Scottish American Investment Company (SAIN) 503p

Market cap: £898 million

Ballie Gifford-managed Scottish American (SAIN), also referred to as ‘SAINTS’, is trading at an 8% discount to net asset value which offers a great opportunity to buy high-quality assets on the cheap.

The fund is steered by co-managers James Dow and Ross Mathison, after Toby Ross stepped away from co-managing the fund in February.  

The managers are focused on finding and investing in steady, long-term compounders which throw off sustainable, resilient dividends.

The trust was founded in 1873 to seek higher income outside the UK and has grown its dividend for 50 consecutive years. The last time the dividend was cut was 1938, before the Second World War.

Over the last decade, the trust has grown its dividend at an annualised rate of 3.3% per year, which is ahead of UK price inflation as measured by consumer prices, which has annualised at 2.9% per year.

The team believe dividend growth is closely associated with compounding and enhances investment returns.

The manager’s approach is similar in style to investment legend Warren Buffett and Fundsmith founder Terry Smith. SAINTS likens compounding to the effect of a snowball rolling down a long hill: the further it travels, the faster it gains in size.

The fund has a robust track record over the longer term, delivering a total return in net asset value of 222.6% over 10 years, equivalent to a compound annual return of 12.4% per year, and outperforming the FTSE All-World Index total return of 218.2%.

The portfolio consists of around 60 holdings, with the top 10 representing 31% of the portfolio’s total value.

Top holdings include software giant Microsoft (MSFT:NASDAQ), Danish diabetes and weight-loss specialist Novo Nordisk (NOVO-B:CPH) and US distributor of air-conditioning equipment Watsco (WSO:NYSE).

The latter two companies were strong contributors to performance over the last 12 months, gaining 54% and 30% respectively. The managers trimmed the Novo position many times through the year as the position size nudged up against the fund’s 6% size limit.

The managers invested in five new companies over the last year including US home improvement retailer Home Depot (HD:NYSE), intimate healthcare product maker Coloplast (COLOB-B:CPH), analytical testing and assurance provider Eurofins Scientific (ERA:EPF), drinks group Diageo (DGE) and semiconductor maker Texas Instruments (TXN:NASDAQ).

The trust has an annual ongoing charge of 0.58% per year. 

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