New for 2017. Patiently turning a tanker round
Scottish Investment Trust was formed in 1887. Its returns were relatively insipid in recent years until its current manager, Alasdair McKinnon, took over in February 2015.
Since then its performance has improved markedly. McKinnon has slimmed down the trust's investment management team and cut back on other expenses to bring down its ongoing charge.
The number of holdings in the portfolio has been reduced and McKinnon has adopted a new, contrarian investment approach. There is an active discount control strategy. So we think there is potential for returns to continue to improve under McKinnon, enhanced by a narrowing discount.
The trust's portfolio is widely diversified both by market sector and geographic location in order to spread investment risk. However, investments themselves are acquired on the basis of the merits of the individual stocks rather than those of regions, sectors or themes.
McKinnon says that in general terms he looks to hold companies where he can see a clear path to future price appreciation. He warns that his views are not always initially confirmed by a friendly share price movement, but he is prepared to be patient.
Analysts at Winterflood Securities say that McKinnon's approach is to analyse companies through a qualitative and quantitative framework in order to identify where companies are in the 'sentiment cycle'.
This includes assessing how much potential exists for further improvement, and whether dividend yields offer an element of downside protection. Along with reducing the number of holdings to around 70, McKinnon's aim is to have low portfolio turnover.