IRN-BRU’s maker AG Barr, bank HSBC and British American Tobacco are among some of the longest-held UK stocks by some of the industry’s best-known investment trusts and managers.
With a number of investment trusts having investing around for several decades and in a handful of cases more than a century, several trusts own stocks that they have held for some time.
Unlike open-ended strategies, where managers need to keep an eye on inflows and outflows, investment companies´ closed-ended structure enables managers to take a long-term view of their portfolio.
Below, FE Trustnet considers some of the longest-held UK stocks by top managers in the investment trust space.
HSBC - Bankers Investment Trust
First on the list is London-listed global bank HSBC, which is one of the longest-held stocks by an investment trust.
The first appeared in Bankers Investment Trust’s first reports and accounts dating in 1889 and has been in the portfolio for 129 years.
“The first set of annual accounts from Bankers Investment Trust in 1889 contains a fascinating list of portfolio holdings,” said Alex Crooke, manager of the trust. “While dominated by water companies, railroads, breweries and government bonds, a few names stand out.
“However, one holding from 1889 still remains in the portfolio today and I believe has been held continuously; the Hong Kong & Shanghai Banking Corporation, now simply known as HSBC.”
Crooke added: “There are few holdings with this tenure but many other companies we have held for over 30 years.
“Investment managers are essentially just custodians for a period of time and we hope to hand over the reins with all in fine order.
“Longer holding periods mean lower transaction costs and the ability to benefit from a company’s strategy and products over multiple economic cycles.”
Performance of HSBC since 1995
Source: FE Analytics
Last year the bank reported pre-tax profits of $17.2bn up from $7.1bn in 20166 pm as reported revenues increased from $48bn to $51.4bn, year-on-year. The significant increase in pre-tax profits was “non-recurrence of a number of large significant items from 2016”.
As the above chart shows, HSBC’s share price has grown by 134.16 per cent since 1995.
AG Barr - Finsbury Growth & Income Trust
AG Barr, the company that created soft-drink Irn-Bru which the firm claims “is seen by many as part of the culture of the Scottish nation”, has been in Finsbury Growth & Income Trust’s portfolio since manager Nick Train took over in 2001.
“One of the first investments we made was into AG Barr, the maker of the wondrous IRN-BRU,” explained FE Alpha Manager Train. “This was and remains the number one soft drink in Scotland, making Scotland, as a result, one of the very few countries in the world where Coke is available but not the top seller.
“For decades Warren Buffett had been explaining the merits of investing in leading beverage brands – cost of ingredients very low: consumer loyalty to the brands very high.”
“We chose to follow his general advice by buying Barr, which is still in FGT’s portfolio 17 years later.”
Train added: “The value of the shares has gone up nearly nine-fold since then, but the statistic I like is this: if you compare Barr’s 2017 dividend payment to our average book cost for the holding we are now earning a dividend yield of about 19 per cent on the original investment.
“Only long-term equity investing can do this for you and closed-end investment trusts are some of the best designed vehicles for long-term equity investing.”
Performance of A.G. Barr since 2000
Source: FE Analytics
Since 2000, A.G. Barr’s share price has risen by 973.17 per cent, as the above chart shows.
British American Tobacco (BAT) - Perpetual Income & Growth Investment Trust
Another UK stock that has been held by an investment company over the long term is British American Tobacco, which is Perpetual Income & Growth Investment Trust’s largest holding at present (6.60 per cent).
Mark Barnett, head of UK equities at Invesco Perpetual and has been a manager of Perpetual Income & Growth Investment Trust for almost 20 years.
“During this period specific holdings and sector weightings have changed, though one constant has been my focus on finding companies that I believe will provide growing levels of return to investors,” he said. “If I look back on my investments over the past two decades, one clear constant is the tobacco sector”
Barnett said the sector has weathered shifting consumer trends and an increasingly hostile regulatory environment while remaining “a rewarding source of income for the portfolio in a changing investment landscape”.
As such, one of the manager’s key long-term holdings has been British American Tobacco (BAT), which he said has been a strong income generator for the trust for many years.
“A key advantage of holding cash generative stocks such as BAT within the investment trust structure is the company’s ability to store up to 15 per cent of the income each year in reserve, he said.
“This builds an income ‘cushion’ – helping to ensure the smooth payment of dividends in years where income may be harder to generate.”
Performance of BAT over 10yrs
Source: FE Analytics
During the past decade, BAT’s share price has risen by 122.65 per cent.
Wadworth –Lowland Investment Company
Finally, Lowland Investment Company’s James Henderson highlighted brewer and pub company Wadworth, which has sat in the portfolio for half a century.
“Wadworth has been in Lowland’s portfolio since 1968. The company is a brewery and pub company based in Devizes in Wiltshire, which started in 1852,” he explained.
“It is a family controlled company run on a long-term basis and the brewery produces quality beers such as 6X and has a quality estate of managed pubs which gives it a substantial asset value.”
Henderson added: “The value of the holding has increased 100 times and there have been dividend payments along the way as well.
“It is the only unquoted operating company in Lowland’s portfolio and it is valued at a discount to the most recent substantial traded price. It has been a very worthwhile long-term holding for Lowland.”