The Securities Trust of Scotland invests in a portfolio of high-quality and resilient businesses that we expect to compound free cash flow reliably over the long term. This should provide a growing income stream that forms part of the balance of income and capital growth. The aim is to produce an above-average return with below-average volatility. With this approach we hope to establish the trust as the high-quality, conservatively managed global equity income trust in the sector.
In a further effort to protect investors from undue volatility, especially those who have irreplaceable capital and a need for income, we have a discount-control mechanism in place. This keeps the share price close to net asset value (NAV) and provides liquidity for shareholders.
At Troy Asset Management we concentrate our portfolios in sectors that can sustain high returns on capital employed (a key gauge of profitability) owing to the competitive advantages that some companies enjoy. With low turnover and correspondingly long holding periods we want to invest in businesses that we can leave to compound over ten years or more. Three such sectors are consumer staples, exchanges and information technology.
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 crowd favourite
Consumer-staples companies are excellent businesses. Strong brands, scale, depth of distribution and longevity all breed familiarity and make for powerful competitive advantages. While best known for its eponymous carbonated soft-drink brand, PepsiCo (Nasdaq: PEP) is actually predominantly a snack business.
With a dominant position in the US and growth opportunities overseas it is a wonderful company. Most of its products are impulse buys at checkouts, which allows the company to raise prices without affecting demand – especially useful in these more inflationary times.
A hedge against inflation
Formally called the Chicago Mercantile Exchange, CME (Nasdaq: CME) owns and trades some of the most important and liquid futures contracts in the world, including those on interest rates, Treasuries and commodities.
Investors’ need to hedge the risks associated with inflation and rising interest rates has benefited the company. Greater volatility in commodity markets also drives activity across the exchange. Limited capital requirements allow CME to pay an attractive and growing dividend. It is very well placed for the uncertain times in which we currently live.
The profits in payrolls
Within information technology (IT) we have exposure to enterprise IT expenditure, which we expect to be more resilient and predictable than household spending in this area. Paychex (Nasdaq: PAYX) was originally a payroll firm, but is now a leading provider of payroll, human capital management and insurance serving US small and medium-sized enterprises.
It boasts 710,000 clients and pays one in 12 private sector workers in the US. Despite its scale, the opportunity to penetrate this market further means the company has plenty of future growth potential. The attractive economics Paychex enjoys allow it to pay a decent and growing dividend, which we think it can sustain for years to come.
-
December 2023 NS&I Premium Bond winners - check now to see what you’ve wonIf you hold money in NS&I Premium Bonds, you can check from today (2 December) to see if you have won in the December prize draw. Here’s how to check.
-
OpenAI – corporate drama unleashed
OpenAI, the firm behind ChatGPT, was in uproar as its boss was booted out, briefly snapped up by Microsoft and then brought back again.
-
Halifax: House price slump continues as prices slide for the sixth consecutive month
UK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?
UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investments
Investors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodation
Student accommodation can be a lucrative investment if you know where to look.
-
Best investing apps
We round up the best investing apps. Looking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go?
-
The top funds to invest in - November 2023
Tips Investors are focused on income strategies and FTSE heavyweights. We look at what investors have been adding to their portfolios in the last month
-
The world’s best bargain stocks
Searching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in Britain
New research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
