The Aberdeen Equity Income Trust uses an index-agnostic approach, scouring the entire UK market to identify companies where change has not been fully recognised by investors. This strategy acknowledges that some of the best investment opportunities can arise from under-researched parts of the market, where valuation mispricings are most significant.
As a result, the trust’s portfolio often looks very different from other investment vehicles offering access to UK equity income. As of its latest year end, 51% of the trust’s portfolio was invested in companies outside the FTSE 100 index.
This approach provides access to the broadest range of income-generating investment ideas, including many stocks that offer attractive dividend yields and dividend growth. As their prospects are recognised by the wider market, they can be re-rated, supporting capital growth. With the macroeconomic backdrop beginning to improve and investors looking beyond the FTSE 100, we believe this index-agnostic approach has the potential to reap significant rewards.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
A valuable niche
Galliford Try (LSE: GFRD), a small construction company, is in a favourable position with a growing order book across niche infrastructure areas such as water, defence, prisons and affordable homes. These activities address social needs, boost productivity and generate a multiplier effect for the wider economy, making them a key focus for policymakers.
Discipline across the sector has improved following some high-profile failures, with fewer contractors bidding on a fixed-price basis, resulting in a more rational competitive environment. This is helping to drive consistent earnings growth, with operating margins on track to double as the order book expands. We see Galliford Try as an example of a defensive small cap value stock with clear visibility on earnings and dividend growth.
TP ICAP Group (LSE: TCAP) is the world’s largest inter-dealer broker and provider of over-the-counter data, with a market share of approximately 40%. The company, a member of the FTSE-250 mid-cap index, boasts an entrenched market position, unrivalled connectivity and long-established relationships with top-tier clients. TP ICAP is benefiting from cyclical tailwinds as geopolitical instability and interest-rate volatility help drive up volumes, making it a good diversifier for the trust’s portfolio. TP ICAP has a growing data business called Parameta Solutions, which it plans to float on the New York Stock Exchange. This is a key catalyst for the share price, as it should force the equity market to put a value on this asset.
Petershill Partners (LSE: PHLL) is the private markets division of Goldman Sachs Asset Management. This FTSE-250 business owns stakes in 20 private firms, providing investors with access to this fast-growing sector. Petershill’s assets under management have expanded at a compound annual growth rate of 23% since 2018, outpacing the wider industry. Management expects to raise another $20-$25 billion of funds in 2025, continuing their strong growth record.
We increased our holding after concerns over rising interest rates caused the stock to fall to around half its book value. We believe Petershill Partners exemplifies the bargains available among under-researched mid-and small-cap stocks.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Who won the £1 million jackpot in the May Premium Bonds prize draw?NS&I has announced the winners of May’s Premium Bonds prize draw. Who won the £1 million jackpot and how can you find out if you scooped a prize this month?
-
Trump's first 100 days: investment winners and losersDonald Trump triggered a rollercoaster on the stock markets during the first 100 days of his second presidency. We look at which funds, investment trusts and sectors have performed best and worst
-
Three British mid-caps that could make 'attractive' investmentsOpinion Charles Luke, manager of the Murray Income Trust, highlights three UK-listed mid-cap companies, as he tells us where he'd put his money
-
LendInvest: a promising fintech firm going cheapOpinion LendInvest has made some mistakes in the past, but it’s now primed for growth, says Rupert Hargreaves
-
Falling revenues and mounting debt spell trouble for Jumia TechnologiesStruggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.
-
Chemring Group: an explosive investment opportunity in defenceEuropean states are raising their military spending, and Chemring Group looks well placed to profit
-
Best of British bargains: cash in on undervalued companies in the UK stock marketOpinion Michael Field, Chief Equity Market Strategist, EMEA, Morningstar, selects three attractive UK stocks where he'd put his money
-
PZ Cussons share price down 75% in last decade – why it's one to watchOpinion Once-strong consumer-goods business PZ Cussons is out of favour with the market. That spells opportunity for investors, says Jamie Ward
-
Cash in on the biotech sector with specialist trust BioPharmaOpinion BioPharma has an attractive niche in lending to asset-rich biotechnology companies
-
Three top-notch Taiwanese companies cashing in on the advent of AIOpinion Eric Chan, investment director and co-manager of the Aberdeen Asian Income Fund, highlights three potential Taiwanese winners in the technology industry
