Moneywise First 50 Funds: Murray International Trust

1 February 2017

Bruce Stout, manager of Murray International Trust – the highest performer of our First 50 Funds in 2016 – gives Moneywise’s Helen Knapman the lowdown.

What is the Murray International Trust?

It is a closed-end investment trust. Its shares are listed on the London Stock Exchange, and there is a board of directors who govern the trust.

The trust seeks to protect and grow investors’ capital over the long term, as well as pay an above-average dividend yield [annual income].

The main strategy is diversification, and as it’s a global trust we can invest anywhere in the world. At this particular moment, the trust has 48 equity holdings and 24 bond holdings, and is represented in 25 different countries worldwide.

You’re often described as a ‘contrarian’ investor. What does this mean?

Contrarian investing in its purist form is just going against whatever the consensus thinks. This conjures images of people who buy deeply out-of-favour industries because they want to do the opposite of everyone else, and we do not do that. We don’t go out of the way to do what everyone else isn’t.

But what we do want to do in the contrarian sense is to buy things that everyone is selling. This is because if everyone is selling and there aren’t enough buyers, you’ll probably get the company at a cheap price.

How do you pick companies to invest in?

The first question is do we understand the business model? If we understand it, then we should be able to value it, and we can make a decision as to whether it’s cheap or expensive.

Ultimately, we’re looking for businesses that are completely different from the others we own, and we want a company that gets stronger as it grows.

Normally, the bigger the company gets, the weaker it gets; it becomes more vulnerable because you have to delegate, you have to expand, and mistakes are made.

But with some companies, the bigger they get, the stronger they get. One company that we own – Taiwan Semiconductor – produces semiconductors [the chips that go into smart phones]. It’s very expensive and technologically difficult to produce semiconductors, and the customers – Apple or Samsung, for example  want quality. So although the chips have a low selling price the quality of them is important. To have that, the company must invest in itself, which costs billions. This financial muscle keeps out competition. 

Another company we own, Asur, a Mexican airport operator, gets stronger as it gets bigger because there is no competition. You can’t build another airport in those areas, but you can add terminals, and in airports you have a captive group of people who want to spend money.

How often do you buy or sell companies?

We don’t buy or sell very often. If you look at our top 20 holdings, 15 of them have been in there for over 10 years.

Every time you trade, you cost your shareholders money in commission fees. Instead, our strategy is to buy and hold – but we’re not slaves to holding companies.

What companies have you recently bought?

We bought Auckland airport in New Zealand. The airport only has one terminal so there’s a lot of growth ahead for it.

We also bought Siam Commercial Bank in Thailand. It’s a simple, straightforward bank and that’s quite difficult to find in the banking world now. In Thailand, there is also huge growth potential as a lot of people don’t have bank accounts, loans or mortgages.

Another 2016 purchase was MTR. It operates railway lines in Hong Kong, and it’s also working on Crossrail here in the UK and other global rail projects.

What companies have you recently sold?

We sold out of Swiss insurance company, Zurich Financial. We felt the company might find it difficult now bond yields are negative. There is also pressure on insurance premiums and a saturation of insurance products on the market. 

We also sold out of Baxter International – a medical company in the US. It split its business and we didn’t like the new format – it wasn’t the same company we invested in.

Are you worried about the impact of Brexit on the trust’s returns?

Murray International has the lowest exposure to the UK that it’s ever had, but that’s not because of Brexit – we didn’t know this would happen. It is because UK profitability had been declining, sterling had been going up for five years, and the UK was living beyond its means. So there is not as much investment opportunity - there are one or two good companies still in the UK but they’re not at a good price, and this means the opportunities for us this year are outside of the UK.

But it’s certainly an uncertain time for companies. If I were to ask you, “what is the implication of Brexit on employment in the UK”? The answer would be I don’t know. “What is the implication on taxation?” I don’t know. “What is the implication on where a company can do business in two years’ time?” I don’t know.

What’s your best and worst investment decision?

If you had four children and someone said to you, “Which is your best child?” To answer that would be getting too emotionally attached, wouldn’t it? And if you get caught up emotionally in investing you’ll lose a fortune.

What’s your top tip for a beginner investor?

Invest monthly to cost-average any losses or gains. If you can’t do this and want to invest a lump sum, lock the investment away in a box and don’t do anything with it for at least five years.

The man behind the fund

Bruce Stout joined Aberdeen Asset Management in 1987 via the acquisition of Murray Johnstone. Bruce has held a number of roles including investment manager on the emerging markets team. He began managing Murray International Trust in June 2004. Bruce graduated with a BA in Economics from the University of Strathclyde and completed a graduate training course with General Electric Company UK.

Murray International Trust key stats

  • Launched: December 1907
  • Total assets: £1.65 billion
  • Net dividend yield: 4.08%
  • Ongoing charges: 0.75%

Source: Morningstar on 30 January 2017.

Top 10 holdings

  • Grupo Aeroportuario de Sureste – 4.6%
  • Taiwan Semiconductor Manufacturing – 4.6%
  • British American Tobacco – 4.3%
  • Unilever Indonesia – 3.9%
  • Philip Morris International – 3.6%
  • Taiwan Mobile – 3.5%
  • Daito Bank – 3.2%
  • TELUS Corp – 2.5%
  • Sociedad Quimica Y Minera De Chile – 2.5%
  • Singapore Telecommunications – 2.5%

Source: Morningstar factsheet, 30 October 2016

Geographic breakdown

  • Fixed interest – 15.5%
  • USA – 11.5%
  • UK – 10.6%
  • Mexico – 9.4%
  • Taiwan – 8.3%
  • France – 4.5%
  • Japan – 4.3%
  • Other – 35.9%

Source: Morningstar factsheet, 30 September 2016

Five-year performance of Murray International Trust

Share price18.90%4.10%1.70%-15.20%50.40%
FTSE World Index total return GBP*11.80%22.30%11.20%4.30%29.50%

* The performance benchmark. Source: Murray International

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