"As companies start to see stronger balance sheets, their first step is to increase media and sales. We're expecting the Daily Mail and General Trust and WPP Group to do well on the back of that, RCM's head of investment trusts," Simon White said.
Simon Gergel, who manages The Merchants Trust at RCM, has almost doubled his company's exposure to media since the start of the year, saying the position reflects the convergence of three important factors; a macro-economic driver, attractive business franchises and low valuations. It now holds over 8 per cent in telecoms, media and technology. The £530m company is trading at a 0.2 per cent discount.
Sector weightings of The Merchant's Trust
Elsewhere in the investment trusts universe, Gresham House IT, LMS Capital and Lindsell Train IT all have a decent exposure to media.
| IT | Sector weighting to media |
Discount |
| Gresham House |
12% | -35 |
| Lindsell Train |
13.80% | +6.8 |
| Merchants Trust |
8.60% | 0.2 |
Nick Train, manager of the Triple Crown rated Lindsell Train IT, explains why media is becoming an increasingly important part of portfolios.
"Here is a sector which has been out of favour for a long time, with share prices lower than they were a decade ago. There are half a dozen outstanding British media companies which provide great investment opportunities," he said.
"These companies are starting to perform brilliantly, especially because of the advertising cycle which has just swung in its favour," he added.
Train also says the internet has boosted some media groups, such as the Daily Mail and General Trust, contrary to popular opinion which holds that the internet will be the downfall of newspapers.
Media-heavy trusts' performance over 3-yrs
Source: Financial Express Analytics
However, a high weighting to media does not necessarily equate to a high performance, as Financial Express data shows. Over three years both Gresham House IT and LMS Capital have produced negative returns to investors; 58 per cent and 26.7 per cent respectively.
Merchants Trust has yielded a return, but only 3.5 per cent over three years. The star company from this selection is Lindsell Train, which has returned 40 per cent to investors over three years. Its performance is reflected in its price, however; it is trading at a premium of 6.8 per cent.