Today’s half-year results from F&C Investment Trust (LSE: FCIT) have crept under the radar for many investors. The share price hasn’t moved, but I reckon the trust’s latest numbers could highlight an interesting buying opportunity for investors who want exposure to the big artificial intelligence (AI) stocks.
Here’s why. This 156-year-old investment trust owns shares such as Nvidia and Amazon, in addition to a wide range of other quality growth stocks. And F&C shares have outperformed the UK market for many years.
The trust’s book value (the market value of its investments) rose by 13.2% to 1,145.5p per share during the first half of the year.
However, as I write, the trust’s share price is nearly 10% lower than this, at 1,050p. This is the discount I’m referring to. The trust’s own shares are selling for less than the price of its investments.
Here, I’ll explain why I think F&C shares are a better way to invest in global growth than simply holding a handful of top US stocks.
Global growth strategy
F&C’s strategy is to generate “long-term growth in capital and income” by investing mainly in a portfolio of international equities.
Right now, about 60% of the trust’s assets are invested in North America. Roughly 20% are in Europe and the UK, with the remainder spread across Japan, Emerging Markets and Asia Pacific.
Manager Paul Niven works with a group of specialists to adjust the trust’s exposure as opportunities emerge and economic conditions change. This strategy’s delivered strong results for shareholders.
F&C shares have risen by 165% over the last decade — an average of 10.6% a year. That’s very close to the 178% gain delivered by the US S&P 500 index over the same time.
The big difference is that F&C has delivered its gains with lower risk, in my opinion.
Why F&C could be safer than an index tracker
F&C owns most of the big US stocks that have driven the market higher over the last couple of years. Top holdings include Microsoft, Nvidia, Alphabet, Amazon and Apple.
But this isn’t just an index tracker. F&C also owns shares in other high-quality tech companies, such as Broadcom and Taiwan Semiconductor.
In addition, the company also diversifies its exposure into other important areas such as pharma (Eli Lilly, Novo Nordisk) and payments (Mastercard, Visa), for example.
My verdict
I’d rather own F&C shares than be invested only in those major US tech stocks collectively known as Magnificent 7. Although I’m pretty sure Nvidia and the others are great businesses with a strong future, this doesn’t mean they won’t become overvalued at some point.
Cisco Systems – one of the original millennium boom stocks – is still an essential part of the internet today. But the company’s share price has still not returned to the record highs seen in early 2000.
The flipside to this is that F&C’s management could end up missing out on bigger gains by investing in too many less successful stocks. The shares could underperform the US market – and the dividend yield of 1.4% isn’t much of an income.
Personally, I’m happy to take the risk. I reckon F&C offers a ready-built portfolio I could buy and forget. I’ve added the shares to my watchlist of investment trusts to consider buying.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet, Amazon, Apple, Mastercard, Microsoft, Novo Nordisk, Nvidia, Taiwan Semiconductor Manufacturing, and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
