My Q3 2024 Portfolio Review

Here’s my portfolio review for the third quarter of 2024. I was up 7.5% over the first nine months of the year while global markets rose 12% and the investment trust index gained 6%.

My performance

This table summarises both my recent and longer-term performance against a range of comparators:

^{Notes: The Vanguard global tracker fund is my main comparator with the more conservative LifeStrategy 60 fund, a UK index tracking fund, and an index of UK investment trusts providing additional reference points. All returns are pre-tax and measured in sterling using a unitised method that adjusts for any money put in or withdrawn. All trading and admin costs are included in my returns but not for the fund and index returns.} 

I broadly matched the global tracker and investment trust index over the third quarter with a gain of just under 1%. Both LifeStrategy 60 and the UK tracker performed a little better, rising some 2%. So there was not much change overall, despite the wobble markets had in early August, reportedly due to worries about the yen carry trade.

My performance by holding

Here’s how my positions performed on a share price and NAV basis:

^{Note: the links go to my trust profiles, which were written some time ago now and therefore don’t reflect recent events and results.}

The weighted average discount across all my positions was 4.0% at the end of September. That compares to 4.7% at the end of June and 4.9% as of December 2023. HGT, which is one of my larger positions, probably accounted for a lot of that reduction with most of my other holdings remaining on much wider discounts than they have had historically.

In terms of trading, I did very little as usual just topping up HICL, BlackRock Smaller and Lindsell Train using the dividends I received.

Rather than doing a review of every position, I’ll just highlight a few recent developments at three holdings.

Keystone throws in the towel

Keystone said last year it would hold a continuation vote in 2027 to give shareholders a chance to evaluate its revised strategy. But now it looks like it’s giving up entirely due to its weak performance of late and the low liquidity of its shares. I suspect that Saba taking a stake of over 20% played a role, too.

Discussions have been held with major shareholders about the company’s future and shareholders will be able to opt for a cash exit or roll over into the Baillie Gifford Positive Change Fund, the open-ended equivalent that has £1.8bn of assets. The exact mechanics are to be determined, but it looks like the 4% of Keystone in private companies will be excluded from the calculations and the proceeds from selling these will be distributed later. I’m not sure why £6m of private assets can’t be taken on by a £1.8bn fund but there may be legal or regulatory reasons prohibiting that.

The transaction is expected to be completed in the first quarter of 2025 but I will probably wait for full details before deciding whether to sell into the market, take the cash, or roll into the open-ended fund and sell after that. I can’t say I will be sad to see this position go and the prospect of having one less holding to watch is rather appealing!

GRID takes a large write-down

GRID issued a 30 June NAV update in early September ahead of its interim results saying its NAV per share fell from 129p at the end of 2023 to 109p. The introduction of Modo as a second and more conservative power price forecaster was cited as the main reason for the fall. There was the usual slight slippage in the dates for its remaining projects becoming operational. The shares fell about 15% on this news but remained well above the lows seen in April.

The half-year results released at the end of September contained a little more detail, including updated revenue curves so we could see that the revenue reductions were across the board with a further delay in the forecast recovery of revenues to 2030 rather than 2027. GRID has done itself no favours here and is still somewhat vague about exactly how this situation was allowed to develop. Clearly, it should have been more upfront about just how much the various market forecasts differed in the past.

The results contained some metrics on how the portfolio is being valued on an EV-to-EBITDA ratio but they seemed pretty basic and didn’t add much to what most investors could do themselves. What’s needed is some stats on comparable deals to put these numbers into better context.

None of GRID’s storage projects have been sold yet either, so we lack some much-needed comfort on the trust’s NAV. A group of eight small assets was on the block but it looks like these will be retained and upgraded instead as battery size and cost reductions now make this a much more attractive option. There was said to be an offer that was close to the new lower NAV for this sub-group of the portfolio but GRID says it is now looking at selling just one or two assets.

Assuming no project sales, debt should peak at £175m at the end of this year with about £10m cash held for working capital purposes. I think £110m of this is hedged at 3.7% with the remainder at SONIA plus 3.0% (i.e. 8%) with the facility running until the end of 2027. So there is no refinancing required for a while yet.

Interestingly, a new and very large project has appeared in the trust’s development pipeline. Based in Cockenzie in Scotland, it’s 342MW and for a 2-hour duration — over three times the size of any of GRID’s current assets. Prior to this, the last year or so had seen GRID’s pipeline shrink in size as options to acquire various projects expired.

Dividends should resume in 2025 thanks to the tolling agreement with Octopus but we won’t know any specifics for several months. GRID wants a more than fully covered and sustainable dividend so I would be surprised if the payout was higher than 3.0p versus the 7.35p originally planned for 2023. The trust is also hosting a Capital Markets Day in November where it will unveil a three-year plan for 2025 to 2027.

I’m sitting still with this position for now despite the gaping discount to its quoted but questionable NAV. Battery revenues have recovered from their lows of the first quarter and there are decent reasons to think that will continue as system improvements are made and more renewables come online. But despite the potential upside, investors aren’t willing to give GRID the benefit of the doubt after its numerous recent missteps although I did note there was a director purchase just after the results, the first for several months.

RIT does some marketing!

It is pretty brief and very dry but it was good to see Maggie Fanari, the new lead manager at RIT Capital Partners speak to AJ Bell. I’ve held this trust since 1996 and this is the first time I can recall it doing any sort of marketing to retail investors like this. The trust’s website seems to have had a refresh as well.

Hopefully, this is just the start of a more meaningful attempt to narrow the discount. Who knows, might we even see a live-streamed AGM presentation next year?

Read my fund profiles at Money Makers

I am continuing to write fund profiles at Money Makers with recent articles covering Bellevue Healthcare, Global Opportunities, abrdn UK Smaller Companies Growth, Smithson, abDrn Asia Focus, Ecofin Global Utilities & Infrastructure, Edinburgh Investment Trust, Oryx International Growth, the newly created Henderson European, Fidelity China Special Situations, and Target Healthcare REIT.

The profiles are published on Wednesday mornings and there are now around 160 available to view in our back catalogue.

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Thank you for reading!

Disclaimer

Please note that I may own some of the investments mentioned above -- you can see my current holdings on my portfolio page.

Nothing on this website should be regarded as a buy or sell recommendation as I'm just a random person writing a blog in his spare time and I am not authorised to give financial advice. Always do your own research and seek financial advice if necessary!

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