Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

North American Income Trust (NAIT)

Closed-end funds and OEICs
OllyDrod
2 Lemon pips
Posts: 103
Joined: February 5th, 2020, 3:58 pm
Has thanked: 91 times
Been thanked: 85 times

Re: North American Income Trust (NAIT)

#390834

Postby OllyDrod » February 28th, 2021, 10:34 am

compscidude wrote:https://www.northamericanincome.co.uk/

The North American Income Trust plc (Aberdeen standard investments)

NAIT.L

I purchased this for my portfolio last month. I find the current >12% discount attractive (vs. +4% premium 12 months ago), the terms and scale of gearing attractive, the holdings attractive (sectors, balance, and PER). The fee, less attractive, though in light of the discount I'll live with it.

But perhaps I am an idiot. If anyone would like to tell me why I am an idiot, specifically in relation to this IT, I would be very glad to hear them.

comp

p.s. separately has anyone noticed a large number of peculiar trades in this stock in the last week?



I purchased in May at a similar discount and found it attractive for similar reasons - nice broad exposure to the US, undervalued holdings, uncharacteristic discount and with a reasonably punchy yield to boot. I don't expect stellar capital performance but it's well-placed to benefit if there is a more sustained rotation to value and should do well over the medium-term as the US begins to get a handle on COVID and economic activity returns to some semblance of normality. With ~19% in financials, it also stands to benefit if the Fed raises interest rates. I expect the discount to narrow and the board seem happy to buy back back the shares. The fee would be high for a bog-standard UK income IT, but there aren't many comparable US Income trusts out there (BlackRock has an NA Income fund, and there's the Middlefield Canadian, but I think that's it). Given how well-researched the US is, I imagine management are having to work hard to find value - and I'm happy to pay them for it. The fee structure per the AIC seems reasonable.

For me, its a nice and boring buy and hold with the potential for capital growth which gives me exposure to the 'real' US economy. If that ticks your boxes, then good - you're not an idiot. If you were expecting a clone of Baillie Gifford USA... you're still not an idiot - but might want to re-evaluate the position (!)

Wasn't paying close attention last week - what peculiar trades have you spotted?
- OllyDrod

compscidude
Lemon Pip
Posts: 68
Joined: November 6th, 2016, 10:07 pm
Has thanked: 10 times
Been thanked: 46 times

Re: North American Income Trust (NAIT)

#390883

Postby compscidude » February 28th, 2021, 12:30 pm

0. Thank you to whichever mod merged my post into the pre-existing thread that I didn't see.

Hello Olly. Thanks for the reply & thoughts.

1. BlackRock has an NA Income fund, and there's the Middlefield Canadian

MCT is an old favourite of mine though lately given the exposures to tar sands and canadian housing (and canadian banks lending to both of these) I gave it a miss. Though oddly enough tar sands are now doing rather well following the cold winter & huge efforts to shrink their operational costs - if I wanted to invest in Canada I'd maybe do a solo pick of Suncor (SU), but I can hardly do that alongside BP/RDS/Total... :-)

I vaguely remember MCT being notorious for unusually wide spreads at times. Let's take a quick look at holdings... oh dear yes that is rather a lot of Canadian banks & real estate right there. Not for me.

Blackrock BRNA I know about but thank you for bringing it up. Smaller discount (5.6%), higher yield, no gearing, much smaller size (£133m), higher fees (1.06%). Can't justify paying more, getting less discount, having more risk of it just randomly shutting down. They might be stretching for yield a tad too. They have a higher weighting on comms shares vs NAIT which has more weight on bio/pharma type stuff.

For me the real question is: BRK, NAIT, both or neither? I feel like I would like to have BRK again. It's annoying to repurchase above the price I last sold but on the other hand, I now have cast-iron certainty about the profitability of the last 5 years and Buffett's longevity over that period, plus certainty that Trump did not destroy everything in sight, which is extremely valuable info. I estimate the PTBV of Berkshire around 1.25x currently, or about 1.35x if you revalue Apple at 16 PER instead of 33. This is historically low or average for BRK depending on which figure you take.

Still, discount, gearing, divis and a different mix of US value are pretty nice too. More thought needed for me I think over the next few weeks or months. Perhaps if I sell my oil shares in a few months I will put some into BRK too. I don't like the US markets generally just now - overpriced, broadly - but 100% agree with you that a rotation from growth to value could be good for low PER sectors over there like pharma, property, banks, comms, defense, oil, utilities.

2. Odd trades: Lots and lots of trades like this on thursday:

1000
100
1000
100
1000
100

and on friday:

1048
52
1152
48
2200
...

the sums involved are small (£2650 per pair of trades) but whoever is doing this clearly likes the number 1100.

There's an algo strategy where you get an average price by placing smaller trades every 30 minutes or whatever but these were all just 2-3 minutes apart over 1 hour. I guess it's just one of life's many mysteries.

3. A spicy thought. There is a 3 year vote held for NAIT on whether to discontinue the trust, the next one is this year I think. I wonder what would happen if the trust were discontinued, assets sold off, and the funds returned to investors (+discount bonus!). Hmm. Not likely to happen but hopefully the thought of it will motivate the directors to repurchase stock just a tad.

4. Agree completely on the issue of value-stock picking in the US market. It's totally not worth the time to do it, especially if you don't live there and have no insight into how the companies might be going horribly wrong in real life outside of the accounts. There is a question though I suppose of whether it's better to just buy a russell 1000 ETF (unsure if such a thing is accessible in the UK though). Historically NAIT outperformed that index; lately, it has not. However, one would also lose the option income, gearing & discount that way.

thank you and best wishes

comp

richfool
Lemon Quarter
Posts: 3492
Joined: November 19th, 2016, 2:02 pm
Has thanked: 1193 times
Been thanked: 1280 times

Re: North American Income Trust (NAIT)

#390901

Postby richfool » February 28th, 2021, 2:24 pm

Thanks for your post and thoughts compscidude.

I must admit I have been in and out of NAIT a couple of times over recent years, but tended to get disillusioned by its poor capital performance and slightly larger BO spread.

I moved solely into USA (growth only) earlier last year, (well solely apart from MCT - Canadian,with some US exposure, which I have a large holding of). Then I took some profit from USA a few weeks ago and opened a position in BRNA. I did that to enhance my dividend income and broaden my US sector exposure and to cover myself in case of a move back to value stocks. When I looked BRNA had a slightly better capital performance record and there was little difference between the charges of the two.

OllyDrod
2 Lemon pips
Posts: 103
Joined: February 5th, 2020, 3:58 pm
Has thanked: 91 times
Been thanked: 85 times

Re: North American Income Trust (NAIT)

#390903

Postby OllyDrod » February 28th, 2021, 2:28 pm

compscidude wrote: For me the real question is: BRK, NAIT, both or neither?

Buffet's track record speaks for itself, but I wouldn't have said BRK and NAIT are that comparable... for starters, BRK (famously!) doesn't pay a dividend and NAIT is primarily an income play, with the potential modest capital gain. There are some overlapping holdings, but they're very different beasts. I wouldn't say either/or - think it depends on your objectives. At the risk of straying wildly off topic, I'm not convinced by the succession plan at BRK - fully suspect it'll take a real hit when Buffet and Munger finally (and sadly) shuffle off this mortal coil.

compscidude wrote:2. Odd trades: Lots and lots of trades like this on thursday:

1000
100
1000
100
1000
100

and on friday:

1048
52
1152
48
2200
...

Not a clue on this I'm afraid (I only recently had the mystery of uncrossing trades helpfully explained by Monabri and Breelander!) From the LSE they mostly look like algorithmic trades as you say, but I'll leave it to those with genuine expertise to suggest an explanation. A stab in the dark - perhaps something to do with tidying-up before month-end?

compscidude wrote:3. A spicy thought. There is a 3 year vote held for NAIT on whether to discontinue the trust, the next one is this year I think. I wonder what would happen if the trust were discontinued, assets sold off, and the funds returned to investors (+discount bonus!). Hmm. Not likely to happen but hopefully the thought of it will motivate the directors to repurchase stock just a tad.

Can't see it getting wound up either - but yes, I'd imagine the Board will continue to manage the discount. The Annual Report says June 2021 for the next continuation vote... I may be tempted to top-up a little beforehand.

Cheers
- OllyDrod

Avantegarde
Lemon Slice
Posts: 269
Joined: January 29th, 2018, 10:13 pm
Been thanked: 159 times

Re: North American Income Trust (NAIT)

#390989

Postby Avantegarde » February 28th, 2021, 10:24 pm

compscidude wrote:https://www.northamericanincome.co.uk/

The North American Income Trust plc (Aberdeen standard investments)

NAIT.L

I purchased this for my portfolio last month. I find the current >12% discount attractive (vs. +4% premium 12 months ago), the terms and scale of gearing attractive, the holdings attractive (sectors, balance, and PER). The fee, less attractive, though in light of the discount I'll live with it.

But perhaps I am an idiot. If anyone would like to tell me why I am an idiot, specifically in relation to this IT, I would be very glad to hear them.

comp

p.s. separately has anyone noticed a large number of peculiar trades in this stock in the last week?


I owned shares in this trust for some years, then sold them a couple of years ago. Why? The total return had been hopelessly worse than that of an S&P 500 tracker. The TR on this trust has been just 3% over the past three years. That is 3% in total, not even per year! Diabolical.

scotia
Lemon Quarter
Posts: 3561
Joined: November 4th, 2016, 8:43 pm
Has thanked: 2371 times
Been thanked: 1943 times

Re: North American Income Trust (NAIT)

#390996

Postby scotia » February 28th, 2021, 10:41 pm

compscidude wrote:https://www.northamericanincome.co.uk/

The North American Income Trust plc (Aberdeen standard investments)

NAIT.L

I purchased this for my portfolio last month. I find the current >12% discount attractive (vs. +4% premium 12 months ago), the terms and scale of gearing attractive, the holdings attractive (sectors, balance, and PER). The fee, less attractive, though in light of the discount I'll live with it.

But perhaps I am an idiot. If anyone would like to tell me why I am an idiot, specifically in relation to this IT, I would be very glad to hear them.

comp

p.s. separately has anyone noticed a large number of peculiar trades in this stock in the last week?

I have no intention of calling you an idiot :) This is quite an interesting IT.
Looking at its total return over 5 years, until the crash on the stock markets about 12 months ago, this was performing rather well, tracking above an S&P500 Index ETF. But at the crash, it dipped much further than the S&P 500 Index, made a weak partial recovery, and since then has wobbled about around a level well below its peak, while the S&P 500 has soared off to heights well above the pre-crash peak. The big question is - where is it going now? Why is it not following the S&P 500, as it did previously? I would guess that much of the recent S&P 500 rise is due to "growth" stocks with little or no dividends, which will not be held by NAIT - with its 4% yield. Dividend bearing stocks may return to fashion - but when? I can see the attraction of NAIT at its current discount - but its not a big enough attraction to make me a buyer. I'll watch with interest as to how your investment in NAIT performs, compared to mine in an S&P 500 tracker ETF (CSP1).

Lootman
The full Lemon
Posts: 18674
Joined: November 4th, 2016, 3:58 pm
Has thanked: 628 times
Been thanked: 6557 times

Re: North American Income Trust (NAIT)

#391013

Postby Lootman » March 1st, 2021, 1:29 am

Avantegarde wrote:I owned shares in this trust for some years, then sold them a couple of years ago. Why? The total return had been hopelessly worse than that of an S&P 500 tracker. The TR on this trust has been just 3% over the past three years. That is 3% in total, not even per year! Diabolical.

When I looked into this IT a few years ago, it was apparent that much of the "income" generated from this fund was from selling call options on the holdings. This does of course add to income but at the expense of future growth.

The biggest driver of owning a US fund, i.e. to tap into the dynamic growth of US world-beating companies, is therefore being undermined by this strategy. I swear that if I were in the business of marketing regional funds, I would add the word "income" to every offering. It seems to draw investors like moths to a flame.

Bagger46

Re: North American Income Trust (NAIT)

#391028

Postby Bagger46 » March 1st, 2021, 7:36 am

Lootman wrote:
Avantegarde wrote:I owned shares in this trust for some years, then sold them a couple of years ago. Why? The total return had been hopelessly worse than that of an S&P 500 tracker. The TR on this trust has been just 3% over the past three years. That is 3% in total, not even per year! Diabolical.

When I looked into this IT a few years ago, it was apparent that much of the "income" generated from this fund was from selling call options on the holdings. This does of course add to income but at the expense of future growth.

The biggest driver of owning a US fund, i.e. to tap into the dynamic growth of US world-beating companies, is therefore being undermined by this strategy. I swear that if I were in the business of marketing regional funds, I would add the word "income" to every offering. It seems to draw investors like moths to a flame.


And moths to a flame is bang on, have a red. The ‘cult of the divi’ so prevalent on these boards is going to cost young investors getting sucked in a monstrous amount of potential total returns, and total returns, no matter what is said, is all that matters to those pot builders, and is what an investor actually gets anyway, like it or not.

Bagger

CryptoPlankton
Lemon Slice
Posts: 786
Joined: November 4th, 2016, 12:12 pm
Has thanked: 1544 times
Been thanked: 873 times

Re: North American Income Trust (NAIT)

#391134

Postby CryptoPlankton » March 1st, 2021, 12:48 pm

Bagger46 wrote:
Lootman wrote:
Avantegarde wrote:I owned shares in this trust for some years, then sold them a couple of years ago. Why? The total return had been hopelessly worse than that of an S&P 500 tracker. The TR on this trust has been just 3% over the past three years. That is 3% in total, not even per year! Diabolical.

When I looked into this IT a few years ago, it was apparent that much of the "income" generated from this fund was from selling call options on the holdings. This does of course add to income but at the expense of future growth.

The biggest driver of owning a US fund, i.e. to tap into the dynamic growth of US world-beating companies, is therefore being undermined by this strategy. I swear that if I were in the business of marketing regional funds, I would add the word "income" to every offering. It seems to draw investors like moths to a flame.


And moths to a flame is bang on, have a red. The ‘cult of the divi’ so prevalent on these boards is going to cost young investors getting sucked in a monstrous amount of potential total returns, and total returns, no matter what is said, is all that matters to those pot builders, and is what an investor actually gets anyway, like it or not.

Bagger

I can understand your concern for "young investors", but I don't think the use of such pejorative expressions as "cult of the divi" is really called for. They may not be of any practical use to you, but "income" investments do have a place for many investors close to or in retirement. The mere existence of such equities shows this to be the case.

It is a fact that this site has many contributors who use "income" investment as part (or even all) of their retirement strategy. Surely, that is up to them and they should be free to discuss their investments with like-minded people? Just because it suits their circumstances, doesn't mean they believe it would be the optimal long-term approach to pot-building. If you see a newbie being advised otherwise (I'm not sure I have) then, by all means, call it out. However, I'd like to credit our younger folk with enough intelligence to see the difference between their requirements and someone looking to produce a reliable income in their latter years.

scotia
Lemon Quarter
Posts: 3561
Joined: November 4th, 2016, 8:43 pm
Has thanked: 2371 times
Been thanked: 1943 times

Re: North American Income Trust (NAIT)

#391254

Postby scotia » March 1st, 2021, 5:57 pm

CryptoPlankton wrote: They may not be of any practical use to you, but "income" investments do have a place for many investors close to or in retirement. The mere existence of such equities shows this to be the case. It is a fact that this site has many contributors who use "income" investment as part (or even all) of their retirement strategy.

Just a word of caution concerning the needs of the elderly (myself included). They may be happy with their "income" investment strategy if it provides adequate income while they are healthy and can look after themselves. But if/when a care home is required, then there will be a need for a substantially larger sum, so it may be wise to think about growing capital for that eventuality. Hence I would be wary about concentrating investments in income-bearing equities and ITs if they do not provide a total return that matches the market average. After all, it is easy to convert growth into income. Another factor, of course, is the investment risk. A few years ago I would probably have believed that "income" equities and ITs would have been more secure - but the crash of a year ago showed exactly the opposite.
But getting back to the subject of NAIT - I was interested in how it maintained its substantial dividend, while out-performing the S&P 500 on total return (the best of both worlds) - until the crash of a year ago. And I was intrigued as to why it has since failed to return to such winning ways.

OllyDrod
2 Lemon pips
Posts: 103
Joined: February 5th, 2020, 3:58 pm
Has thanked: 91 times
Been thanked: 85 times

Re: North American Income Trust (NAIT)

#395487

Postby OllyDrod » March 14th, 2021, 4:23 pm

A recent research note from QuotedData FYI:
https://quoteddata.com/research/north-a ... s-pace-mc/

- OllyDrod

compscidude
Lemon Pip
Posts: 68
Joined: November 6th, 2016, 10:07 pm
Has thanked: 10 times
Been thanked: 46 times

Re: North American Income Trust (NAIT)

#397551

Postby compscidude » March 20th, 2021, 11:28 pm

For what it's worth:

- if the idea of 'income' or the word 'income' enables someone to invest when otherwise they feel too nervous or ignorant about when to time withdrawals of capital from the market, then it serves a useful purpose. Not everyone enjoys this game that we play.

- for those that believe in the efficient market hypothesis (in its strong or weak forms), it should not make any significant difference in principle whether you buy an income fund or something else (other than fees), everything should be priced fairly according to its risk-adjusted returns (including any dealing in options).

- the name or declared objective of a company/fund is generally irrelevant to performance; the question is: what does it actually *do*? To give an example, 'Scottish Mortgage' sounds like a boring manager of the mortgage debt of dour folk, but it is nothing of the sort. It was holding almost 10% of its assets in Tesla on a PER of over 1000 until recently.

- there might be specific reasons for someone to seek funds/trusts that try to bring in income rather than capital gains; for example the trust/fund may tend to hold a specific type of share / niche sectors that you would like to be exposed to but do not wish to keep track of directly; also I believe there are distinct allowances for both dividends and capital gains to UK investors and someone may feel it is tax-efficient to use both tax allowances fully.

comp

Lootman
The full Lemon
Posts: 18674
Joined: November 4th, 2016, 3:58 pm
Has thanked: 628 times
Been thanked: 6557 times

Re: North American Income Trust (NAIT)

#397669

Postby Lootman » March 21st, 2021, 3:22 pm

compscidude wrote: for those that believe in the efficient market hypothesis (in its strong or weak forms), it should not make any significant difference in principle whether you buy an income fund or something else (other than fees), everything should be priced fairly according to its risk-adjusted returns (including any dealing in options).

I suspect that if an investor truly believes in one of the various forms of the efficient market hypothesis, then they would simply buy an index fund, rather than then try and second guess the market by choosing "income" (or for that matter "growth" or "value" or any other angle).

Investing via some skew or tilt, if you genuinely believe that it is impossible for an individual investor to know more or do better than the market, does not seem consistent.

compscidude
Lemon Pip
Posts: 68
Joined: November 6th, 2016, 10:07 pm
Has thanked: 10 times
Been thanked: 46 times

Re: North American Income Trust (NAIT)

#397703

Postby compscidude » March 21st, 2021, 5:47 pm

Lootman, thanks for your reply.

The point about EMH is the weakest of those I present but the ideas are independent. I agree that someone who comes to believe in the EMH would most likely buy an index if investing from cash. However such a person might also choose not to sell/reinvest existing holdings knowing (to them) it will not make a great difference anyway and is not worth a CGT liability to change. More relevant to this thread, such people would not express *strongly* critical views of those who like income trusts, again, since they would believe it will make little significant difference anyway and that any extra risk or likely underperformance vs index is already in the price.

mike
Lemon Slice
Posts: 707
Joined: November 19th, 2016, 1:35 pm
Has thanked: 42 times
Been thanked: 428 times

Re: North American Income Trust (NAIT)

#403800

Postby mike » April 13th, 2021, 9:26 am

Encouraging results for the year ending 31 Jan 2021 released today

https://www.investegate.co.uk/north-american-it--nait-/rns/annual-financial-report/202104130700031972V/

Highlights
Dividend increased by 5.3% to 10.0p (2020 - 9.5p)
Revenue reserve increased by 14.5% in sterling terms

Total revenue from equity holdings in the portfolio for the financial year was £15.6 million (2020 - £16.3 million). Most of the Company's equity holdings continued their established record of dividend growth. 73 % of the equity holdings raised their dividends over the past year, with a weighted average increase of 7.4%. Only two companies within the portfolio made dividend cuts during the year.

For holders - Final dividend of 4.5p (2020 - 4.3p), ex-div 6 May, paid 4 June


Return to “Investment Trusts and Unit Trusts”

Who is online

Users browsing this forum: No registered users and 11 guests