Should you buy energy infrastructure investment trusts?

Renewable energy infrastructure investment trusts look cheap, and one in particular stands out

Energy infrastructure investment trusts displayed with aerial view of the solar power station on the background of stock charts
(Image credit: Getty Images)

The listed infrastructure investment trust sector offers some extraordinary bargains. Infrastructure investment trusts are trading at an average discount to net asset value (NAV) of 22%. Renewable energy infrastructure investment trusts are trading at an average discount of closer to 30%. The reason for these discounts is uncertainty. NAVs are based on estimated cash flows from the assets these trusts own, discounted back at an appropriate rate. 

Discount rates are tied to interest rates and the higher the discount rate, the lower the present value of future cash flows, and vice versa. However, these values are open to interpretation, and at present the market doesn’t appear to believe the values the trusts are reporting – hence the wide discounts to NAVs across the board. 

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Rupert Hargreaves
Contributor and former deputy digital editor of MoneyWeek

Rupert is the former deputy digital editor of MoneyWeek. He's an active investor and has always been fascinated by the world of business and investing. His style has been heavily influenced by US investors Warren Buffett and Philip Carret. He is always looking for high-quality growth opportunities trading at a reasonable price, preferring cash generative businesses with strong balance sheets over blue-sky growth stocks.

Rupert has written for many UK and international publications including the Motley Fool, Gurufocus and ValueWalk, aimed at a range of readers; from the first timers to experienced high-net-worth individuals. Rupert has also founded and managed several businesses, including the New York-based hedge fund newsletter, Hidden Value Stocks. He has written over 20 ebooks and appeared as an expert commentator on the BBC World Service.