Shares magazine 28 August 2025

FIVE FUNDS FOR RETIREMENT

The future of healthcare. Putting technology at the heart of biology.

The Scottish Mortgage Investment Trust seeks out the world’s most exciting growth companies and invests in them for the long term. We believe this is the best way for you to enjoy strong returns for decades to come.

We explore a number of exciting themes on our mission to find these world-changing businesses. Healthcare is just one of them. Why not discover them all?

Three important things in this week’s magazine

FIVE FUNDS FOR RETIREMENT

Funds for retirement

Examining five collective vehicles which could be a good fit for someone in drawdown from their pension pot.

Shanghai stocks at 10-year high

The factors driving this domesticfocused index to levels not seen in a decade and why MSCI China and the Hang Seng are not keeping up.

What next for WH Smith?

After a hugely damaging update revealed accounting issues, the travel retail outfit has it all to do to rebuild credibility with the market.

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:

Filtronic sees

rally

Will defensives make a comeback?

European cyclicals are trading at a threedecade high relative to their non-cyclical counterparts

In recent weeks there have been some hints that defensive stocks might be coming back into fashion. One piece of evidence for this is the outperformance of the FTSE 100 relative to its European, US and Japanese counterparts since the middle of August.

The composition of the UK’s flagship index is on the stodgier side, but its lower representation in growth areas like technology has been something of a virtue of late as the index has reached new highs above the 9,300 mark.

As Ian Conway’s News article makes clear, the Trump administration’s apparent meddling in the workings of the Federal Reserve is not being taken well by the market, making a renewed case for having some ballast in terms of defensive stocks in investment portfolios.

As a reminder a defensive stock, unlike a cyclical one, is not correlated to the business cycle. It is a firm whose revenue and profit are not overtly impacted by the state of the economy, typically because demand for its products or services is relatively steady.

Because revenue and therefore profit and cash flow are stable, defensive stocks are usually in a position to maintain a consistent dividend policy –offering shareholders a regular and secure income.

Yet, for now, European defensives are, according to

European cyclicals / defensives performance

Source: BofA Global Research, LSEG

Bank of America number crunchers, trading at a 17year low relative to the market and cyclical stocks are at a 30-year high relative to defensive names.

They note: ‘We see scope for a rotation out of cyclical winners and into beaten-up defensives: the cyclical sectors with the strongest negative correlations to risk premia have been the key winners over the past 12 months, including capital goods and construction materials, while the defensive sectors with the highest negative correlation, including pharma and food & beverages, have been particularly weak.

‘If the weakness in US final demand growth continues to soften and risk premia rise, we think this pro-cyclical performance skew is likely to reverse.’

This week’s issue includes some fund ideas for someone investing in retirement as well as a look at why Shanghai’s SSE Composite index is trading at a 10-year high.

The outperformance of this domestically focused collection of companies relative to other Chinese indices shows the importance of getting into the granular detail when it comes to how markets are performing. It’s also a reminder for ETF investors, for example, to look closely at the index their chosen product Is tracking.

Investors unnerved by Trump’s attempt to oust Federal Reserve Governor

You might think investors would be used to President Trump’s idiosyncratic interventions, especially given his constant haranguing of Federal Reserve chair Jerome Powell for not having cut interest rates at his bidding.

Yet the move to fire Fed Governor Lisa Cook, following allegations she falsified mortgage documents, represents a major escalation in the administration’s efforts to exert greater influence over what should be a politically neutral body.

‘Under the banner of boosting growth, Trump has threatened to fire Powell and other Fed officials in an effort to curb the central banking independence that has underpinned America’s economic foundations for more than half a century,’ commented the Financial Times.

The move comes on the heels of the firing of the head of the Bureau of Labour Statistics, following a significant downgrade to the employment statistics, raising doubts about the authenticity of

future economic data which, among other things, is a major input in the Fed’s thinking on interest rate policy.

In a letter posted on social media, Trump claimed he had ‘sufficient cause’ to sack Cook, who was appointed by President Biden in 2022, accusing the Fed board member of ‘deceitful and possibly criminal conduct in a financial matter’.

Forcing out Cook, whose term is not due to expire until 2038, would give Trump the opportunity to install someone more sympathetic and tip the balance in his favour on the Fed’s sevenstrong Board of Governors.

As well as sending the dollar lower, the White House’s attack sent stocks and bonds lower on 25 August while the gold price gained.

‘This is a kill shot at Fed independence’, said Aaron Klein, a senior fellow at the Brookings Institution, in an interview with Bloomberg.

‘Trump is saying the Fed is going to do what he wants it to do, by hook or by crook.’

European markets were dealing with their own mini-crisis after French prime minister Francois Bayrou scheduled a vote of confidence in the government for 8 September as doubts grow over the country’s ability to push through its plan to reduce the budget deficit.

Shares in major French banks and companies in the energy and infrastructure sectors fell as investors began to question the durability of longterm government investment plans.

The sell-off also impacted other European countries, reigniting the debate as to whether Europe’s major economies can manage their debt burdens at a time of slowing growth and fracturing global trade in an increasingly ‘multi-polar’ world. [IC]

Are there more skeletons in the closet at WH Smith?

More questions than answers for retailer after accounting error and profit warning send shares to 12-year lows

Shares in WH Smith (SMWH) slumped 42% on 21 August, the second worst one-day fall ever among the current batch of UKlisted mid and large-cap retailers according to analysis by AJ Bell, after the travel retailer said it had uncovered a £30 million accounting error in its North America operations.

This major accounting gaffe and associated profit warning represent a big blow to the credibility of the FTSE 250 retailer, which has slimmed itself down through the recent disposal of its structurally-challenged UK high street division to Modella Capital and the sale of online greeting cards business Funky Pigeon to Card Factory (CARD) for £24 million in cash.

WH Smith’s board has instructed Deloitte to undertake an independent and comprehensive review of the accounting clanger, but investors will be wondering if the accounting blip is the tip of an iceberg of other issues. The retailer will also now be under pressure from shareholders including activist investor Palliser, which recently flagged the potential for 60% to 90% upside for the shares over the next three years, to address the accounting issues and rebuild trust with the market.

WH Smith (p)

Source: LSEG

now seen ‘in the region of £110 million’, implying a near-35% year-on-year decline from the previous year’s £166 million haul.

Accounting issues can be harder to comprehend than disappointing sales figures and they leave investors wondering if there are more skeletons in the closet at WH Smith.

WH Smith said that while preparing its results for the year ending 31 August 2025, it identified ‘an overstatement of around £30 million of expected headline trading profit in North America’, largely due to the ‘accelerated recognition of supplier income’ in this division. In plain English, this refers to incorrectly booking rebates or payments from suppliers.

As a result, WH Smith now expects this year’s headline trading profit from the North America division to come in at roughly £25 million, down from previous market expectations of around £55 million. For the group, full-year pre-tax profit is

There are similarities between WH Smith’s warning and Tesco (TSCO) in September 2014, since they both overstated profit and cited the ‘accelerated recognition of income’.

Dan Coatsworth, investment analyst at AJ Bell, said: ‘Bargain hunters might now be prepared to buy WH Smith following its accounting warning given the shares fell to a 12-year low. However, there are more questions than answers following its shock warning. Principally, does the accounting issue mean investors can no longer trust historic profits for its US arm, and has the company made other accounting errors?’

DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Tom Sieber) own shares in AJ Bell. James Crux has a personal investment in Card Factory.

Pop Mart shares soar to highest since listing in 2020 on latest toy craze

Chief executive says 2025 sales could easily be 50% ahead of expectations

We’re reasonably sure if we were to take a straw poll of Shares readers, few would have heard of Chinese

toymaker Pop Mart International (9992:HKG), and fewer still would have heard of its signature product, LaBuBu, described by the company as ‘a vibrant collection of designer characters that seamlessly blend playful design with dynamic storytelling’.

Yet thanks to the craze for these diminutive fairytale characters, Pop Mart shares have soared more than 250% this year giving it a market cap of CNR 390 billion ($54 billion) or three times more than the combined value of leading US toymakers

Hasbro (HAS:NYSE) and Mattel (MAT:NYSE)

The stock price hit a new all-time high last week after chief executive Wang Ning said the company would beat its annual sales forecast and announced plans for a new mini Labubu doll which customers could

Ibstock shares plumb new 12-month lows following profit warning

The new-build residential market continued to show signs of recovery but activity remains well below normalised levels

Clay and concrete building products supplier Ibstock (IBST) plumbed new 12-month lows recently, adding to losses which has seen the shares lose a quarter of their value.

The shares slumped 16% in June after the brick maker issued a profit warning and lowered full year EBITDA (earnings before interest, tax,

depreciation, and amortisation) to a range of £77 million to £82 million, undershooting the £87.8 million expected by analysts.

The company said demand for lower priced wire-cut bricks from the major developers had a negative mix impact on group pricing, which, combined with a more competitive market, made passing on cost inflation more challenging.

There was some relief at the first-half results (6 August) after the company reiterated full year profit guidance amid a recovery in volumes,

hang on their mobile phones. According to Bloomberg, Wang told analysts on an earnings call on 20 August that due to the global collecting frenzy he couldn’t accurately predict where earnings would be this year, but instead of the official sales target of CNR 20 billion ($2.8 billion) for this year he believed it ‘would be quite easy’ for sales to reach CNR 30 billion ($4.2 billion). [IC]

stable pricing and ‘some potential’ for positive sales mix during the second half.

Analysts appear to have taken this on board with 2025 consensus earnings per share forecasts nudging up 3% in recent weeks. [MG]

1 Sep: XP Factory

2 Sep: Alumasc

4 Sep: Genus, Newmark Security

1 Sep: Team Internet

2 Sep: Everplay, Johnson Service Group, Michelmersh Brick Holdings, Oxford Nanopore Technologies, Uniphar

3 Sep: Cairn Homes, Churchill China

4 Sep: Alfa Financial Software, Funding Circle Grafton, International Publc Partnerships, Vistry, WAG Payment Solutions

Ashtead to be quizzed over growth outlook after lacklustre performance

Firm has guided for a low-singledigit sales increase following last year’s fall

Investors in US-focused plant and equipment hire group Ashtead (AHT) are in line for a double update next week as it celebrates its AGM (annual general meeting) on 2 September and reports its first-quarter figures a day later.

In June, the firm published its results for the year to April, which showed a small drop in revenue for the year but a 4% drop for the final quarter due to a soft US commercial construction market, with project completions outweighing starts, and a lower level of used equipment sales.

Ashtead Group (p)

3 Sep: Ashtead

4 Sep: Safestore

At the same time, general tool rental revenue was flattered slightly by hurricane response efforts, whereas this year there have been few extreme weather events in the US necessitating rebuilding, so revenue from the core business may disappoint unless the non-residential market picks up.

The specialty rental business did

What the market expects from Ashtead

better last year with an 11% increase in turnover, driven by both volume and price, but again some of the uplift was thanks to hurricane response efforts which may not recur this year. Due to the lack of revenue growth and an increase in interest costs and depreciation – the former caused by higher debt levels and the latter caused by lower utilisation of its growing fleet of equipment, as well as the impact of life cycle fleet inflation – operating profit and earnings per share were down.

For the current financial year, the firm has guided revenue expectations to flat to up 4%, so analysts and investors will be focused on that number, and on free cash flow guidance of $2.0 billion to $2.3 billion.

They will also no doubt want to know if the firm has a specific date in mind for moving its primary listing from London to New York, rather than a fairly vague ‘some time in the first quarter of 2026’. [IC]

Software giant Salesforce needs a growth narrative change

Stock has underperformed this year as maturing markets and AI integration worries persist

US technology firm Salesforce (CRM:NYSE) finds itself at a critical juncture. The customer relationship management gorilla has been talking up the impact of its new autonomous AI agent for business customers AgentForce since its launch in October 2024, but the stock has remained dogged by slowing growth worries and changing market dynamics.

In 2025, the share price has lost 25% versus 10% gains for the S&P 500.

Salesforce needs to demonstrate a viable plan for revitalising growth, which has averaged 17% a year compounded revenue since 2020. Current consensus forecasts for the firm’s fiscal second quarter, due 3 September, imply just 9% topline growth.

First-quarter results at the end of May hinted at progress after the $237 billion company raised full year 2026 (to 31 January) guidance

Source: LSEG

but it wasn’t enough to change the narrative around the stock.

‘Q1 results, while not game changing, point to a stable demand environment, with continued strength in the Agentforce new product cycle,’ wrote Citi analyst Tyler Radke.

Wall Street analysts remain supportive, with 43 of the 54 that cover the stock applying ‘buy’ ratings. The 12-month PE (price to earnings) multiple is close to all-time lows at 20.6 according to Stockopedia data. [SF]

UPDATES OVER THE NEXT 7 DAYS

QUARTERLY RESULTS

2 Sep: Zscaler

3 Sep: Campbell’s, Copart, Dollar Tree, Hewlett Packard, Salesforce

4 Sep: Broadcom, Lululemon Athletica

Source: Zacks

Get on board as Dr Martens gets back into its stride

Sales momentum is starting to turn driven by a customer-led strategy

Dr Martens (DOCS) 88.6p Market cap: £847.5 million

Life as a public company for iconic British shoe brand Dr Martens (DOCS) has been far from smooth sailing.

The comapny promised healthy profit margins, mid-teens revenue growth and ‘operational excellence’ when the company floated in January 2021 at 370p, giving the unique boot brand a £3.7 billion market capitalisation.

It is easy in hindsight but maybe the then chief executive Kenny Wilson, should have consulted CEO Simon Wolfson at retailer Next (NXT) or Games Workshop (GAW) boss Kevin Roundtree, both grandmasters in the art of managing investor expectations.

This is a widely underappreciated but very important component in achieving success on the

Source: LSEG

stock market. It takes patience and courage to under promise and over deliver, but the rewards are worth it.

Arguably, the combination of high investor expectations and the bottleneck issues at the firm’s Los Angeles distribution centre and associated profit warning in January 2023 explain the 82% drop in the share price.

HERITAGE

Dr Martens’ origins date to 1945 when 25-year-old Dr Kalus Maertens created a unique air-cushioned sole to aid his recovery from a broken foot.

British shoemaker Bill Griggs bought the rights to manufacture the shoes in 1959 and created the iconic bulbous boot with a distinctive yellow welt stitch. In 1960 the eight-hole 1460 Dr Martens boot was born and a year later the 1461 shoe arrived.

The company has built a ‘highly engaged’ and distinctive culture focused on preserving the quality, image and reputation of the brand, which harnesses an inclusive global appeal across different ages and genders.

The brand’s broad allure is demonstrated by the fact that sales are distributed evenly between the sexes and across all age groups.

RETURN TO OPERATIONAL EXCELLENCE

Looking forward, the former has already been fixed by the dramatic fall in the shares, which has wiped out around £4 billion of market value, while a return to operational excellence looks to be gaining traction under new CEO Ije Nwokorie.

Nwokorie served as the chief brand officer at Dr Martens and was a former senior director at technology giant Apple (APPL:NASDAQ). Shares believes Dr Martens’ growth strategy and ambitions are readily achievable given the strength of the brand and its relatively low penetration across the globe.

The first tangible evidence of progress was

Source: Peel Hunt

revealed at the full year results (5 June) when the company flagged a return to profit growth in the year to March 2026, driven by the direct-toconsumer channel in the US.

In addition, the company has delivered £25 million of annualised cost savings, at the top end of guidance.

Nwokorie said the new strategy would increase Dr Martens’ opportunities by shifting the business from a channel-first to a consumer-first mindset. This could prove an important inflection point for the company.

LEVERAGING GLOBAL APPEAL

Analysts at Peel Hunt believe the customer-centric strategy and investment case look increasingly positive. ‘In our opinion, Dr Martens remains one of the few globally relevant heritage brands that continues to resonate strongly with consumers,’ opined the broker.

‘We believe the debate is not whether DOCS can recover, but rather how long it will take,’ added the analysts.

Restoring operating margins to 15% implies a near three-fold profit opportunity according to Peel Hunt. With existing capacity able to support over 30% volume growth, there is a clear operating leverage story emerging. [MG]

The systematic approach adopted by Meon Adaptive Growth looks a winning strategy

This minnow fund is well set for a tricky-tocall market backdrop

ISFL Meon Adaptive Growth (BMQ8V53) 149p

Assets: £53.1 million

Size isn’t everything. It may only have around £50 million in assets but ISFL

Meon Adaptive Growth (BMQ8V53) has a recent track record which would put larger counterparts to shame.

Over the last three years the fund is up 56.9% versus 26.2% for the IA Global sector. This strong performance is underpinned by the systematic strategy adopted by Robert Hale which marks the vehicle out from peers.

This dispassionate approach could be a good fit for an unpredictable environment which looks set to test even the most dearly-held investment doctrines.

Through the use of computer modelling Hale assess numerous financial metrics for prospective investments. He also has the flexibility to use exchange-traded funds to gain exposure to asset classes beyond just stocks and shares (including commodities and bonds).

That doesn’t mean slavishly sticking to the outputs spat out by the machine – Hale is able to exercise his own judgement if he thinks the outcomes he is getting do not stack up.

Notably, while the fund has a bias towards US-listed large caps, alongside UK and European names, it doesn’t currently hold any ‘Magnificent Seven’ names.

Success chalked up from positions which have subsequently been closed of late include Italian defence firm Leonardo (LDO:BIT) and cruise operator Royal Caribbean Cruises (RCL:NYSE).

ISFL Meon Adaptive Growth

202320242025

Source: LSEG

Running winners include Spanish construction outfit ACS (ACS:BME) and Norwegian multinational defence and oil and gas contractor Kongsberg Gruppen (KOG:OSE)

‘Perhaps one of the greatest advantages of a systematic approach to the management of a global equity portfolio is that you don’t get hung-up on style,’ says Hale.

‘Many managers set out their stall with a bias toward value, whereas others are more adept at a growth approach. Convincing a value stalwart to jump ship to growth and vice versa doesn’t always end well. The market is currently rather split upon which side of the divide to invest.’

With interest rates apparently heading lower, ‘growth could be where to head, but bond yields are remaining stubbornly high and therefore value could still prevail’, explains Hale.

‘And so it is that we at Meon rejoice in the fact that our style-agnostic, systematic approach, which ignores the confusing noise from around the globe, has navigated a successful path, providing worthwhile outperformance, with lower levels of volatility and a globally diversified portfolio that has adapted along the way.’ [JC]

Why TJX has rallied to new all-time highs

Our ‘buy’ call on the world-leading discounter is already in the money as it delivers the value consumers desire

TJX Companies (TJX:NYSE)

$138.27

Gain to date: 12%

We urged readers to run the rule over TJX Companies (TJX:NYSE) at $123.4 on 3 July, arguing a share price pause for breath had presented investors with the chance to buy a world-leading discounter and high-quality compounder with years of market share gains, earnings growth and progressive dividends ahead of it.

Shares also observed that the ‘off-price’ apparel and home fashions seller occupies something of a sweet spot in retail, since its flexible business model relieves premium brands of excess stock and benefits value-focused shoppers by giving them access to aspirational labels at affordable prices.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

Our ‘buy’ call has delivered a rapid 12% return, with TJX shares rallying to all-time highs after second-

Source: LSEG

quarter (20 August) revenues and earnings per share beat Wall Street expectations and the retailer raised its full-year 2026 guidance in the face of tariff pressures.

A 7% jump in second-quarter revenue to $14.4 billion came in ahead of consensus expectations, as did the 4% growth in comparable sales. CEO Ernie Herrman commented: ‘Sales, pretax profit margin, and earnings per share were all above our plan. As we have seen through so many different retail and economic environments, consumers were drawn to our excellent values and brands. Customer transactions were up at every division as we saw strong demand at each of our US and international businesses.’

WHAT SHOULD INVESTORS DO NOW?

Keep buying TJX, with further upgrades likely in the near term given that guidance from management remains conservatively pitched. Jefferies, which hiked its price target from $155 to $160 off the back of the results, believes the retailer should benefit from ‘the secular migration toward the off-price sector’ which, in the broker’s view, ‘will likely lead to share gains from other, more traditional retailers. Additionally, we believe Home and International expansion represents unique growth opportunities for TJX’, enthuses Jefferies. [JC]

FIVE FUNDS FOR RETIREMENT

Ideas to give you protection, growth and income

It has now been 10 years since the then chancellor George Osborne, introduced the so-called ‘pension freedoms’ for individuals with defined contribution pension savings.

‘Pensioners will have complete freedom to draw down as much or as little of their pension pot as they want, anytime they want. No caps. No drawdown limits. Let me be clear. No one will have to buy an annuity,’ Osborne announced in his budget speech on 19 March 2014.

While a lot has happened in the world of UK pensions since then, this remains perhaps the most monumental change of legislation we have witnessed in our lifetimes, shifting the risk irreversibly from the state and employers to individuals.

For many of us, with little or no defined benefit pension to rely on, the level of comfort and financial security in our final years will be determined by how much we’ve saved, how kind the markets are to us, and our life expectancy. By removing the obligation on new retirees

to swap their pension savings (or, at least 75% of them) for an annuity gave Brits more options in how and when they access and manage their nest egg through their later years, it also turned on its head the old thinking about investment risk.

NIGHTMARE SCENARIO

Before pension freedoms, the nightmare scenario was a sharp fall in the value of your pension pot in the run up to your retirement. The traditional way to mitigate that risk was to gradually shift away from more volatile assets like shares and into cash or bonds.

This still stacks up for those preferring the financial security of a guaranteed income for the rest of your life that an annuity provides. It also helps that annuity rates have rallied in recent years as interest rates and gilt years have gone up. But with interest rates now on a downswing, an excess of prudence could leave future retirees

Drawdown risks and benefits

KEY BENEFITS

• Take the income you want, when you want. Keep your options open if your circumstances change.

• Beat inflation with returns from your investments. Help maintain buying power as prices rise.

• Pass on your money – anything left when you die can normally be paid as a lump sum or as income.

KEY RISKS

• You could run out of money if you withdraw too much, your investments don’t perform as you hope or you live longer than expected.

• Income isn’t secure, it could fall or even stop completely.

• It ’s possible you’ll get back less than you originally invested, as all investments can fall as well as rise in value.

increasingly exposed to inflation, the biggest threat to a comfortable retirement. Fortunately, pension freedoms give investors an alternative option – so-called ‘drawdown’, a flexible option that lets you control how much you withdraw and where you invest. It also offers the potential for real-terms growth (over and above inflation), although investment returns aren’t guaranteed.

DRAWDOWN FLEXIBILITY

The flexibility of drawdown can be an advantage, but it also comes with more risks. Your income isn’t secure, and you could run out of money if your investments don’t perform as well as you might have hoped. The hands-on approach of drawdown won’t be right for everyone, so it’s important you weigh up the risks and benefits. For some, the belt and braces approach may be to combine the financial security of an annuity with partial drawdown, where you use part of your pension pot to buy an annuity, leaving the rest invested in a diversified portfolio of funds that will (hopefully) give you the right combination of income and growth.

The exercise here is to provide investors with a handful of ‘foundation funds’ that should help do

that. This is not meant to be a ‘do it all’ drawdown portfolio. It is designed to give investors some ideas that will cover crucial long-term retirement bases – like stable income – Twentyfour Select Monthly Income Fund (SMIF), steady growth –Merchants Trust (MRCH), gold – iShares Gold Producers (SPGP) etc – to which they can add their own investment ideas to build a more diversified portfolio that is right for them and their retirement years ahead.

What do we mean by ‘Pension Freedoms’?

‘Pension Freedoms’ are rules that give you more control over your retirement income. Before the introduction of pension freedoms, you could typically take a 25% tax-free withdrawal from your retirement fund, then use the rest to purchase an annuity to generate an income.

However, an annuity might not have necessarily suited your individual circumstances. For example, if you pass away before your annuity income exceeds the total value of your pension pot, you might not get to make the most of your retirement savings. After their introduction, pension freedoms increased the number of options for savers when they reach the normal minimum pension age of 55 (rising to 57 in 2028).

According to survey data by insurer Royal London earlier in 2025, typically:

• 8% took it within six months of turning 55

• 26% deposited it in a bank or savings account

• 19% used it for home renovations

• 8% gave it to their loved ones

But now, you are no longer forced to purchase an annuity with the remainder, you can withdraw as much or as little as you want, when you want it.

As well as lump sum withdrawals, another option now available is so-called ‘flexi-access drawdown’. This allows you to take the income you need while keeping the rest of your fund invested. This income is typically taxable, but it does allow your pension to continue growing and accumulating wealth, even after you start drawing from it.

FUNDS FOR RETIREMENT

3i Infrastructure (3IN)

349p

Investors seeking a combination of capital growth, inflation busting dividend growth and a decent income should look no further than 3i Infrastructure (3IN).

This trust provides investors with a diversified portfolio of unique private sector infrastructure businesses that are resilient, making them suited to a retirement portfolio, and well positioned to benefit from four megatrends.

These include the energy transition, digitalisation, demographic change and renewing vital infrastructure. The resulting portfolio has growth characteristics which allows the company to pay a growing stream of dividends ahead of the rate of inflation.

Since 2019 the company has grown dividends per share at a compound annual growth rate of 6.5% a year while the current yield, based on the targeted dividend for 2026 is 3.9%, covered nearly three times by earnings per share.

The company has delivered an annualised growth rate in net asset value including ordinary and special dividends of 17% a year over the last decade. This is comfortably ahead of peers and its own targeted rates of return.

The trust sits on an unwarranted 10% discount to net asset value as of the last update on 31 March.

The roughly £4 billion portfolio is comprised of 12 assets which satisfy the investment manager’s criteria for investment and benefit from one of the identified megatrends.

The investment criteria include assets which are difficult to replicate, provide essential services, have established a leading market position, good visibility of future cash flows, and opportunities for further growth.

A good example of the types of assets held in the portfolio is TCR, Europe’s largest independent asset manager of airport GSE (ground support equipment). It operates at more than 230 airports across more than 20 countries.

Reliable GSE is critical to the efficient running of airports and TCR helps deliver this service alongside access to scarce airside repair workshops, providing high barriers to entry.

Fleet optimisation is also important in the context of enabling decarbonisation of airport ground operations.

TCR has secured multiple commercial contract wins including a centralised all-electric Ground Support Equipment pooling contract at JFK International Airport New Terminal One.

In a trading update on 3 July the company said its portfolio companies were generally performing in line or ahead of expectations. [MG]

3i Infrastructure assets by megatrend

Source: 3i Infrastructure

iShares Gold Producers (SPGP)

£19.68

Gold is a useful diversifier in a retirement portfolio as it is typically uncorrelated with other asset classes – often offering a safe haven at times of market uncertainty.

The big drawbacks with gold include the fact it does not offer any income and it is already trading pretty close to all-time highs. There are reasons to think the precious metal could trade higher still but one solution to the lack of yield and elevated price is to invest in the companies which dig it out of the ground.

As the chart of the iShares Gold Producers (SPGP) ETF shows, gold miners have not kept pace with the move higher in the gold price.

Investing in gold miners, while it comes with operational risk, also allows you to typically secure income from dividends and enjoy outsized gains if they can deliver growth.

Plus, putting your money to work in a diversified fund of gold producers protects you from the risk of being caught out by the failings of individual companies.

In the current gold price environment, gold producers are generating significant cash flow. Canadian operator Barrick Mining (ABX:TSE), for example, generated $2.5 billion in operating cash flow in the first half of 2025 up 32% year-on-

year. This helps underpin generous shareholder returns, although note this ETF is accumulating, meaning the income from underlying holdings is reinvested.

The product has an ongoing charge of 0.55% and has delivered a 10-year annualised total return of 17.3% versus 14.7% from BlackRock Gold & General (B5ZNJ89), the big actively managed gold mining fund which has a much higher ongoing charge of 1.16%.

Top constituents include the aforementioned Barrick, US-listed Newmont (NEM:NYSE) – the world’s largest gold miner with operations across the globe – and Wheaton Precious Metals (WPM) which buys precious metals production from third parties – typically where this is a by-product to another metal. [TS]

Gold bullion

iShares Gold Producers Source:

Latitude Horizon Fund

(BDC7CZ8) 167p

This £472 million all-weather fund aims to deliver capital appreciation over the long term by holding a concentrated portfolio of global stocks, whilst lowering the equity risk and enhancing return through a selection of uncorrelated non-equity holdings.

Managed by a team of experienced professionals headed up by Freddie Lait, the investment philosophy is to keep things simple and focus on protecting and growing clients’ capital though cycle. This focus on protection is likely to be attractive to someone investing in their retirement.

The fund has delivered a total return of 41.5% over the last five years and 15.5% over the last three years, comfortably ahead of the total return from the Investment Association’s Flexible Investment category.

Lait and the team believe consistent risk management is the most important success factor in capturing returns in rising markets and protecting portfolios in weak markets.

The team have identified four main risks facing investors including an overvalued US stock market, a high concentration in AI and technology stocks, government spending and deficit risks to bonds and finally, a slowdown in consumer spending leading to recession.

It is important to mitigate and protect against these risks, even though none of them are inevitable, due to the potential harm they can cause to portfolios.

At the same time, it is important not to overexpose the portfolio to any one risk, says Lait.

In terms of the equity portion of the portfolio, Lait believes it remains well diversified and inexpensive relative to the market, which should provide some protection. In addition, Lait believes most holdings are ‘defensive’ in nature and ‘would perform strongly in a recession, should one happen’.

Turning to the non-equity holdings which, represent 52% of fund assets, the fixed income allocation has an average duration of just two years, making it defensive. Duration measures the sensitivity of bond prices to a change in interest rates.

The currency exposure of the fund is diversified across sterling, the US dollar, euro and yen.

‘Betting on any one outcome in markets might make you famous, but it rarely makes your clients rich.

‘We don’t believe we know what will happen but do believe the portfolio is built robustly to withstand many of these potential risks, while generating reasonable returns over time,’ adds Lait. The fund has an ongoing charge of 1.15% a year. [MG]

Latitude

Horizon Fund top 10 equity holdings

Company % portolio

Data at 31 July 2025

Source: Latitude IM

The Merchants Trust (MRCH)

555p

Investors seeking to bolster their income in retirement should buy The Merchants Trust (MRCH), among the higher-yielding trusts in the AIC’s (Association of Investment Companies) UK Equity Income sector.

Merchants has grown its dividend for 43 years at an annualised growth rate above inflation, bringing it coveted ‘Dividend Hero’ status. And following the board’s use of revenue reserves to sustain dividends through the Covid-19 period, the trust has been able to rebuild reserves in recent years, which should ensure payouts can continue to rise during any difficult periods encountered in the years ahead.

Founded in 1889, Merchants’ current manager Simon Gergel looks to deliver a high and rising income together with capital growth through a policy of investing mainly in higher-yielding large UK companies. However, the trust’s investment philosophy prioritises value, which often leads Gergel to mid and small cap stocks, which are typically more domestic focused and cyclical in nature.

Seasoned income-seeker Gergel continues to see value and a healthy number of opportunities across the UK stock market. Recent additions to Merchants’ portfolio include Reckitt Benckiser (RKT), the consumer products powerhouse whose strong brands include Dettol, Finish, Nurofen and Durex. Gergel initiated the position with Reckitt’s

shares trading well below his assessment of fair value and paying a 4% dividend yield.

Lower down the cap spectrum, he has initiated a position in Begbies Traynor (BEG:AIM), the UK insolvency practitioner with ‘a fantastic record of organic growth and well-timed acquisitions at modest prices over the last decade’, as well as a ‘great record of profit growth and cash generation which has allowed the company to de-lever from a fair amount of debt to having virtually no debt’. Another addition to the portfolio is Serco (SRP), the outsourcing leader which recently delivered better-than-expected first-half results and announced a new £50 million share buyback.

Merchants’ top 10 holdings as of 30 June 2025 included UK lender Lloyds (LLOY), pharma and biotech giant GSK (GSK) and cigarettes titan British American Tobacco (BATS), alongside energy giant Shell (SHEL) and mining company Rio Tinto (RIO). [JC]

DISCLAIMER: James Crux has a personal investment in The Merchants Trust.

Merchants has a strong dividend track record - backed by revenue reserves

Source: Annual report, 2025

TwentyFour Select Monthly Income (SMIF)

87.6p

We believe TwentyFour |Select Monthly Income (SMIF) is one of the undiscovered gems not just of the investment trust world but the whole London stock market.

The fund generates an attractive risk-adjusted return, mainly through income, by investing in a broad range of fixed income products but specifically in less liquid securities which don’t suit open-ended funds and where it can earn a higher yield.

That is not to say it invests in ‘junk’ or lowquality bonds – over 70% of the fund is in bonds rated BB or above, with more than two thirds invested in UK and European bank debt issued by firms such as Barclays (BARC), NatWest (NWG), Nationwide, Banco Santander (SAN:BME) and Intesa SanPaolo (ISP:BIT) or ABS (asset-backed securities) issued by well-known borrowers.

Most of the assets have a maturity of between one year and seven years, and the fund targets a net total return to investors of between 8% and 10% per year.

When it was launched, this meant an annual dividend of 6p and a target capital return of between 2p and 4p, based on the original share price of 100p, and the 6p annual dividend has consistently been met while over the past one year and three years the total annual return

Geographical Exposure

including dividends has been over 13%, well above the original 8% to 10% target.

One of the most attractive features of the fund is it pays dividends monthly, giving investors the choice of taking a regular income stream or reinvesting to compound their returns.

In their latest market commentary, the managers say the fund ‘navigated market uncertainty well’ during July, posting another positive total return for the month, with corporate bonds performing strongly and insurance and Additional Tier 1 again making the biggest contribution to performance.

‘Despite the economic and political volatility of the past few months, developed markets remain in a strong position heading into the latter part of the summer. Fundamentals continue to be solid, with earnings releases so far bringing no negative surprises from a credit point of view,’ add the team. [IC]

DISCLAIMER: Ian Conway has a personal investment in TwentyFour Select Monthly Income

Breakdown

TwentyFour

Source: TwentyFour Asset Management, August 2025

Is the UK now a natural hunting ground for investors?

Rebecca Maclean, Co-Manager, Dunedin Income Growth Investment Trust

• The UK market has made strong progress in spite of a lacklustre economic backdrop

• UK companies have benefited from capital flowing out of the US

• Nevertheless, some areas have been left behind amid stronger returns overall

It has been a strong first half to 2025 for the UK stock market. The FTSE 100 briefly topped the symbolic 9,000 level, and the FTSE 250 has gained over 20% since its lows in early April. The rotation is welcome, but there are still areas that have been left behind amid renewed enthusiasm for UK companies.

The recent gains have come about in spite of an unexciting backdrop for the UK economy. The past few weeks have seen a grim round of economic statistics: inflation is up, economic growth is down and wage growth is slowing. In the end, the catalyst for the UK market has been simply that investors have started to look beyond the US market. The UK’s low valuations, dividend strength and defensive characteristics have made it a natural hunting ground.

Equally, while UK companies will not be thrilled with the 10% tariffs imposed by Donald Trump, it is lower than many of their international peers. It also means that they have greater visibility on earnings than companies in other countries. This may have improved the UK’s

‘safe haven’ credentials at a time when tariffs are creating significant uncertainty.

The rotation has been welcome. It is our view that we are only in the foothills of a recovery for the UK market. It has been out of favour for some time, and on most measures –price to earnings or dividend yield, for example – it compares favourably to its own history and to its international peers.

Nevertheless, there are some nuances to the UK market today that require careful navigation. There are pockets of irrationality, for example. Share prices in the defence sector, for example, have run up a long way in a very short space of time. While defence spending is rising in Europe, there is relatively little clarity on where it will fall for the time being.

Markets also lack discernment in their assumptions about AI, apparently willing to pay higher and higher multiples for companies where the payoffs are not yet clear.

Equally, the UK is an international market. UK companies draw their revenues from across the globe. While the UK has secured its trade deal, UK companies may still be vulnerable to some of the repercussions from global trade disruption, and also from the disruption in global currency markets. Many of our companies are still exposed to the US: it is a vast and dynamic market, and it is difficult to find similar growth elsewhere, but we are navigating the disruption carefully.

There are also factors that have been particularly in and out of favour. Quality companies – the

area on which we focus – have marginally lagged the recent rally. Value companies, in contrast, have performed extremely well. Our research shows that quality companies have lagged value companies by around 50% since the discovery of the Covid vaccine in November 2020. This has persisted into this year. While quality companies have outpaced the FTSE 100, they have trailed value companies by around 5%.

This relationship may be due for a re-set. In our view, quality characteristics should be more highly prized by investors at a time of greater uncertainty. Resilient business models should be more insulated from global trade disruption. We’re believe the valuation and growth prospects for companies in our portfolio are very encouraging today. We are focused on companies that have clear visibility of earnings, supported by structural rather than cyclical growth. National Grid, for example, is a beneficiary of the

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.

• Company/Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance

Other important information:

The details contained here are for information purposes only and

UK’s ongoing decarbonisation drive. The ‘Great Grid Upgrade’, which will connect renewable power from its source to where it is needed and install batteries into the system, is well underway. The company is also operating under a clear and predictable government regime.

We would also highlight medical products group Convatec. Its product portfolio includes advanced wound care, ostomy care, continence care, and infusion care. It is an unglamorous business, but its products are vital for supporting quality healthcare for patients worldwide. It has a natural tailwind from an ageing population, and a growing incidence of chronic wounds, ostomies and continence problems. It also supplies infusion sets for diabetes and Parkinson’s disease management.

Prudential has a history as a bluechip UK insurer, but its core activities are now in Asia, with a presence in all major markets in the region. It is in

should not be considered as an offer, investment recommendation, or solicitation to deal in any investments or funds and does not constitute investment research, investment recommendation or investment advice in any jurisdiction. Any data contained herein which is attributed to a third party (“Third Party Data”) is the property of (a) third party supplier(s) (the “Owner”) and is licensed for use with Aberdeen. Third Party Data may not be copied or distributed. Third Party Data is provided “as is” and is not warranted to be accurate, complete or timely. To the extent permitted by applicable law, none of the Owner, Aberdeen, or any other third party (including any third party involved in providing

prime position to take advantage of the growth of the middle class across Asia. This fast-growing population is creating growing demand for life, health and savings products, from a very low base. It also has a large business in Africa.

On the Dunedin Income Growth Trust, we are finding plenty of interesting, idiosyncratic ideas for the portfolio within the UK market. There are a range of companies where the growth potential is well-established, including companies such as Genus, Genuit and Oxford Instruments. These companies are not reliant on the cycle, and not particularly vulnerable to the latest edicts from the White House.

Renewed interest in the UK market is welcome. We agree that it holds real opportunities, with interesting companies trading at low valuations. We are optimistic that the recent rally can develop some self-sustaining momentum from here as more investors recognise the value in UK companies.

and/or compiling Third Party Data) shall have any liability for Third Party Data or for any use made of Third Party Data. Neither the Owner nor any other third party sponsors, endorses or promotes the fund or product to which Third Party Data relates.

The Dunedin Income Growth Investment Trust Key Information Document can be obtained here.

Find out more at www. aberdeeninvestments.com/DIG or by registering for updates

You can also follow us on social media: Facebook, X and LinkedIn.

A ‘stealth’ rally has returned Shanghai stocks to a 10-year high

While most investors have been fixated on the US stock market, which has been making new highs almost daily over the summer, unnoticed by almost everyone another market on the other side of the world has just hit its highest level in a decade.

The Shanghai Stock Exchange or SSE Composite Index, which is made up largely of domestic Chinese companies with domestic Chinese shareholders, has been on a tear gaining 30% over the past year, and has just hit an historic milestone.

What’s more, analysts and fund managers believe the rally has the makings of a lasting bull run as there are few signs of FOMO (‘fear of missing out’) and short-term volatility in Chinese stocks is generally low.

DIVERGING FROM REALITY?

One of the reasons few people have noticed the rally in Shanghai-listed stocks is the big indices which most firms consider regional benchmarks – such as the MSCI China index or the Hang Seng Index – are nowhere near making 10-year highs.

Another reason is recent Chinese economic data has hardly been supportive of a rally, with retail sales, corporate investment and credit and activity numbers seemingly more representative of a downturn.

Most analysts expect Chinese growth to weaken further in the second half due to the front-loading of exports in the first half and continued lukewarm domestic demand.

So why are stocks ‘diverging from reality’ and making new highs?

One of the reasons is market liquidity, with China’s central bank adding hundreds of billions of yuan of

short-term cash through reverse purchase or ‘repo’ operations in order to stabilise the bond market.

The People’s Bank of China recently injected a net CNR 465 billion or $65 billion of liquidity, its thirdbiggest repo operation this year, as investors desert the bond market over a proposed tax on interest income on new bonds and general concerns over the economy.

That money has to find a home somewhere, and for now it seems Chinese institutional investors are staying close to home, preferring to pile cash into runof-the-mill domestic stocks rather than whizzy tech names like Tencent (700:HKG), Alibaba (9988:HKG) and Xiaomi (1810:HKG) which make up more than 30% of the Hang Seng and MSCI China indices.

Another reason, says Bank of America’s greater China chief economist Helen Qiao, is these investors are ‘looking through’ the short-term fundamentals, encouraged by the fact US tariffs have been put off yet again.

A third reason, says BNP Paribas’ head of regional equity and derivative strategy Jason Lao, is interest rates have come down a long way in the past year and Chinese households are sitting on more than CNR 160 trillion or $22.3 trillion of savings.

With government bonds yielding 1.6%, and stocks of large Chinese companies yielding 3% to 4%, equities

now offer an alternative from an income perspective, adds Lao.

It is also worth pointing out that, in China as in other markets, stocks don’t always move hand in hand with the economy, because investors are constantly looking ahead rather than basing their decisions on current or past trends.

HOW FAR COULD THE RALLY GO?

One of the most interesting features of the rise in Shanghai stocks is how measured it has been – there has been no panic-buying, unlike in previous rallies.

This has encouraged analysts to think there is more to come, and it will also have pleased the Chinese authorities who have been hoping for a ‘slow bull market’ to restore confidence, aid wealth creation and spur domestic consumption.

Chinese consumer confidence fell off a cliff after Covid and is still stuck at levels of mid-2023, according to figures from the OECD.

Yet Shanghai exchange data shows more than 14 million new retail accounts were opened between January and July of this year, which suggests more small investors are becoming aware of the attractions of trading local stocks.

Interviewed on Bloomberg’s The China Show, Hao Hong, managing partner and chief investment officer of Lotus Asset Management, says it is ‘more likely than not’ the rally keeps going.

Most of the money which has flowed into the market so far is institutional, says Hong, and while retail investors have been building up deposits in their accounts, they haven’t yet jumped into the market.

Rising margin debt, rather being seen as a risk, should be seen as ‘encouraging’, argues Hong, adding ‘For the longest time, we haven’t seen this level of risk appetite coming back to the market.’

Whether the rally in Shanghai spreads to other indices is up for debate – stock-focused Chinese ETFs (exchange-traded funds) have seen eight weeks of constant selling up to the middle of August, according to data compiled by Bloomberg

However, if the rally does spark life into the bigger benchmarks at least foreign investors will have had fair warning.

By Ian Conway Deputy Editor

Made in China – how important is manufacturing to the Chinese stock market and economy?

THistorically China’s economic growth has been heavily tied to being the ‘world’s factory’ Manufacturing has

he economic growth seen in China over the last half-century or so has been built on being the ‘world’s factory’ but how central is manufacturing today to the Chinese market and economy?

In broad stock market terms, if we take the industrials sector as a rough proxy for manufacturing, the weighting afforded this space is not that significant. It represents just 4.3% of the MSCI China index compared with 28.2% for consumer discretionary stocks and 22.8% for communication services.

The MSCI A China index, which is focused on domestic Chinese shares as opposed to the MSCI China which encompasses shares listed in Hong Kong and overseas, has a more significant weighting to industrials at 14.8%, the third largest sector after financials and information technology.

Battery manufacturer Contemporary Amperex Technology (300750:SHE) or CATL for short is the second largest stock by market value in this index.

In terms of the Chinese economy the World Bank calculated manufacturing represents around 25% of GDP on a value-added basis. While significant, this is down from 32% two decades ago. World

Sponsored by Templeton

Emerging markets: tariffs, interest rates and a China growth air pocket

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

1. Tariffs in emerging markets (EMs): The 1 August deadline for reaching a trade agreement with US President Trump has passed, and many EMs have failed to secure a deal. India, Brazil and Taiwan are among the larger countries that are facing tariffs of 25%/40%/20% respectively. We expect negotiations to continue and remain optimistic that an agreement will eventually be reached, possibly at the new normal tariff rate of 15% that Europe and Japan recently agreed to with Trump.

2.

Banks and interest rates: The US Federal Reserve (Fed) and the Bank of England appear to be adopting a wait-and-see approach to further interest rate cuts, while the European Central Bank may have reached the end of its easing cycle. The impact of rising tariffs on US inflation is one factor giving the Fed pause for thought. Nevertheless, it is clear to us that the global easing cycle is ending, with positive implications for bank stocks, which tend to experience falling net interest margins and in turn profitability as rates decline..

3.

China growth air pocket: There are signs that the Chinese economy may be going through a growth air pocket. The government’s crack-down on disorderly competition in the manufacturing sector is showing signs of impacting output, as signaled by recent purchasing manager indexes showing a softening in manufacturing output. While reducing disorderly competition may reduce deflation risks, it may also require additional stimulus to support growth.

Chetan Sehgal Singapore

Schroder Income Growth Fund (SCF)

Sue Noffke, Head of UK Equities

The Schroder Income Growth Fund (SCF) is an AIC Dividend Hero with a 28 year track record of delivering an increasing dividend achieved by investing primarily in above average yielding UK equities.

Global Opportunities Trust (GOT)

James Sym, Fund Manager

The Global Opportunities Trust (GOT) invests in a range of assets across both public and private markets throughout the world. These assets include both listed and unquoted securities, investments and interests in other investment companies and investment funds (including limited partnerships and offshore funds) as well as bonds (including indexlinked securities) and cash as appropriate.

Smithson Investment Trust (SSON)

Simon Barnard, Portfolio Manager

Smithson Investment Trust (SSON). 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.

Market rally fuels interest in momentum investing strategies

Historical data illustrates the potential outperformance from this method of trading stocks

Equities have enjoyed a solid run so far in 2025 including new record highs for the FTSE 100 and the S&P 500 indices. There is optimism across the markets and that typically encourages certain investors to look at a particular strategy, namely momentum investing.

There is a much-used phrase in investing that says ‘a rising tide lifts all boats’, meaning that economic growth will be benefit everyone. Investors often adopt that phrase in the belief that stocks of any quality might increase in value if markets are racing ahead.

That approach can backfire if you’re not careful as the tide can turn quickly. Instead, it might pay to consider more specific momentum investing techniques that aim to filter out parts of the market and where certain signals identify when to consider buying or selling. Fund managers often deploy such techniques as do computer-based investment strategies including certain factor-based ETFs.

WHAT IS MOMENTUM INVESTING?

Strength in share price performance or earnings relative to the broader market over the past 12 months are often at the heart of momentum investing. Investors look for companies ‘on a roll’ and hope this success will continue. It’s a bit like a surfer riding a wave, hoping they get a good, long ride.

Rather than buying low and selling high, momentum investing involves buying high and selling higher. It’s the complete opposite of value investing and looking for unappreciated/forgotten market gems.

‘The success of momentum is probably best explained by behavioural finance theories – that is, investors will tend to buy stocks whose price is going up, leading to further upward pressure on the stock’s price,’ says asset manager BlackRock.

The idea of buying a stock when its share price is flat or falling is alien to certain individuals,

particularly those who are less experienced investors. They might only want to buy what’s going up, believing that is a symbol of a worthwhile investment. In reality, buying when others have lost interest can yield big rewards down the line, but certain people simply want to ride an upwards wave even if it means paying a higher price for a stock. It’s pure FOMO – fear of missing out.

PUTTING MOMENTUM STRATEGIES INTO PRACTICE

Momentum investing can involve a large element of timing the market. To add an element of control, investors might look to only buy and sell shares when they perform in a certain way.

For example, one strategy is to buy a stock when it hits a 12-month high and then keep buying if it continues to hit new highs. A potential trigger to consider exiting a trade is when the stock hits a three-month low.

Fund managers often use this approach as a starting point and then refine the momentum strategy by adding additional criteria.

There are various momentum indices which form the backbone for factor ETFs. For instance, the MSCI All Countries World index is a popular benchmark for global equities. There is a momentum version of this index that focuses on stocks with high price momentum, rebalanced twice a year.

Long-term past performance data is interesting as it shows the momentum strategy has the potential to beat the market. In the 20 years to 20 August 2025, the MSCI ACWI Momentum index returned 588% versus 404% from the ‘normal’ MSCI ACWI index. This outperformance was also recorded

Momentum wins over last two decades

over the past one, three and 10 years (but not five years). While these statistics are enlightening, it’s important to remember that what’s worked in the past won’t necessarily work in the future.

SPOTTING A SHIFT IN THE MARKET

As any surfer will tell you, riding a wave can be spectacular but it’s hard to sustain. Momentum investing comes with similar thrills and disappointments. It can lead to heightened volatility in an investment portfolio and requires an ability to read the mood of the market.

As such, it’s worth following market sentiment indicators as these can act like a traffic light system. Bullish sentiment often implies that conditions are positive for momentum trades, whereas a sudden switch to bearish sentiment can signal a potential loss of momentum.

CNN publishes a ‘Fear and Greed’ index on its website that features different indicators including ‘market momentum’ based on the US stock market. It says a ‘greed’ status can drive up share prices and ‘fear’ the opposite.

When the S&P 500 is above its moving or rolling average of the prior 125 trading days, CNN says that’s a sign of positive momentum. But if the index is below this average, it suggests investors are getting skittish.

At the time of writing (21 August), CNN’s fear and green index sat at the higher end of ‘neutral’ and just below ‘greed’, with the market momentum factor registering ‘neutral’.

Source: MSCI, data covers 20 years to 20 August 2025

Momentum investing might form part of an investors’ portfolio, particularly on the sidelines as a way to take higher risks. However, it is less common for it to be at the core of someone’s investment strategy as that’s more likely to feature ‘get rich slowly’-type assets.

How to invest for passive income from shares

Doing some homework and making use of funds are ways which can help you secure a reliable stream of dividends

The idea of creating an income stream which you get paid without working is nothing new, it’s actually the fundamental basis of any retirement plan. However the concept has been repackaged as ‘passive income’ in recent years, as people of working age seek to make more of their assets and abilities to boost their income. It covers all sorts of activities such as hiring out garden tools through to renting out a room to lodgers.

DON’T FORGET THE UPFRONT COSTS

There is almost always an upfront cost to creating passive income, but the idea is that it requires little continued effort to keep the money rolling in. Building up a portfolio of income investments fits neatly into this category. Once you’ve saved enough for a portfolio which provides you a reasonable income, your working options open up, whether that might be going part-time, retiring early, or retraining in a new field. How much you need to build up depends on

what your income needs are, but once you’ve built up the necessary capital, you’ll need to invest it for income. One way of doing this is to invest in individual stocks. There are plenty of companies in the UK stock market which provide relatively healthy dividends, though high yields are not necessarily the only indicator you should look at when selecting investments.

A historic dividend yield provides you with information on what the company has paid out in dividends in the last year, but sometimes the market adjusts the price of a stock downward because it’s expecting dividends to be cut. That can result in a historic yield which looks high because it relates to last year’s dividends, which aren’t repeated going forward.

LOOKING AT DIVIDEND COVER

Investors should also consider the dividend cover of a stock, which is the amount by which its earnings cover its dividend. This is given as a multiple, for instance a dividend cover of 2x means

that annual earnings are two times bigger than annual dividends, which suggests a company can continue to pay out its dividend unless earnings fall by 50% (though of course it may still choose to cut its dividend if its earnings fall by less than that).

On the other hand, a company with a dividend cover of 1x is skating on thin ice in terms of its income payments, because any reduction in earnings could well mean having to cut the dividend, or fund it through debt.

Another couple of considerations when picking income shares is dividend volatility and dividend growth. Some sectors have more volatile dividends than others. For example, consider mining companies, which derive their earnings from commodity prices. When these are high, the money is rolling in, and dividends can be generous. But when the cycle turns and commodity prices fall, mining companies can see their profits collapsing and might have to take an axe to dividends. Compare this with supermarkets, where demand for their products is relatively stable, and so their profits and dividends are less volatile.

CONSIDER DIVIDEND GROWTH

Dividend growth in the future should also be factored into investment decisions. A company with a high stable dividend may give you jam today, but if the dividend remains flat over time, your income is vulnerable to the effects of inflation. A company which has a good track record of growing its dividend can offer you some protection here, though there is of course no guarantee it will continue to do so indefinitely into the future. Stocks with higher dividend growth potential tend to come with lower starting yields. An income portfolio might therefore include stocks with a high but flattish dividend to boost income in the here and now, alongside companies with lower yields but better prospects for dividend growth.

To run a truly portfolio of individual stocks you really need a minimum of 25 to 30 companies to achieve an adequate level of diversification, to protect you from problems in one company or sector damaging your wealth too badly. For many people, that’s a lot of portfolio management to take on, which is where funds come in.

FUNDS OFFER DIVERSIFICATION

An income fund run by a professional investment

manager offers you instant diversification, as well as someone to pick stocks on your behalf, though there is of course a fee for this service, to the tune of 0.81% per annum for the typical UK Equity Income fund, according to Morningstar data.

Equity Income funds investing outside the UK can also help you diversify your portfolio globally and are definitely worth considering. You may have to accept a lower yield from some markets though, but sometimes that might come with better prospects for capital growth.

Like open-ended funds, investment trusts also offer a diversified portfolio of shares and are run by a professional manager. Income trusts can also manage dividend payments to their shareholders by holding back money in good years to pay out in fallow periods. This doesn’t mean investment trusts receive more dividends than an equivalent open-ended fund, but they can smooth the income as it is paid out each year, which will be attractive to some investors.

It goes without saying if you’re investing for income, you should keep the taxman off your dividend payments. By holding your investments in an ISA, your income from investment faces no income tax, and also no capital gains tax. So, for passive income seekers, making the most of your ISA allowance to save tax and keep more of your income is a no brainer.

By Laith Khalaf AJ Bell Head of Investment Analysis

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

Russ Mould

Laura Suter

Rachel Vahey

Hannah Williford

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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.

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 paid-for 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.

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

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The best performing AIM stocks in 2025

Find out who has done best on the junior market this year

It has been a turbulent year for AIM stocks, as it has been for most financial markets in 2025 but some names have really stood out through the period.

We ran the numbers on the AIM-quoted companies which had performed best so far this year, concentrating on those names with a market valuation of £50 million or more.

Gold prices have soared in recent months and this has supported strong gains for gold miners on the junior market including Thor Explorations (THX:AIM). The company reported a record-breaking second quarter performance – moving from a net debt to a net cash position of $52.8 million. This helped underpin the continuing payment of dividends, having made its maiden payout in May.

Elsewhere in the resources sector, Empire Metals PLC (EEE:AIM) has been actively expanding its in-house project development team and has started large-scale metallurgical testing at its Pitfield titanium project in Western Australia. The company recently completed its largest drilling programme to date at the Pitfield project, marking a key step toward delivering a maiden JORC-compliant mineral resource estimate.

Specialty pharmaceutical business Shield Therapeutics (STX:AIM) reported an 80% revenue growth in the first half of 2025, driven by increased sales of its iron deficiency treatment ACCRUFeR. The company sold approximately 84,000 ACCRUFeR prescriptions during the period, representing a 30% increase from the first half of 2024. Shield‘s loss narrowed to $9.5 million from $15.5 million a year earlier. The company reiterated guidance that it would turn cash flow positive by the end of 2025.

Games developer Frontier Developments (FDEV:AIM) recently reported strong financial results for the financial year ended 31 May 2025. The company‘s revenue increased to £90.6 million, with significant growth in its Creative Management Simulation (CMS) games. Frontier Developments also announced a share buyback programme of up to £10 million, subject to shareholder approval.

In June, the company revealed an October release date for the third instalment of the critically acclaimed JWE (Jurassic World Evolution) game following hot on the heels of the Jurassic World: Rebirth movie released in early July.

Workplace benefit and health insurance specialist Personal Group (PGH:AIM) just published a trading update for the six months to June showing an 11% increase in revenue to £23.3 million and a 41% jump in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation) to £5.5 million. More than 90% of revenue came from recurring sources, providing good visibility for the full year and the group enjoyed high retention rates across all areas of the business.

Best performing AIM stocks in 2025

tinyBuild: A global video games publisher with a new strategy

tinyBuild (TBLD:AIM) is a global video games publisher and developer with a large catalogue of premium PC and console titles such as Hello Neighbor, SpeedRunners and Potion Craft.

After a management change in 2023 and a successful fundraise in January 2024, tinyBuild was able to reset its strategy after a difficult period.

The management focused on tighter cost control, stricter green lighting of new games, and developing new own IP (intellectual property).

The company has made tough decisions on costs to free up resources so it can invest in high-potential games.

By early 2025, the benefits of the reset could be seen in tinyBuild’s numbers.

At the end of May 2025, cash was in the midsingle-digit millions with no borrowings. And in its trading update in June 2025, sales for the first five months of the year were slightly ahead of expectations, despite the market backdrop remaining challenging.

tinyBuild continues to carefully manage cash ahead of major new game launches and has maintained a disciplined investment approach focused on evergreen franchises. That prudence has been paired with a rationalisation of the company’s portfolio of assets, including the sale of testing studio Red Cerberus in April 2025, to focus the company on publishing and development.

WHAT NEXT FOR TINYBUILD?

So, what comes next? tinyBuild’s pipeline of games is the strongest it has ever been, with community interest building around distinctive, systems-rich projects, such as Streets of Rogue 2, that will keep players engaged over the longterm. In the first half of 2024, the company’s games appeared in over three million wish lists, reflecting a bigger, more involved audience than any other non-AAA publisher.

tinyBuild’s games are developed and marketed with a data-driven approach: open development via public playtests, iterative

demos, and content updates that reward the time invested by players in the game.

As the games find their audiences, budgets and features are reassessed, and the release date adjusted to realise the full potential of the game at launch.

The tinyBuild approach to new games is deliberately patient — building communities first, then scaling into broader awareness — and it has the knock-on benefit of boosting the company’s backcatalogue as new players go hunting for similar experiences.

platform launches, downloadable content, and sequels.

This creates steady and predictable sales at reduced risk, and older games can continue to grow their audience, with some having their best years in terms of revenue, years after they have launched.

A strong back catalogue supports investment in promising game prototypes to turn them into new, long-lasting franchises, with the IP-owned by tinyBuild. Kingmakers, SAND, FEROCIOUS and Streets of Rogue 2 are some of the most anticipated names, with three of them in the top 100 global Steam wish lists rank.

As it looks ahead, tinyBuild’s strategy is clear: invest where player validation is strongest and double-down on games designed to be played for hundreds of hours.

Green-light decisions are anchored in playtest data; marketing leans on demos and community events rather than big ad buys; and production resources are concentrated on titles with the clearest path to long-term player engagement.

Successful titles create monetisable events every year, including game updates, new

Recent months have delivered more evidence of the success of the reset, and tinyBuild’s approach.

Deadside’s console debut drew 100,000 new players in its first week and topped 150,000 within a fortnight — the strongest console launch the company has ever had. On PC, The King Is Watching sold 100,000 copies in just four days on Steam.

As it enters the second half of 2025, tinyBuild has done the hard work to refocus and streamline the business and build a more resilient balance sheet to manage the tough market conditions.

This means it has the resources to invest in successful games that in turn become long-term franchises. With a strong back catalogue and pipeline of high-potential, exciting new games, tinyBuild is ready to start a new chapter.

London Bitcoin Company: managing digital assets in a digital age

London Bitcoin Company (BTC) is one of the very few cryptocurrency enterprises which is both listed on the main market of the LSE (London Stock Exchange) and is focused entirely on bitcoin.

From a global brand perspective, its BTC ticker gives London BTC unique positioning.

London BTC’s main market presence also provides access to a broad and diverse international investor base.

BITCOIN TREASURY AND STRATEGIC ASSET MANAGEMENT

As of mid-August 2025, the company had 85.97 bitcoin in treasury at an average price of $103,137 for a total cost of $8.9 million.

Bitcoin mining across four states in the US and the Labrador region of Canada, with over 1,000 operational bitcoin miners.

Membership of the BTC Inc (Bitcoin for Corporations) initiative which aligns London BTC with other forward-thinking companies to adopt bitcoin as a primary reserve asset.

This collaboration underscores our belief in bitcoin‘s role as a hedge against inflation and a store of value in the digital age.

London BTC offers investment exposure to the bitcoin sector and is a rapidly growing player in

North America’s bitcoin mining industry.

This makes London BTC, which is debt free, a rare investment opportunity in the UK.

Global interest in cryptocurrencies continues to climb rapidly and bitcoin is increasingly recognised as a mainstream asset class.

Since February 2021, some 32 multiple spot bitcoin ETFs have been approved in the US and other global markets, and this has added increasing credibility to digital assets.

These ETFs are attracting institutional investors, reinforcing bitcoin’s position as a serious alternative to traditional fiat currencies.

As of this month, bitcoin’s market value stands at around $2.3 trillion. The price of bitcoin has doubled in the last 12 months alone.

As part of the continuous digital currency revolution, London BTC is committed to expanding its role in the bitcoin ecosystem and being a part of the adoption of digital assets worldwide.

FUTURE OF BITCOIN

Significantly for the future of bitcoin, the US president signed an executive order in January 2025, which aims to establish the US as a global leader in blockchain innovation while reducing regulatory uncertainty for the crypto industry.

And in March 2025 the US president issued an executive order establishing a strategic bitcoin reserve for the US.

When Satoshi Nakamoto mined the first bitcoin in 2009, the ultimate number of bitcoins was determined to only ever reach 21 million.

There are currently 19.9 million bitcoins mined, and it is estimated that it will take another 140 years to mine to the very last one.

London BTC is building up a strategic bitcoin holding by installing miners within third-party hosting facilities throughout the US and Canada.

Currently, London BTC operates bitcoin miners in Indiana, Iowa, Nebraska, and Texas in the US and in Labrador in Canada and this footprint will continue to expand.

London BTC plans to have its growing population of miners hashing to London BTC’s wallet from each North American state, providing a diverse and de-risked platform for revenue generation.

With each new expansion, it aims to install new miners that have an attractive operating margin over the prevailing bitcoin price on installation, thereby always modernising the fleet and keeping up to date with the latest competitive technology.

LONDON BTC STRATEGY

London BTC remains at the forefront of the bitcoin mining industry by adopting state ofthe-art ASIC (Application Specific Integrated Circuit) miners, ensuring continuous upgrades with each new model to maximize efficiency and output.

As the cryptocurrency landscape rapidly evolves, London BTC is committed to maintaining its competitive edge through

technological innovation and operational excellence.

This forward-thinking approach aligns with the risk-reward appetite of investors seeking exposure to innovative, high-growth firms in the digital asset sector.

By consistently optimising its mining infrastructure, London BTC reinforces its position as a leading player in the Europeanlisted bitcoin mining industry, while aiming to deliver long-term value to shareholders.

REGULATORY LANDSCAPE AND ADOPTION

With bitcoin and other digital assets gaining mainstream acceptance, regulatory clarity is becoming more pronounced.

Dozens of governments have now adopted regulatory frameworks for cryptocurrencies that promote growth.

The UK is steadily moving towards the creation of a comprehensive regulatory landscape for digital assets, which will bring companies like London BTC into the mainstream in the eyes of investors.

LONG-TERM GROWTH IN THE BITCOIN MARKET

London BTC sees the long-term growth prospects of bitcoin market as significant.

Many analysts predict that bitcoin will continue to appreciate over the next decade as government policy changes, mainstream adoption increases, and supply diminishes due to the halving events that occur about every four years.

London BTC offers an option to potentially capitalise on the long-term price appreciation of bitcoin while benefiting from the company’s operational expansion and market share growth.