets are volatile, and trading sideways, investors need income generation to generate a return. In this, the UK market has a clear advantage. As it stands, the sum of

the dividend yield and the buyback yield for the UK market is almost 7%, approximately the long-run real return on equities.

In other words, to make a return from the UK market, all investors need is for those distributions to stay the same. They do not need ambitious growth projections to materialise. While it is still important to be selective, and to find companies that are well-managed, with strong balance sheets, that are growing earnings and dividends, the hurdle rate for success in UK equities is low.

POTENTIAL CATALYSTS?

It is also worth noting that the outlook for the UK is not universally gloomy. While it would be a stretch to suggest that the UK is on the cusp of a significant recovery, there

are factors that could improve the outlook for UK equities.

For example, the UK consumer has far less debt than its US equivalent. UK credit card debt usage is still low, which gives consumers the capacity to raise spending levels. Real wages are rising, with the last set of Official of National Statistics data showing year on year wage increases of 5.9% for the last quarter of 2024. In the UK, people’s main store of wealth is their home, and that’s been a resilient asset over time.

The closed-ended structure of Shires means we can lean into these potential areas of growth and take a longer-term view. In the past, when we have seen these levels of pessimism about the UK economy, it has been an effective strategy to buy the highest quality names while they remain cheap. Today, this is companies such as Dunelm. It is a well-run business, with a compelling online presence, that continues to win market share. We see many similar opportunities in the UK market to buy quality companies at cheap prices.

There are other areas that might have an impact. Pension reforms could direct more capital to UK stock markets. If there is an enduring peace in Ukraine, there could be a peace dividend. Equally, confidence has been on its knees and while restoring confidence isn’t easy, little things – like swerving a recession in December – could start to change the narrative.

Important information

Risk factors you should consider prior to investing:

• The value of investments and the income from them can fall and investors may get back less than the amount invested.

• Past performance is not a guide to future results.

CONTRAST TO THE US

We would contrast this situation to that of the US, where optimism is high and significant assumptions about economic growth are built into share prices. Yet that economic growth partly rests on an increasingly fragile consumer. Not only is the US consumer more indebted, but a greater share of their wealth is also in the stock market, bitcoin and more speculative assets. If markets started to weaken, it could weaken consumer sentiment as well. There may be risks from the new administration for US companies as well as their global peers. The key difference is that these risks are not necessarily reflected in US valuations.

It is worth noting that the dominant ‘Magnificent Seven’ have

Other important information:

Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG.

Authorised and regulated by the Financial Conduct Authority in the UK.

looked increasingly fragile in recent weeks. Market leadership has been broadening out, and this may yet become the dominant theme for 2025. With the whole of the UK market only narrowly exceeding the size of Apple, it wouldn’t need much of the capital coming out of US megacaps to be directed towards the UK to change the trajectory of the market. The $589bn that left Nvidia in a single day in January would buy BP 9x over.

At a risky time, investors need to ensure that risks are properly understood. The UK market already assumes that a lot will go wrong, and there is little optimism that anything will go right. The US market is the opposite.

We know where we feel more comfortable.

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Why Alliance Witan is well positioned to outperform

The merger has bedded in well and a broadening out of market leadership should benefit this bottom-up stock picking trust

Abig takeaway from 2024 was the big uptick in investment trust consolidation. It was a record year for mergers in the sector and the landmark deal was the combination between Alliance Trust and Witan to form Alliance Witan (ALW). Completed in October, the merger created a global sector giant with total assets of £5.8 billion, achieved economies of scale that have been passed on to shareholders through reduced ongoing charges and catapulted the enlarged company into the FTSE 100.

The first set of post-merger figures, annual 2024 results (7 March 2025) marked a transformative year for the Dundee-headquartered trust established back in 1888. So on results day, Shares jumped at the chance to converse with Craig Baker, global chief investment officer at Alliance Witan’s investment manager WTW (Willis

Towers Watson).

Topics on the menu were the merits of the megamerger, recent performance and the outlook for a storied trust that has navigated the stock market ups and downs through two World Wars, the Great Depression and myriad financial crises.

DISTINCTIVE APPROACH

First, a primer on Alliance Witan. The trust aims to be a core investment that beats inflation over the long term through a combination of capital growth and rising dividends and is one of the Association of Investment Companies’ (AIC) feted ‘Dividend Heroes’ with 58 years of unbroken dividend growth under its belt.

Alliance Witan invests in global shares across sectors and industries through a distinctive multi-manager approach, blending the top stock

All style bases covered by a large collection of managers

Table: Shares magazine • Source: Alliance Witan, at 31 December 2024

selections of some of the globe’s best active managers into a diversified portfolio designed to outperform the market whilst dampening down risk.

Baker, who manages the trust in concert with colleagues Stuart Gray and Mark Davis, informs Shares that WTW has selected 11 elite managers, each with distinct yet complementary investment styles, who choose no more than 20 stocks each.

He stresses ‘everything has been running as a single trust’ since the end of October and that ‘a decent slug’ of Witan’s portfolio came across unchanged via a BlackRock-managed transition. Having added deep value manager ARGA for Jupiter in the first half of the year following star manager Ben Whitmore’s decision to leave Jupiter to set up his own business, there were two further changes to the manager line-up during the merger. Alliance and Witan both had GQG Partners and Veritas in common already, but the merger also presented an opportunity to introduce growth manager Jennison Associates to the portfolio at a low cost.

‘Jennison is a manager that we have liked for a number of years,’ enthuses Baker. ‘We use them

at WTW in some of our institutional portfolios, so here was an opportunity to bring across their portfolio in-specie.’ During the transition, value manager EdgePoint was also appointed, replacing Black Creek, while a small number of investment trusts and private equity holdings were inherited too; currently trading at prices well below what WTW deems to be intrinsic value, they’ll be held until attractive valuations are achieved. Beyond that, the combination did not lead to any change in the trust’s successful investment approach.

A CORE INVESTMENT

‘Clearly, being larger is helpful in terms of being a core investment for shareholders,’ says Baker. ‘Now, you’ve got a company with a lot more liquidity than before, both through size and FTSE 100 status. Alliance Witan is now of interest to more investors and with a combined entity you can spend more on the marketing required to ensure more retail investors are aware of everything that’s going on.’

The WTW guru adds that because the board has been able to keep the discount much lower than the rest of the sector, Alliance Witan looks ‘a pretty attractive proposition for investors who might not

have invested historically’ and has increased appeal with wealth managers seeking larger trusts.

THE BEST OF THE BEST

Shares is hungry for more info on Alliance Witan’s underlying stock pickers, who run highly concentrated portfolios, typically 10 to 20 of their very best investment ideas, yet with markedly different yet complementary styles. ‘We’ve got 11 managers today, ‘says Baker, ‘and that’s 12 portfolios. Some of the managers are a bit more focused on the US, but high quality emerging market manager GQG runs two portfolios for us, one being a smaller pure emerging markets portfolio.’

When pressed on whether any key styles or exposures are absent from the trust, Baker’s reply is instant: ‘We are comfortable that we manage across multiple styles and one of our key jobs at WTW is to ensure stock selection drives everything in the portfolio. We balance the types of managers we choose, but also the weightings we give to each. We don’t think there’s anything missing because we’ve got a variety of managers that all think about the world very differently.’

Blending these best-in-class managers together means Alliance Witan looks similar to the MSCI All Country World Index from a top down perspective, but from a bottom up stock selection basis, the portfolio looks ‘very different to the index, so we feel we can significantly outperform but with almost all of that coming from stock selection’.

Baker points out that WTW undertakes thorough analysis to discern how much of Alliance Witan’s returns are coming from correctly calling company fundamentals versus returns from multiple expansion for those stocks, in other words is performance coming from earnings or sentiment.

‘The only bias that we do tend to end up with in the portfolio on an ongoing basis is a small bias away from large and mega cap,’ continues Baker. ‘But no real value, growth, momentum type biases. We ensure we’ve got managers in all those styles so that they balance each other out.’

What would be the impact if WTW had to change one of the underlying managers tomorrow, Shares wonders aloud? With an enviable book of fund manager contacts, Baker says there are between 10 to 15 elite managers sitting on a deep bench that could replace them. ‘The only reason

WHAT THE BROKERS ARE SAYING

Investec is sticking with its ‘buy’ rating on Alliance Witan, which the broker notes has delivered a strong NAV total return of 82.7% over a five year period, ranking it 65th out of an extended peer group of 272 global open and closed ended funds. The trust ‘continues to trade in a relatively narrow discount range, an experience that contrasts starkly with the wider closed-end industry, which has endured a brutal de-rating and elevated and damaging discount volatility in recent years.’

In contrast, Stifel retains a ‘neutral’ rating on Alliance Witan: ‘In our view, the trust’s multimanager approach offers something different for investors - with it being good to have some choices in the sector in terms of investment management style. However, with the shares trading on a circa 5% discount, we doubt there is much scope for the discount to narrow significantly from here.’

they are not in this portfolio now is because we don’t need two similar types of managers in a particular area,’ he explains.

A BOOST FROM BROADENING OUT

Alliance Witan’s 2024 results revealed NAV (net asset value) total returns of 13.3%, lagging the 19.6% return from the MSCI All Country World Index, in sterling terms, given the concentrated nature of a market focused on a few mega cap tech stocks where the portfolio was underweight, as well as a relative lack of exposure to US banks. Disappointingly, Alliance Witan also marginally underperformed its AIC Global Sector peers. The investment managers concede that ‘not

owning enough Nvidia (NVDA:NASDAQ) was painful’. Yet while recent performance has suffered from this market concentration, Alliance Witan remains ahead of the benchmark over three years and WTW will stick to running a portfolio diversified exposure by geography and style, whilst seeking to add value from stock picking by the underlying managers.

Year-to-date, markets have seen a broadening out of stock market returns amid concerns over Trump’s tariffs, frothy US valuations, escalating geopolitical tensions and a Mag 7 sell-off following the release of DeepSeek’s lower cost AI model. And this broadening out of market leadership should benefit Alliance Witan, which is significantly underweight the Mag 7 and runs a diversified portfolio that looks quite different from the index.

‘The scenario where this portfolio does particularly well is where it’s a broad market of those companies producing the best fundamentals and that gets reflected in the share price,’ explains Baker. ‘We look at our portfolio and we’re really

excited about it. We think there are hidden gems delivering terrific earnings and beating expectations, but it hasn’t really been reflected in the share price yet because investors have been focusing on a pretty narrow sector of the market.’

Having digested Witan, might other investment trust morsels be on the menu for Alliance Witan, asks Shares? ‘Ultimately, that’s a call for the board,’ says Baker, ‘but it is hard to see that there won’t be continued consolidation and I’m sure the board would look at other opportunities if they are in the best interests of shareholders from a cost perspective. But we are very comfortable that the size of the trust today makes it a very attractive proposition for end shareholders already.’

By James Crux Funds and Investment Trusts Editor

Aiming for higher returns shouldn’t have you on the edge of your seat.

If you’re eager for the kind of returns that active management generates but don’t want to live life constantly on the edge, Alliance Witan is for you. Our unique investment process is designed to quietly deliver long-term capital growth by investing in companies around the world without you needing to leave your comfort zone. We’ve increased our dividend every year for an impressive 58 years, making this an ideal equity centrepiece for your portfolio. So sit back and relax, secure in the knowledge that your investment is just working away in the background. To find out more visit: alliancewitan.com

FOREVER STOCKS ISA FOR YOUR

PICKS TO COMMIT TO FOR THE LONG RUN

The benefits of a stocks and shares ISA are best measured over the long term. Investors should look to get rich slowly through the power of compounding. Compounding describes the process whereby investment returns themselves generate future gains. The value of an investment can increase exponentially because growth is earned on both the initial sum of money plus the accumulated wealth.

Imagine you invest £1,000 in a stock and it increases in value by 5% in year one to £1,050. If the stock rises by another 5% in year two, it will be worth £1,102.50. In the first year you earned £50 and in the second year you earned £52.50.

You can make compounding work even harder for you by reinvesting dividends - as that means you own more shares. You then receive more dividends next time, which you reinvest to get more shares, and so on.

If the dividend is at least sustained, or better still is growing, then the effects can be really powerful. To illustrate, the total return with dividends reinvested from reliable dividend growth stock Halma (HLMA) over the last 20 years is 2,390%.

The simple total return (just adding up all the capital gains and dividends) is 1,730%. Put

By The shares team

another way, if you’d invested £1,000 in the stock in 2005 and reinvested your dividends you would be sitting on an investment worth nearly £25,000, nearly one-and-a-half times the £18,300 total if you hadn’t.

In this article we have identified six ‘forever’ stocks which can enable you to benefit from these compounding effects. Investments you can make today and slot in a tax wrapper for the long term with confidence they will continue to deliver over the decades. One of these names is Halma, discussed above, read on to discover more about why it, and the other five, warrant their ‘forever’ status.

Dividend reinvestment made easy

Investment platforms will often let you reinvest dividends automatically.

With AJ Bell you can choose which dividends you want to be automatically reinvested rather than kept in cash. For each reinvested dividend, you’ll be charged £1.50.

You can turn on dividend reinvestment for one or more specific shares in your portfolio, or for every eligible share in your portfolio now and in the future.

Beverage giant Coca-Cola Company (KO:NYSE) has proven its ability to grow profitability and sustainably over many decades. Yet, despite operating for 138 years the company has only scratched the surface of the global market opportunity.

Based on the company’s estimates it has a 14% volume share of developed markets and a mere 7% share in developing and emerging markets, which is a key focus area of Coke’s growth strategy.

In these markets, which comprise 80% of the world’s population, most potential drinkers do not consume any commercial beverages, which is a big virgin opportunity for Coke to exploit.

Long-term investor Warren Buffet once famously quipped that if someone offered him $1 billion dollars to compete with Coke, he would hand the money back.

This speaks to the strength of the ecosystem the company has built and the brand value. Coke’s franchise model means it has developed a huge network of partners which work on its behalf.

These include six million people serving the Coca-Cola network, 120,000 suppliers and 3,000 production lines. Today Coke sells more than just its namesake product.

From Costa Coffee to Sprite and Fanta through to Dasani water, the company has assembled 15 billion-dollar brands among the 200 in its portfolio. Coke is the number one global player in Water, Juice and International Sports Drink brands.

The capital light business model means the company generates high operating margins, returns on invested capital and

strong free cashflow. In 2024 operating margins were 30% and return on invested capital was 23%, while free cash flow was just shy of $11 billion.

Strong cash flow allows Coke to outspend competitors on marketing and advertising and to invest in the business to increase durability, creating a flywheel effect.

Over the last six decades Coke has delivered a growth rate in earnings per share of between 8% and 9% a year. Looking forward the company is targeting 4% to 6% organic revenue growth and 7% to 9% comparable earnings growth, excluding currency effects.

Coke trades on a cyclically adjusted PE (price to earnings) ratio below its longterm average, which, given the quality and stability of the business, looks stingy. [MG]

Halma (HLMA) £26.60

Of all the companies named in this feature, technology firm Halma (HLMA) may be the least well-known, certainly for novice investors and possibly for even more experienced investors, despite it being a FTSE 100 stock.

Amersham-based Halma is a collection of world-class specialist technology and engineering businesses serving the safety, health and environmental industries across the globe.

Growth is driven by reinvesting in the existing businesses and by acquiring new businesses in niche markets with sustainable long-term demand and strong defensive ‘moats’.

Within the group, companies tend to have a high degree of autonomy, but from time-to-time Halma management will merge businesses to speed up penetration in certain markets.

Conversely, if the growth dynamics in a particular market start to look less attractive, they will sell businesses and look to reinvest the proceeds in other areas at a higher rate of return.

This focus on sustainably high returns means the company has better visibility than most firms and generates higher earnings growth than the market as a whole with much lower volatility, which has translated into a 100-fold increase in the share price over the last 50-odd years.

Despite this, the shares are cheap relative to their historic average valuation and offer attractive longterm returns, especially if dividends are reinvested in

buying more shares.

In its most recent trading update, the company said it had made ‘good progress in the second half in varied trading conditions amidst an evolving economic and geopolitical backdrop’, allowing it to raise its margin guidance for the year to the end of March 2025.

Order intake was ahead of both revenue and the prior-year period, while the adjusted EBIT (earnings before interest and tax) margin benefitted from a better-than-expected performance across its three main business areas.

Thanks to a favourable product mix and good operational delivery, the company now expects its EBIT margin to be ‘modestly above’ its previous target of around 21% and is on track to deliver its 22nd consecutive year of record adjusted profit. [IC]

DISCLAIMER: Ian Conway owns shares in Halma.

Intertek (ITRK) £49.06

Like its Swiss and French peers SGS (SGSN:SWX) and Bureau Veritas’(BVI:EPA), Intertek (ITRK) is a leading player in the assurance and testing, inspection, and certification (TIC for short) industry.

It operates in various sectors such as food, chemicals, transport, and retail, benefiting from regulatory drivers which provide good visibility on future earnings. Its activities range from inspecting power stations and certifying vaccines to testing toys. With a shift towards outsourcing testing due to regulations, Intertek sees significant growth potential. It is these attributes which make it the sort of stock you could buy and tuck away for the long term.

In its 2023 annual report, Bureau Veritas estimated the annual TIC market at close to €300 billion or £250 billion, with 45% outsourced and 55% government-contracted or done internally.

Intertek’s push into assurance, which identifies and mitigates risks in the operations or supply chain of a business, is a key development. Fund manager Nick Train recently added Intertek to Finsbury Growth & Income Trust (FGT), noting the company’s 20% revenue from assurance puts it ahead of competitors.

Intertek has five divisions: Consumer Products, Corporate Assurance, Health and Safety, Industry and Infrastructure, and World of Energy. The latter, with experience in traditional and renewable energy sectors, is well-positioned for the energy transition.

Intertek’s profitability has increased due to substantial capacity investments. The company recently boosted its medium-term margin target from 17.5% to 18.5%, translating to strong EPS growth. Although concerns exist about the company’s Chinese business, which accounts for

18% of revenue, the risk is largely reflected in the valuation.

Intertek has a robust balance sheet, with borrowings projected to remain well within its targeted leverage range. The company generates ample cash for organic growth investments and potential acquisitions. It also continues to reward shareholders with a growing stream of dividends, which could be reinvested to benefit from long-term compounding effects. Based on consensus forecasts for 2025 it offers a 3.5% yield. Intertek is also trading at a discount to its long-run average price-toearnings ratio at 18.2 times. [TS]

Intertek

Chart: Shares magazine • Source: LSEG

Sometimes we can overlook what’s right in front of us, and although it may seem an obvious choice Microsoft (MSFT:NASDAQ) can genuinely be considered a ‘forever’ stock.

There can be few other companies whose products are so embedded in its clients’ processes and workflows, whether it is Word, Excel, Outlook, Teams, or more advanced products such as Azure, its cloud computing platform which offers analytics, storage, networking and so on.

Inevitably there has been a great deal of value placed on the firm’s role in developing AI (artificial intelligence) products, especially after it bought OpenAI, and chief executive Satya Nadella believes the emergent technology will have the same transformative effect on businesses as the launch of Excel.

However, the shift towards it becoming a major element of workflows will take time as companies themselves work out how it can add real value to

their business rather than using AI for its own sake.

What matters more is the core of Microsoft’s business, which is the repeat sales it gets from straightforward products like 365 Commercial and 365 Consumer, server and cloud revenue, news and search advertising, and even non-core activities like LinkedIn and Xbox content and services.

In its second-quarter results published in January, Microsoft posted global revenue of almost $70 billion, an increase of 12% on the previous year, which for a firm of its size is truly impressive.

Just as impressive, operating income was just under $32 billion, up 17% on the previous year, representing a margin of 45%, a level which most companies can only dream of achieving.

The firm throws off so much cash from its operations that, having already returned $9 billion to investors during the first quarter in the form of dividends and share buybacks, it returned another $9.7 billion in the second quarter, and there is no reason to think this trend can’t continue. [IC]

Rightmove (RMV) 684.6p

Online property portal Rightmove (RMV) stands out as a forever stock because it is the market leader in a UK property market with attractive supply and demand dynamics. In 2024, 80% of all consumer time spent on UK property portals (16.4 billion minutes) was on Rightmove. Last year, it was also the fourth busiest UK-based digital platform.

Being the market leader creates a virtuous circle for Rightmove. Its site has the most listings and is therefore the one which prospective property buyers will go to when looking for their next home. This reinforces its position as a must-have product for estate agencies and gives it significant pricing power when it comes to securing subscriptions from agencies. These strengths were evident in the company’s most recent full-year numbers. Rightmove reported a 7% rise in 2024 revenue to £389.9 million and returned£181.7 million of surplus cash through share buybacks and dividends.

The company is targeting 8-10% revenue growth for 2025 with a stable operating margin. The company operates a subscription-based model under which it is paid an annual fee by estate agents, lettings agents and housebuilders to list their properties on the site.

There is scope to grow ARPA (average revenue per advertiser) significantly from current levels by offering increased insights as the company ramps up its data analytics capabilities and, by doing so, offers more compelling insights to its clients. According to its last set of results ARPA rose £93 to £1,524

per month compared to £1,431 in 2023. Estate agency ARPA was £1,440, increasing by 6% and new homes developers’ ARPA of £1,987 increased by 9% compared to £1,825 in 2023.

It comes as no surprise with impressive numbers like these that the company recently attracted the attention of Australian rival REA Group (REA:ASX). The UK property portal rejected four offers from the outfit owned by Rupert Murdoch’s News Corp last October.

One worry for Rightmove is that to maintain its dominant market position it needs to keep an eye on the competition, with the stakes raised by US firm CoStar’s purchase of OnTheMarket in 2023, although its position looks pretty entrenched for now. [SG]

Tesco (TSCO) 321.5p

Stocks which are intended to be held forever or at least for a long period of time need a sustainable competitive edge, strong balance sheet and a clear growth strategy.

That is because over longer periods the share price follows the growth in the fundamentals of the business such as growth in free cash flow and earnings per share.

Grocer Tesco (TSCO) appears to have rediscovered its growth engine whereby it uses scale to drive down prices to drive more customers through the doors.

Tesco has halted the creeping share of German discounters Lidl and Aldi through its effective price match strategy while more restrictive planning permissions mean future growth is getting harder to achieve.

The Christmas and third quarter trading update (9 Jan) showed continued volume growth ahead of the market and value market share up 0.78% to 28.5%, the highest since 2016, representing 19 consecutive quarters of share gains.

The company said it is well placed to deliver long term growth by continuing to invest in customer offers, which, in turn drives volume momentum.

Management also confirmed it expects to deliver free cashflow within its medium-term range of £1.4 billion to £1.8 billion and an adjusted operating profit contribution from Tesco bank of around £120 million.

UK grocery market shares

Table: Shares magazine • Source: Kantar, data at 23 February 2025

Management has a clear policy to utilise free cash flow to drive shareholder returns through share buybacks and dividends. Since launching its first buyback in 2021, the company has so far returned £2.4 billion to shareholders.

Fund manager and founder of Latitude Investment Management, Freddie Lait, has owned Tesco shares for many years, and believes Tesco can grow intrinsic value by a mid-teens percentage.

It may at first appear quite a stretch given the 3% to 4% growth rate in revenue, but there are other drivers at play.

While continuing to invest in price, there is scope for margin expansion through operating leverage which could see earnings growth of between 5% and 6%.

Utilising free cash flow to buy back shares which have been running at around 4% a year increases earnings growth to 10%. Finally, adding the dividend yield of 4.5% results in mid-teen’s growth.

That should be considered the base case and assumes no change in the PE (price to earnings) ratio of the shares. On a cyclically adjusted basis the shares at a big discount to their average ratio, giving further upside potential for patient shareholders. [MG]

DISCLAIMER: AJ Bell, referenced in this article, owns Shares magazine. The editor (Tom Sieber) and authors (Ian Conway, Martin Gamble and Sabuhi Gard) of this article own shares in AJ Bell.

Sponsored by Templeton

Discover more about the big listed Indian consumer names

Despite a recent retrenchment Indian consumer stocks have still outpaced a buoyant wider domestic stock market over the medium term, supported by an emergent middle class in the country.

On a three-year view the MSCI India Consumer Discretionary index has delivered an annualised return of 16.3% versus 11.1% for the MSCI India index.

Car and motorcycle manufacturers dominate this part of the market, accounting for more than 50% of this sub-set of the market. Founded as a steel company in 1945, automotive outfit Mahindra & Mahindra (M&M:NSE) is the largest name in the space.

The company produces SUVs, multi-utility vehicles, pickups, lightweight commercial vehicles, heavyweight commercial vehicles, and tractors.

Among the other big consumer names is Zomato (ZOMATO:NSE) – a takeaways platform roughly analogous to the likes of Deliveroo (ROO) and Just Eat.

This sub-set of the market has outpaced the broader domestic stock index MSCI

India Consumer Discretionary

Several of the largest listed Indian consumer firms are subsidiaries of conglomerate Tata Group, including Tata Motors (TATAMOTORS:NSE), fashion accessories group Titan (TITAN:NSE) and Indian Hotels (INDHOTEL:NSE) which manages a portfolio of hotels, resorts, jungle safaris, palaces, spas and in-flight catering services.

This collection of consumer-focused companies has an average forward price to earnings ratio of 26.3 times versus 20.2 times for the MSCI India index.

This outlook is part of a series being sponsored by Templeton Emerging Markets Investment Trust. For more information on the trust, visit www.temit.co.uk

Sponsored

Emerging markets: China plays catch-up and Indian consumer stocks rebound

Three things the Templeton Emerging Markets Investment Trust team are thinking about today

1.

China plays catch-up: Chinese startup DeepSeek has sparked a wave of renewed optimism for domestic technology stocks. China’s progress toward technological self-reliance comes even as the country is denied access to advanced chips. Share prices of Chinese internet companies reacted positively to announcements of developments in artificial intelligence (AI). This refreshed attention also came as China’s president held a meeting with large domestic technology companies. This seems to mark a turnaround from the regulatory crackdown on technology companies four years ago.

2.

Slowing growth in Latin America: The central banks of Brazil and Mexico cut their economic growth forecasts for 2025. Inflationary environments were also similar for both economies, with annual inflation rates slowing in January from the previous month. Mexico’s central bank also reduced its benchmark interest rate. The United States confirmed that tariffs on Mexico will come into effect in early March, with the amount to be determined.

3.

Consumption stocks rallied after the Indian budget announcement, which was positive overall for shoring up urban consumption. This budget appears to make very few errors in the path to sustain India’s growth, which was slower than expected in recent quarters.

Chetan Sehgal Singapore

A breather for Indian consumer stocks: Slowing consumption has weighed on Indian consumer stocks in recent months.

Different ways to earn a living from your investments

One of the key attractions of investments is the potential to earn a regular income. As in common in the world of personal finance, there isn’t a one-sizefits-all approach for income investing.

There are diverse ways to obtain a regular stream of cash rewards from your investment ISA, so make sure you pick the right one for your needs. Here are five methods.

1

HIGH YIELD

For decades, investors have looked to investment markets to see if they can find something that offers a better yield than available on cash in the bank. The current benchmark to beat is 5%, being the best-buy savings account rate. That might seem a high bar to clear, yet qualifying opportunities are widespread across stocks, bonds, funds and investment trusts.

The UK stock market is a treasure trove of high yielding stocks thanks to the plethora of low growth, yet highly cash-generative industries. Life insurance, tobacco and property feature heavily, with approximately one fifth of the FTSE 100 offering a prospective yield above 5%.

Investment trusts are also a popular hunting ground, with big yields from companies across the property, renewable energy and debt sectors.

While it is tempting to sit back and let the cash roll in, the income stream only forms part of the returns from an investment. It is important to also look at capital gains or losses.

It’s no point owning a share, trust or fund if you’re consistently losing more money than you make from dividends. Total return is a term that looks at both capital gains/losses and income, and the goal is for that figure to be positive on a long-term basis.

Yields can look high as a result of a big share price declines. A falling share price reflects market

concerns about something – such as tougher trading conditions or a lack of faith in earnings forecasts. If a company struggles for a long time, it might cut or cancel the dividend.

Just because an investment offers a high yield doesn’t mean that dividend is sustainable – in fact, the high yield could be a red flag. It’s important to weigh up what could go wrong with an investment as what could go right.

Land Securities (LAND) has a 7.2% prospective yield and has historically been an office and retail sector landlord. It’s now adding residential properties as a third bow. Commercial property might have been out of favour over the past few years amid a rising interest rate environment, but Land Securities has its eyes on the longer-term prize. That’s why it is hungry to increase retail exposure when others are retreating from the space. The plan is to shift the portfolio towards assets that generate a higher income for the group, which implies higher dividends for investors down the line.

Five flavours of income to suit a range of ISA investors

2

MONTHLY DIVIDEND PAYERS

People receive their salary like clockwork throughout their working life. While it’s reassuring to know that money is coming in on a regular basis to cover monthly bills, it can be a shock when someone retires and they no longer have that money topping up their bank account. Investments play a role in replacing that income – either selling small chunks to generate capital or, ideally, using dividends to pay the bills.

Individual stocks typically pay dividends twice a year but that frequency might not suit someone who has monthly bills to settle. An investor could create a portfolio with dividends trickling in across different months. Alternatively, there is a growing number of funds and investment trusts paying dividends monthly to investors.

Man Income Professional (B0117D3) yields 4.3% and pays a monthly income to investors. Manager Henry Dixon aims to beat the FTSE All Share index by investing in companies of all sizes on the UK stock market. He looks for undervalued and unloved companies that have a dividend yield at least in line with the market.

3

DIVIDEND ARISTOCRATS

While income hunters may judge an investment on its dividend yield, it’s also worth considering dividend growth.

The cost of living typically goes up each year so it’s important that dividends grow at least in line with inflation to ensure you maintain spending power. The ability of a company to grow dividends each year can also be a sign it’s a high-quality business.

There are two ways to quickly identify investments with dividend growth. One is to look at investment trusts classified as Dividend Heroes which are names that have consistently raised their dividends for at least 20 years in a row, including F&C Investment Trust and City of London Investment Trust.

The other is look at tracker funds labelled as Dividend Aristocrats. This is a term to describe companies with a long record of raising their dividend each year, often by 25 years of more. There are various ETFs which track a basket of companies classified as Dividend Aristocrats in Europe and the US.

Not all investors need to take the income from their investments and they might choose to reinvest any dividends to enjoy compounding benefits. The prospect of owning an investment that aims to deliver consistent dividends or even dividend growth – such as Dividend Aristocrats – might appeal to them.

SPDR S&P Euro Dividend Aristocrats (EUDV) tracks an index of 40 high-yield Eurozone companies that have had stable or growing dividends for at least 10 consecutive years. The index yields 4% and the ETF has achieved strong returns since launch in 2012. Annualised total returns over three years are 11% and 12.4% over five years.

Europe is all the rage this year as investors turn their back on the US stock market and look for cheaper options in other parts of the world. The SPDR ETF is big in financials, utilities and industrials and top holdings include insurer Ageas and pharmaceutical group Sanofi.

Man Income Professional’s portfolio features HSBC holdings

4

ENHANCED INCOME

Income-hungry investors are often happy to receive the bulk of their returns from dividends rather than capital gains. There is a specific type of fund that might appeal to this type of person.

Enhanced income funds (also known as ‘income maximiser’ funds) have a clever trick up their sleeve to boost their dividend power. They might generate a 4% or 5% yield from their underlying portfolio but have a neat way to pay even more to investors.

They sell call options on stocks held in the portfolio to generate additional income. These options are contracts that give the buyer the right, but not the obligation, to buy the underlying asset at a specific price on or before a certain date.

For example, an investment bank buys an option on Company X from an enhanced income fund for a fee. This entitles the investment bank to any rise in the price of the underlying share above a certain level over a set period, typically three months. The enhanced income fund uses the option fee to top up its dividends, but in doing so it sacrifices part of the capital growth from the stock holding.

Enhanced income funds might underperform traditional equity income funds when markets are rising but potentially outperform in a falling market.

Call options can be difficult to understand and charges on enhanced income funds are often much higher than a traditional equity income fund. That means these types of funds won’t suit everyone.

Schroder Income Maximiser (B53FRD8) targets 7% yield, albeit not a guaranteed payout. The bulk of its portfolio is in UK shares, but it also has money invested in US, French, Italian and Germanlisted companies, as well as a small amount in money markets.

The top holdings list is a who’s-who of bigname dividend payers in the FTSE 100 including British American Tobacco (BAT) and Imperial Brands (IMB).

Charging 0.91% a year, the fund has rewarded investors handsomely in the past. Annualised total return, which incorporates share price gains and income, is 14.8% over the past five years and 10.1%

over three years. That compares to 10% and 6.4% annualised returns respectively for the Investment Association UK Equity Income sector average.

5

BLENDING INCOME & GROWTH

The blended approach of income and growth is increasingly popular with investors who want a happy medium of dividends and capital gains.

Someone in retirement looking to make their pension last longer might use this approach. So might an individual who wants their investments to grow and use cash from dividends to fund additional investments down the line.

JPMorgan Global Growth & Income (JGGI) has won fans in recent years, helped by robust performance and offering more jam today than previous investor favourites such as Scottish Mortgage which is more about jam tomorrow.

The global ‘best ideas’ investment trust is pushing on £3 billion in market valuation and has hoovered up other trusts in recent years. Another deal is on the cards, gobbling up Henderson International Income which will increase its assets under management.

Annualised total returns are 10.6% over three years and 22.1% over five years. The portfolio features a blend of tech, media and retail names as the dominant holdings, alongside a sprinkle of other sectors on a smaller basis.

Amazon is included in JPMorgan Global Growth & Income’s portfolio

SO Experienced

Living and working in Asia, our investment team navigate Asia’s fast-growing markets as locals.

With a history stretching back decades, we look for the best opportunities to invest your money in quality smaller companies with the potential to grow.

ISA savers pocket billions in tax relief

The sums benefiting from being in the wrapper are much higher

ISA savers have hit the jackpot when it comes to tax savings, as new data from HMRC reveals a sharp increase in the value of tax relief provided to both cash and stocks and shares ISA holders over the last few years. Figures obtained by AJ Bell through a freedom of information (FOI) request show that cash ISA savers collectively saved an impressive £2.1 billion in tax in 2023/24, up from just £70 million two years earlier. Meanwhile, stocks and shares ISA investors have seen their tax benefits double over the past six years, rising from £2.8 billion in 2017/18 to £5.6 billion last year.

WHY THE SUDDEN SURGE

The sharp increase in tax relief for cash ISA savers is largely down to rising interest rates, which have pushed more savings interest above the personal savings allowance, which is the amount taxpayers can receive in interest each year before paying tax. The allowance is £1,000 for basic rate taxpayers, £500 for higher-rate taxpayers and precisely £0 for additional-rate taxpayers.

With tax thresholds frozen and more people being pulled into higher tax bands too, the benefits of shielding savings from tax through an ISA have never been clearer. A typical cash ISA holder saved £114 in tax last year by wrapping their cash in a tax shelter, based on the latest figures published by HMRC. Savers with large holdings will have saved significantly more.

For a long time, low interest rates and the introduction of the personal savings allowance in 2016 made cash ISAs seem irrelevant to many savers, but the environment has shifted dramatically. With rates now at a much higher level, tax on savings is more difficult to hide from, and cash ISAs are back in vogue.

Stocks and shares ISA investors saved an average of £721 in tax last year, thanks to the doublebarrelled protection these ISAs offer against dividend tax and capital gains tax. The total tax relief provided by stocks and shares ISAs has doubled in the last six years, from £2.8 billion in 2017/18 to £5.6 billion in 2023/24.

ISA SAVERS COLLECTIVELY SAVED AN IMPRESSIVE

£2.1 BILLION IN TAX IN 2023/24

Once again, rising interest rates have played a part, boosting income from bonds, cash, and money market funds — all of which are sheltered from tax within an ISA. However, other factors have driven the surge in tax relief for stocks and shares ISAs. The dividend and capital gains allowances have been drastically scaled back, leaving those who haven’t wrapped their investments in an ISA exposed to more tax.

STOCKS AND SHARES ISAS: BIGGER GAINS, BIGGER SAVINGS

It’s not just cash ISA savers who are benefitting.

At the same time, booming stock markets have created capital gains for investors which would be heavily taxed if held outside a stocks and shares ISA. A typical global index tracker fund has grown by 92% since April 2017 according to data from FE Analytics, while

the capital gains allowance has been slashed from £12,300 in 2022/23 to just £3,000 now. This combination of shrinking allowances and rising market gains has made the tax protection offered by stocks and shares ISAs more valuable than ever.

A STRONG CASE FOR ISA SIMPLIFICATION

The success of ISAs over the years has led to a proliferation of different types of accounts, from Lifetime ISAs to Junior ISAs and Innovative Finance ISAs. While this gives savers and investors plenty of options, it has also created a more complex landscape that could benefit from simplification. However, one thing remains clear - ISAs are an incredibly valuable tool for anyone looking to protect their savings and investments from tax.

There have been rumblings the government might be looking to scale back the cash ISA allowance, though nothing has been officially confirmed. The Chancellor may well decide it’s not worth the candle, but it does serve as a reminder that the £20,000 allowance isn’t set in stone and can be changed by politicians at any point. Hopefully the powers that be continue to see the benefits of incentivising people to save for their future. But the challenging fiscal situation can lend itself to making even the clearest of views a little bit foggy.

Money & Markets podcast

EPISODE

By Laith Khalaf AJ Bell Head of Investment Analysis

featuring AJ Bell Editor-in-Chief and Shares’ contributor

Dan Coatsworth

Fidelity China Special Situations PLC

An AJ Bell Select List Investment Trust

If you want to take full advantage of the incredible growth of China’s middle classes and a seismic shift towards domestic consumption, you need real on-the-ground expertise.

Fidelity China Special Situations PLC, the UK’s largest China investment trust, looks to capitalise on an extensive, locally based analyst team to make site visits and attend company meetings. This helps us find the opportunities that make the most of the immense shifts in local consumer demand.

China’s growth story

Since its launch in 2010, the trust has offered direct exposure to China’s growth story; from tech giants right the way through to entrepreneurial medium and small-sized companies, and even new businesses which are yet to launch on the stock market. Portfolio manager Dale Nicholls looks to identify and invest in companies that are best placed to capitalise on China’s incredible transformation.

Past performance

Investing in China’s most compelling growth drivers Dale believes a vast and still expanding middle class is increasingly driving stock market returns in China.

“China is well established now as a major driver of growth and investment performance, not just in Asia, but in the wider world. The sheer size of China’s economy, its continued growth and ever-increasing global importance, should see investors increase their exposure to China as part of a balanced investment portfolio.”

Past performance is not a reliable indicator of future returns.

Past performance is not a reliable indicator of future returns

Source: Morningstar as at 28.02.2025, bid-bid, net income reinvested. ©2025 Morningstar Inc. All rights reserved. The FTSE All Share Index is a comparative index of the investment trust

Source: Morningstar as at 28.02.2025, bid-bid, net income reinvested. ©2025 Morningstar Inc. All rights reserved. The MSCI China Index is a comparative index of the investment trust.

Important information

The value of investments can go down as well as up and you may not get back the amount you invested. Overseas investments are subject to currency fluctuations. Investments in emerging markets can be more volatile than other more developed markets. The trust invests more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies. The shares in the investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. The Trust can use financial derivative instruments for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.

The latest annual reports, key information documents (KID) and factsheets can be obtained from our website at www.fidelity.co.uk/its or by calling 0800 41 41 10. The full prospectus may also be obtained from Fidelity. The Alternative Investment Fund Manager (AIFM) of Fidelity Investment Trusts is FIL

(UK)

Issued by FIL Investment Services (UK) Ltd, authorised and regulated by the

the Fidelity International logo and F symbol are trademarks of FIL

How much will my state pension increase by in April?

A question from a reader in their late 70s on what to expect this spring

I am aged 78 and have been receiving my state pension for the last 13 years. I know that my state pension will increase in April. Can you tell me how much it will increase by? Leonard

Rachel Vahey, AJ Bell Head of Public Policy, says:

The media has recently been full of the 4.1% increase to state pensions, which comes into effect next month. And whereas that figure is true, the headlines don’t give the complete picture as the increase only applies to some parts of the state pension.

UNPICKING THE COMPLEXITY

Let’s start by unpacking some of the complexity of the state pension. There are two main forms of state pension: the basic state pension and the new state pension.

The new state pension can be claimed by anyone who reached state pension age on or after 6 April 2016. The state pension age is currently 66 for both men and women, and will start to go up from April 2026, eventually reaching age 67 from April 2028. Before that, women’s state pension age was originally going to gradually increase from age 60 to 65 over the period 2010-20. However, these changes were brought forward, and men and women’s state pensions were equalised at 65 by November 2018 and then increased to age 66 from April 2020.

Broadly, you need to have paid national insurance contributions for 35 years to qualify for the full new state pension, and you still get something if you have paid in for 10 or more years. For anyone who reached state pension age before 6 April 2016, their state pension is split into a basic state pension – which you get in full

if, broadly, you had paid 44 years of national insurance contributions, and you still get something if you had paid in for at least 11 years – and the additional state pension.

Over the years there have been two different forms of the additional state pension - SERPS (state earnings-related pension scheme) and S2P (state second pension), as well as its predecessor, the graduated pension, all of which depended on your earnings.

So, now we have got those facts lined up let’s look at increases to the state pension.

The state pension is guaranteed to increase in line with the triple lock guarantee. This means it will increase in April by the highest of:

• The increase in prices measured by the Consumer Price Index in September the previous year.

• The increase in earnings for May to June of the previous year or 2.5%.

Last year the increase in earnings was the highest of these at 4.1%.

Ask Rachel: Your retirement questions answered

From next month the full basic state pension will increase by 4.1% to £169.50 a week; and the full new state pension will increase to £221.20 a week. But although both are receiving the same percentage increase, because the basic state pension is starting from a lower amount it will receive a smaller increase in pounds and pence –an increase of around £363 a year compared to the new state pension increase of around £472 a year.

NOT ALL ELEMENTS WILL SEE THE SAME INCREASE

However, not all elements of state pension will increase by 4.1%. The additional state pension –whether it’s SERPS, S2P, or the graduated pension – is due to increase in line with price inflation (CPI), which was 1.7%. This can seem a particularly bleak outcome for some pensioners, in a year when the triple lock guarantee was so much higher, and where the current inflation rate is 3.9%.

It’s worth remembering that many people contracted out of the additional pension (by paying lower national insurance contributions),

instead building up their workplace and individual pensions. Consequently, some have a higher pension than they would have under the additional pension.

Having said that, there is no reason why this part of the state pension is not also protected by the triple lock guarantee. However, any government plan to further extend the triple lock guarantee is probably unlikely.

DO YOU HAVE A QUESTION ON RETIREMENT ISSUES?

Send an email to askrachel@ajbell.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares. Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

WATCH RECENT PRESENTATIONS

JPMorgan European Growth and Income

Tim Lewis, Portfolio

Manager

JPMorgan European Growth & Income (JEGI) plc has a distinctive strategy for investing in Europe – with an enhanced dividend policy. The investment managers focus on building a core portfolio of European equities comprising well managed companies with improving prospects and attractive valuations.

Mercia Asset Management (MERC)

Dr Mark Payton, CEO - Martin Glanfield, CFO

Mercia Asset Management is a proactive, specialist alternative asset manager with over £1.8billion in assets under management. The Group is focused on supporting regional SMEs to achieve their growth aspirations. Mercia provides capital across its four asset classes of venture, debt, private equity and proprietary capital: the Group’s ‘Complete Connected Capital’.

Smithson Investment Trust (SSON)

Simon Barnard, CFA

We aim to deliver strong, long-term capital growth by creating a concentrated portfolio of the world’s best small and mid-sized companies. Our analysts seek out exceptionally profitable small businesses, selecting those with substantial growth potential, capable of compounding in value for many years or even decades.

WHO WE ARE

EDITOR: Tom Sieber @SharesMagTom

DEPUTY EDITOR: Ian Conway @SharesMagIan

NEWS EDITOR: Steven Frazer @SharesMagSteve

FUNDS AND INVESTMENT

TRUSTS EDITOR: James Crux @SharesMagJames

EDUCATION EDITOR: Martin Gamble @Chilligg

INVESTMENT WRITER: Sabuhi Gard @sharesmagsabuhi

CONTRIBUTORS:

Dan Coatsworth

Danni Hewson

Laith Khalaf

Laura Suter

Rachel Vahey

Russ Mould

Shares magazine is published weekly every Thursday (50 times per year) by AJ Bell Media Limited, 49 Southwark Bridge Road, London, SE1 9HH. Company Registration No: 3733852.

All Shares material is copyright. Reproduction in whole or part is not permitted without written permission from the editor.

Shares publishes information and ideas which are of interest to investors. It does not provide advice in relation to investments or any other financial matters. Comments published in Shares must not be relied upon by readers when they make their investment decisions. Investors who require advice should consult a properly qualified independent adviser. Shares, its staff and AJ Bell Media Limited do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

Members of staff of Shares may hold shares in companies mentioned in the magazine. This could create a conflict of interests. Where such a conflict exists it will be disclosed. Shares adheres to a strict code of conduct for reporters, as set out below.

1. In keeping with the existing practice, reporters who intend to write about any securities, derivatives or positions with spread betting organisations that they have an interest in should first clear their writing with the editor. If the editor agrees that the

reporter can write about the interest, it should be disclosed to readers at the end of the story. Holdings by third parties including families, trusts, selfselect pension funds, self select ISAs and PEPs and nominee accounts are included in such interests.

2. Reporters will inform the editor on any occasion that they transact shares, derivatives or spread betting positions. This will overcome situations when the interests they are considering might conflict with reports by other writers in the magazine. This notification should be confirmed by e-mail.

3. Reporters are required to hold a full personal interest register. The whereabouts of this register should be revealed to the editor.

4. A reporter should not have made a transaction of shares, derivatives or spread betting positions for 30 days before the publication of an article that mentions such interest. Reporters who have an interest in a company they have written about should not transact the shares within 30 days after the on-sale date of the magazine.

Introduction

Welcome to Spotlight, a bonus report which is distributed eight times a year alongside your digital copy of Shares

It provides small caps with a platform to tell their stories in their own words. This edition is dedicated to businesses powering the global economy, whether that be in mining, oil and gas, the renewables space, infrastructure or energy provision.

The company profiles are written by the businesses themselves rather than by Shares journalists. They pay a fee to get their message across to both existing shareholders and prospective investors.

These profiles are paidfor promotions and are not independent comment. As such, they cannot be considered unbiased. Equally, you are getting the inside track from the people who should best know the company and its strategy.

Some of the firms profiled in Spotlight will appear at our webinars and in-person events where you get to hear from management first hand.

Click here for details of upcoming events and how to register for free tickets.

Previous issues of Spotlight are available on our website

DISCLAIMER IMPORTANT

Shares Spotlight is a mix of articles, written by Shares magazine’s team of journalists, and company profiles. The latter are commercial presentations and, as such, are written by the companies in question and reproduced in good faith.

Members of staff may hold shares in some of the securities written about in this publication. This could create a conflict of interest.

Where such a conflict exists, it will be disclosed.

This publication contains information and ideas which are of interest to investors.

It does not provide advice in relation to investments or any other financial matters.

Comments in this publication must not be relied upon by readers when they make their investment decisions.

Investors who require advice should consult a properly qualified independent adviser. This publication, its staff and AJ Bell Media do not, under any circumstances, accept liability for losses suffered by readers as a result of their investment decisions.

Looking for investment ideas? Register today

29 April 2025 – 18.00

Companies presenting

EJF Investments

A closed-end fund that trades on the Specialist Fund Segment of the Main Market of London Stock Exchange. EJFI’s objective is to provide shareholders with attractive risk adjusted returns through regular dividends and capital growth over the long term.

Janus Henderson

A leading global active asset manager. They exist to help clients achieve their long-term financial goals.

JPMorgan Emerging Markets

They seek to uncover quality stocks from across emerging markets that are also attractively valued, benefiting from an extensive network of country and sector specialists from one of the longest established emerging market teams in the industry.

Strategic Equity Capital

A specialist alternative equity trust. Actively managed, it maintains a highly-concentrated portfolio of 15-25 high-quality, dynamic, UK smaller companies, each operating in a niche market offering structural growth opportunities.

Creating multi-trillion investment opportunities

As one of the largest issuer-sponsored research firms, we are known for our bottom-up work on individual stocks. However, our thinking does not stop at the company level. Through our regular dialogue with management teams and investors, we consider the broad themes related to the companies we follow.

Edison themes aim to identify the big issues likely to shape company strategy and portfolios in the years ahead.

Global temperatures are rising at double the rate seen in the 1980s, creating an unprecedented capital reallocation opportunity. The International Energy Agency estimates $4 trillion in annual investment is needed by 2030 –more than triple current levels – to address both climate mitigation and adaptation.

With global temperatures now 1.2°c above pre-industrial levels and new records being set every three years (instead of every 13.5 years before 1980), the urgent need for climate solutions is creating investment opportunities across seven key verticals: energy, transport, food and land use, industry, climate management, built environment and carbon markets.

A WARMING WORLD

Climate change is one of humanity’s greatest challenges, with scientific evidence showing unprecedented rates of global warming. According to the US National Oceanic and Atmospheric Administration (NOAA) Climate.gov, the Earth’s temperature rise has accelerated from 0.08°c per decade since 1880 to 0.18°c per decade since 1981.

The 2011–20 decade was the warmest on record, with global temperatures now 1.2°c above pre-industrial levels. This acceleration is evidenced by temperature records now being broken every three years, compared to every 13.5 years before 1980.

A $4 TRILLION MARKET OPPORTUNITY

The physical impacts of climate change are driving one of history’s largest capital reallocation opportunities. The International Energy Agency estimates that annual clean energy investment needs to reach $4 trillion by 2030 to achieve net-zero emissions by 2050. This is more than triple current investment levels. McKinsey analysis suggests cumulative investment of $275 trillion will be needed between 2021 and 2050, averaging $3.5 trillion annually, to transform the global economy for net-zero emissions.

SEVEN KEY VERTICALS TO FOCUS ON

The response to climate change is creating opportunities across seven key verticals: energy, transport, food and land use, industry, climate management, built environment and carbon markets. While this investment need is supported by strengthening policy frameworks, with net-zero pledges now covering 92% of global GDP, the second Trump administration is likely to disrupt global progress.

RECENT US ACTIONS LIKELY TO SLOW MOMENTUM

The US has withdrawn from the Paris Agreement again, paused funding for key climate initiatives under the Inflation Reduction Act and Infrastructure Investment and Jobs Act, and halted new wind energy projects on federal lands and waters.

These actions could slow international momentum on climate action, weaken global collaboration and shift the focus away from decarbonization in the US, which is the world’s second-largest emitter.

CLIMATE: FROM GLOBAL CONSENSUS TO CRITICAL CROSSROADS

There is a scientific consensus that climate change is real

There are a number of significant issues that face the world

climate change. Research from the Massachusetts Institute

and that most, if not all, of the change, can be attributed to anthropogenic (ie human origin) greenhouse gas (GHG) emissions, largely driven by economic and population growth. Carbon emissions determine the rate at which global warming occurs.

According to the EU, the 2011-20 decade was the warmest so far and global temperatures have reached 1.2°C above pre-industrial levels. The following are a few statistics offered by NOAA Climate.gov:

• Since 1880, the Earth’s temperature has risen by 0.08°C per decade but has risen at 0.18°C per decade since 1981 (ie. the rate of change has more than doubled).

• The 10 warmest years on record have all occurred since 2005.

• 2020 was the second warmest year on record, with land temperatures at an all-time high.

• From 1900 to 1980, a new temperature record was set every 13.5 years. Since then, a new record has been set every three years.

The chart below shows the average global temperature by year since 1880 versus the 20th century average temperature, which clearly indicates the direction of global temperatures.

prevailing winds. Therefore, CO2 emissions are far harder to manage and regulate compared to pollutants that impact at a local or country level.

The majority of the impact of CO2 emissions is yet to be seen. There are studies that show that climate change is likely to happen, but most of the negative effects are yet to be seen, therefore there is a limit on what policymakers will propose and pay for now, when future voters are likely to see the benefits.

It is hard for scientists to link GHG emissions to a specific environmental disaster. Without a direct link, sceptics can ignore or dismiss the effects of climate change.

This is an excerpt from a report Climate: Creating multi-trillion investment opportunities by Edison, (Climate: Creating multi-trillion investment opportunities - Edison Group) first published on 13 February 2025.

GLOBAL LAND AND OCEAN TEMPERATURES – FEBRUARY TEMPERATURE ANOMALIES FROM 20TH CENTURY AVERAGE

Is lithium the cornerstone of our future?

If you believe the world is going electric, if you believe the adoption of AI (artificial intelligence) is only going to increase and if you believe renewable energy will play a larger role in powering our homes and economies then you will know one critical element stands at the heart of this transformation: lithium.

This essential mineral is a key enabler of EVs (electric vehicles), renewable energy storage systems, and the rapidly expanding data centre industry.

For investors seeking exposure to the global energy transition, lithium represents a compelling opportunity with significant long-term growth potential.

According to Benchmark Minerals Intelligence, a leading research and analytics firm, global lithium carbonate equivalent (LCE) supply currently stands at 1.2 million tonnes annually. However, to meet projected demand by 2030, this figure must grow to 1.5 million tonnes per year.

Achieving this target will require the emergence of approximately 52 new lithium producers, each capable of delivering 30,000 tonnes annually. With just five years remaining to bridge this gap, the urgency for new, sustainable lithium production has never been greater.

CleanTech Lithium (CTL:AIM) is navigating a transformative phase in its development, having achieved significant milestones over the past year. The company, with projects in Chile, is establishing itself as a key contributor to the sustainable lithium supply chain, with a focus on environmentally responsible extraction methods and established community engagement. Despite short-term market volatility and heightened geopolitical pressure, the long-term outlook for lithium remains robust, driven by the global transition towards decarbonisation.

The company’s flagship project in Chile, Laguna Verde, has demonstrated substantial economic potential following an updated JORC-compliant

resource estimate.

The total resource stands at 1.63 million tonnes of LCE, with 0.81 million tonnes classified in the Measured and Indicated categories.

This resource update provides a strong foundation as CleanTech advances its PFS (Pre-Feasibility Study), which remains scheduled for the end of April 2025. The PFS will facilitate substantive discussions with strategic partners, paving the way for project development.

In parallel, CleanTech has submitted its application for a Special Lithium Operation Contract (CEOL) for Laguna Verde, which has been designated a priority project area by the Chilean government. Part of this application includes the support from local indigenous

Laguna Verde CTL Aerial View

communities through cosigned agreements, reflecting CleanTech’s commitment to social license and regional economic development.

The Chilean government has confirmed receipt of the CEOL application, with a resolution expected by the end of March 2025. The granting of a CEOL will authorise commercial lithium production, marking a critical milestone for the company.

EXPANDING GLOBAL INVESTOR ACCESS

CleanTech Lithium is actively pursuing a dual listing on the ASX (Australian Securities Exchange), expected to be

completed in the second quarter of 2025.

This strategic move aims to enhance liquidity, attract institutional investors, and broaden the company’s global market presence.

By diversifying its investor base, CleanTech seeks to strengthen its financial position and support its longterm growth objectives.

A PRAGMATIC VISION OF THE FUTURE

CleanTech Lithium’s vision is underpinned by the robust fundamentals of the lithium market, which are driven by global electrification and decarbonisation efforts. The

CleanTech Lithium’s direct lithium extraction pilot plant inauguration in May 2024

Investing is Better Together: how SIGnet helps private investors improve performance

Warren Buffett had Charlie Munger to bounce ideas off, what about you? Why not join a group of like-minded individuals to discuss investment?

SIGnet, part of ShareSoc, is a nationwide network of almost 50 investor groups.

• Private investors meet regularly to share ideas, discuss strategies, and improve skills. The aim is to help each other improve investment performance.

• We have a social element, some groups meet in pubs.

• We Respect privacy, members invest independently, and groups do not discuss value of investments.

• We have physical and virtual groups, with a variety of meeting times.

• Most groups are generalist, discussing all investment topics; some are specialist e.g. dividend and US groups.

A GROWING NETWORK OF INVESTORS

SIGnet is launching a new group every month.

Groups offer a unique mix of experienced and new investors, creating an invaluable environment for learning and collaboration.

New groups currently being formed and looking for new members:

• Windsor group

• New Cambridge group

• New central London daytime physical group

• New virtual Equity Income group

MORE TO SIGnet THAN JUST GROUPS

• Active and informative monthly newsletter

• SIGnet Challenge - a fantasy share competition with prizes for winning groups

• Company visits. Last year we organised six visits, including Billington (BILN), Journeo (JNEO), and Smiths News (SNWS). This year our programme already includes Transense Technologies (TRT), 1Spatial, Filtronic (FTC), Cohort (CHRT), and Restore (RST)

• Virtual after and follow up meetings to company webinars

WHY SIGnet WORKS

SIGnet is a structured but informal space where investors can discuss stocks without hype or sales pitches. Members bring their own research, debate different perspectives, and challenge each other’s thinking - a process that has helped many refine their approach and improve returns.

HOW TO JOIN

The annual subscription is £50. Click here and use code SHARES20 before 30 April to receive a 20% discount. If SIGnet does not meet your expectations, we offer a three month no quibble refund guarantee.

If you would like to discuss SIGnet before joining, register for the Introduction to SIGnet meeting on 29 April (see ShareSoc events webpage).

JOIN SIGNET