The Monks Investment Trust has been shedding some of its most outstanding performers over the last six months due to concerns about valuations.
Baillie Gifford’s £1.7bn global equities trust, lead managed by Charles Plowden (pictured), sold eight positions and added 10 more during the half-year period to 31 October 2018. It underperformed the FTSE World falling 0.9% compared with a 4.5% return in the index.
The trust’s half-year results listed Abiomed, purchased in early 2017 on the premise of earnings growth between 30-35% for the next decade, as a good example of shares moving much faster than fundamentals. “The shares rose three and a half times in just over 18 months and the valuation moved from high to stratospheric, so the position was sold,” said chairman JGD Ferguson.
Samsung Electronics was also sold over the period.
“Exposure was reduced where share prices have been unusually strong, notably in semiconductors which can be a viciously cyclical industry,” the report said.
Rotation out of large platforms
The strategy was one of three broad themes implemented over the period to diversify the portfolio.
Plowden and his team have shaken up their allocation to online platforms, rotating out of the biggest tech names into less established companies.
Amazon has been trimmed four times since mid-2017, reducing the allocation by around a third. The trust initiated a position in UK food delivery platform Just Eat alongside a Chinese equivalent, Meituan Dianping.
Oil and gas
The portfolio managers added BHP Billiton and lithium miner Albemarle during the period.
“Companies have stopped spending on new projects and this should eventually lead to better supply/demand characteristics, rising prices, more respectable returns and ultimately a new investment cycle,” said Ferguson.
Fast food outlet Chipotle and funeral operator Service Corp International were also added to the portfolio as diversifiers.
Gearing on the closed-ended fund increased over the period from 4.6% to 6.6%.
The trust currently trades at a 2.9% premium, according to the Association of Investment Companies.
