Shares Magazine - May 24, 2018

GREAT IDEAS

14 | SHARES | 24 May 2018

British Empire Trust has addressed issues that weighed on performance

This investment trust

has been reborn and

is ready to strike back

/

ŶǀĞƐƚŽƌƐƐĞĞŬŝŶŐĂĨƵŶĚŇƵƐŚ

with bargain stocks and

ƵƉƐŝĚĞĐĂƚĂůLJƐƚƐƐŚŽƵůĚďƵLJ

ƌŝƟƐŚŵƉŝƌĞdƌƵƐƚ;dDͿ.

/ƚĂŝŵƐƚŽĂĐŚŝĞǀĞůŽŶŐͲƚĞƌŵ

ĂďƐŽůƵƚĞƌĞƚƵƌŶƐďLJŝŶǀĞƐƟŶŐŝŶ

ƵŶĚĞƌǀĂůƵĞĚĂƐƐĞƚƐ͘

/ƚŽīĞƌƐƐŚĂƌĞŚŽůĚĞƌƐǀĂůƵĞ

ǁŝƚŚŝŶƚŚĞƉŽƌƞŽůŝŽ͛ƐƵŶĚĞƌůLJŝŶŐ

ĂƐƐĞƚƐĂŶĚƚŚĞƐŚĂƌĞƉƌŝĐĞĂůƐŽ

trades at a discount to the

ƚƌƵƐƚ͛ƐŽǁŶŶĞƚĂƐƐĞƚǀĂůƵĞ

;ĐƵƌƌĞŶƚůLJε͘κйͿ͘

/ŶǀĞƐƚŵĞŶƚďĂŶŬ:ĞīĞƌŝĞƐ

argues: ‘Having addressed many

ŽĨƚŚĞŝƐƐƵĞƐƚŚĂƚƉƌĞǀŝŽƵƐůLJ

ĚŽŐŐĞĚƚŚĞĨƵŶĚ͕ŶĂŵĞůLJƚŽŽ

ůŝƩůĞĨŽĐƵƐǁŝƚŚŝŶƚŚĞƉŽƌƞŽůŝŽ

ĂŶĚŚŽůĚŝŶŐƚŽŽŵƵĐŚĐĂƐŚ͕ǁĞ

ƐĞĞƌŝƟƐŚŵƉŝƌĞĂƐĂƌĞƐƵƌŐĞŶƚ

ƉƌŽƉŽƐŝƟŽŶ͘

͚ůƚŚŽƵŐŚƚŚĞĨƵŶĚŚĂƐďĞĞŶ

ƐǁŝŵŵŝŶŐĂŐĂŝŶƐƚƚŚĞƟĚĞ

of growth favoured markets,

ƵŶĚĞƌůLJŝŶŐƉŽƌƞŽůŝŽƌĞƚƵƌŶƐĂƌĞ

ĂƩƌĂĐƟǀĞ͕ǁŝƚŚƉŽƚĞŶƟĂůůLJĞǀĞŶ

ŵŽƌĞǀĂůƵĞŶŽǁĞŵďĞĚĚĞĚ

ǁŝƚŚŝŶƚŚĞƉŽƌƞŽůŝŽƚŚĂŶŚĂƐ

ďĞĞŶƚŚĞĐĂƐĞŚŝƐƚŽƌŝĐĂůůLJ͛͘

BAUERNFREUND’S BEST IDEAS

^ŝŶĐĞŚŝƐϮϬϭρĂƉƉŽŝŶƚŵĞŶƚ͕

ĨƵŶĚŵĂŶĂŐĞƌ:ŽĞĂƵĞƌŶĨƌĞƵŶĚ

ŚĂƐŵŽĚŝĮĞĚƚŚĞŝŶǀĞƐƚŵĞŶƚ

process. The manager is more

focused on a core universe of

ĂƌŽƵŶĚϯρϬƐƚŽĐŬƐŵĂĚĞƵƉŽĨ

ŝŶǀĞƐƚŵĞŶƚŽƌŚŽůĚŝŶŐĐŽŵƉĂŶŝĞƐ

ŝŶĐůƵĚŝŶŐĐŽŶŐůŽŵĞƌĂƚĞƐ͕ƌĞĂů

BROKER SAYS: N/A

e s t a t e c o m p a n i e s a n d p r i va t e

ĞƋƵŝƚLJƉŽƌƞŽůŝŽƐ͘

dŚĞƌĞŝƐĂůƐŽŝŶĐƌĞĂƐĞĚ

ĐŽŶǀŝĐƟŽŶǁŝƚŚŝŶƚŚĞƉŽƌƞŽůŝŽ

ǁŝƚŚůĂƌŐĞƌŚŽůĚŝŶŐƐŝŶĐƌĞĂƐĞĚŝŶ

ƐŝnjĞƚŽƌĞŇĞĐƚĂƵĞƌŶĨƌĞƵŶĚ͛Ɛ͚ďĞƐƚ

ŝĚĞĂƐ͛͘ƐƌŝƟƐŚŵƉŝƌĞŽŌĞŶ

ƚĂŬĞƐĂŶĂĐƟǀŝƐƚƐƚĂŶĐĞŝŶŽƌĚĞƌƚŽ

ĐƌĞĂƚĞǀĂůƵĂƟŽŶĐĂƚĂůLJƐƚƐ͕ůĂƌŐĞƌ

ƉŽƐŝƟŽŶƐŝnjĞƐĂŶĚŐƌĞĂƚĞƌǀŽƟŶŐ

power are advantageous.

Throughout much of the trust’s

ƌĞĐĞŶƚŚŝƐƚŽƌLJ͕͚ǀĂůƵĞ͛ĂƐĂƐƚLJůĞ

ŚĂƐƵŶĚĞƌƉĞƌĨŽƌŵĞĚ͕ĐƌĞĂƟŶŐ

a performance headwind and

ƉĂƌƟĂůůLJĞdžƉůĂŝŶŝŶŐƚŚĞĚŝƐĐŽƵŶƚ

ƚŽŶĞƚĂƐƐĞƚǀĂůƵĞ͘

ŽŵƉĞůůŝŶŐĐĂƚĂůLJƐƚƐǁŽƵůĚ

ŝŶĐůƵĚĞĂŵĂƌŬĞƚƐŚŝŌƚŽĨĂǀŽƵƌ

͚ǀĂůƵĞ͛ŽǀĞƌ͚ŐƌŽǁƚŚ͕͛ĂƐǁĞůůĂƐ

ƚŚĞƉŽƐƐŝďůĞƵƉƐŝĚĞĂƐĐĂƚĂůLJƐƚƐ

ŽŶŝŶĚŝǀŝĚƵĂůƉŽƌƞŽůŝŽŚŽůĚŝŶŐƐ

ĐŽŵĞƚŽĨƌƵŝƟŽŶƚŚƌŽƵŐŚ

ǀĂůƵĂƟŽŶƵƉůŝŌƐ͕ƌĞƚƵƌŶƐŽĨ

ĐĂƉŝƚĂůŽƌǁŝŶĚͲƵƉƐ͘

<ĞLJƌŝƐŬƐƚŽĐŽŶƐŝĚĞƌŝŶĐůƵĚĞ

ƚŚĞƉƌĞƐĞŶĐĞŽĨƚǁŽůĂLJĞƌƐŽĨ

ĚŝƐĐŽƵŶƚƌŝƐŬ͕ĂƐƚLJůĞďŝĂƐƚŽ

͚ǀĂůƵĞ͛ĂŶĚĐƵƌƌĞŶĐLJƌŝƐŬĂƌŝƐŝŶŐ

ĨƌŽŵĂƉƌĞĚŽŵŝŶĂŶƚůLJŶŽŶͲ

ƐƚĞƌůŝŶŐƉŽƌƞŽůŝŽ͘

WHAT’S UNDER THE HOOD?

ƐĂƚϯϬƉƌŝůϮϬϭΘ͕ƚŽƉ

ŚŽůĚŝŶŐƐŝŶĐůƵĚĞĚ:ĂƉĂŶ

^ƉĞĐŝĂů^ŝƚƵĂƟŽŶƐ͕ĂďĂƐŬĞƚ

ŽĨϭϳ:ĂƉĂŶĞƐĞƐƚŽĐŬƐǁŝƚŚĂ

ƐŝŐŶŝĮĐĂŶƚƉƌŽƉŽƌƟŽŶŽĨƚŚĞŝƌ

market cap in net cash.

/ƚĂůƐŽŝŶǀĞƐƚƐŝŶ^ǁŝƐƐͲůŝƐƚĞĚ

ŚŽůĚŝŶŐĐŽŵƉĂŶLJWĂƌŐĞƐĂ͕

ũŽŝŶƚůLJĐŽŶƚƌŽůůĞĚďLJƚŚĞ&ƌğƌĞ

ĂŶĚĞƐŵĂƌĂŝƐĨĂŵŝůŝĞƐĂŶĚ

ǁŚŽƐĞŽŶůLJĂƐƐĞƚŝƐŝƚƐρϬй

ƐƚĂŬĞŝŶ'ƌŽƵƉĞƌƵdžĞůůĞƐ

>ĂŵďĞƌƚ͕ĂĞůŐŝĂŶͲůŝƐƚĞĚ

ŚŽůĚŝŶŐĐŽŵƉĂŶLJǁŝƚŚƐƚĂŬĞƐ

ŝŶĚŝĚĂƐĂŶĚWĞƌŶŽĚZŝĐĂƌĚ

among others.

KƚŚĞƌůĞĂĚŝŶŐƌŝƟƐŚŵƉŝƌĞ

ƉŽƐŝƟŽŶƐŝŶĐůƵĚĞƚŚĞh^ŚĞĚŐĞ

funds WĞƌƐŚŝŶŐ^ƋƵĂƌĞ;W^,Ϳ

and dŚŝƌĚWŽŝŶƚKīƐŚŽƌĞ

(TPOU) ĂŶĚǁŝƚŚŝŶƚŚĞůŝƐƚĞĚ

ƉƌŝǀĂƚĞĞƋƵŝƚLJƐƉĂĐĞ͕ĂŚŽůĚŝŶŐ

in ZŝǀĞƌƐƚŽŶĞŶĞƌŐLJ;Z^Ϳ, an

ĞdžĞŵƉůĂƌŽĨĂƉŽƌƞŽůŝŽŚŽůĚŝŶŐ͕

trading at a wide discount to

ĂƐƐĞƚǀĂůƵĞĂŶĚǁŝƚŚŚŝĚĚĞŶ

ǀĂůƵĞƵŶĚĞƌƚŚĞŚŽŽĚ͘;:Ϳ

BRITISH EMPIRE

TRUST È BUY

(BTEM) 758p

Stop loss: 606.4p

Market value: £865m

2017 2018

620 Rebased to first Source: Thomson Reuters Datastream

640

660

680

700

720

740

760

780

BRITISH EMPIRE TRUST

FTSE ALL SHARE - PRICE INDEX