Latest news with #PolarCapital
Yahoo
14-06-2025
- Business
- Yahoo
The FTSE 100 may be soaring, but these two trusts still look heavily undervalued
The FTSE 100 is trading just shy of its all-time high of 8,885 points reached on 10 June 2025. Investors have finally started returning to the UK market after years of underperformance, driven by stabilising interest rates, undervalued blue chips, and strong earnings in cyclical sectors. Housebuilders have been leading the charge as mortgage rates cool, while precious metals stocks continue to benefit from safe-haven demand. However, not every part of the market has caught up with this momentum. In particular, some investment trusts and closed-end funds (CEFs) remain significantly undervalued, despite holding high-quality assets. Trusts trade like shares but can often lag behind market movements due to their pricing structure — they're based on demand for the fund, not just the value of its holdings. That can create buying opportunities when sentiment is slow to catch up to fundamentals. Two such trusts that currently look like bargains to me are Polar Capital Technology Trust (LSE: PCT) and Unite Group (LSE: UTG). This tech-focused trust gives UK investors rare access to a portfolio packed with high-growth US tech stocks. Despite delivering a staggering 474% return over the past decade — equivalent to nearly 19% annualised growth — it still looks cheap by several key metrics. Its return on equity (ROE) stands at an impressive 33%, showcasing how effectively the trust deploys capital. Meanwhile, its price-to-earnings (P/E) ratio of just 3.38 is unusually low for a tech-focused fund, even if it reflects recent weakness in the US tech market. The price-to-book (P/B) ratio of 0.96 suggests the shares are trading close to net asset value, offering investors solid exposure without overpaying. That said, the recent subdued performance of US large-cap tech — particularly the 'Magnificent Seven' — has weighed on short-term returns. If the US market continues to stall, the trust could remain in limbo for a while longer. But for long-term investors willing to ride out the volatility, the trust's low valuation and track record make a compelling case that's worth considering. I covered Unite Group back in May and I still think it's a stock worth considering. As the UK's leading provider of purpose-built student accommodation (PBSA), it's in a sector with stable demand, strong pricing power, and limited supply. It operates as a real estate investment trust (REIT), focusing on long-term capital appreciation and income. Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Its 4.4% dividend yield is supported by a very low payout ratio of 38%, giving it room to grow. In fact, dividends have increased by an average of 5.37% annually, underlining its passive income appeal. Of course, any slowdown in student demand or regulatory change to rental laws could pose risks. REITs are also highly sensitive to interest rates, which have improved lately — but we're not in the clear yet. That said, with limited university housing available and growing international student numbers, the outlook remains positive. What really stands out is the underlying efficiency. Unite has a P/E ratio of just 8.77, a P/E-to-growth (PEG) ratio of 0.03 (suggesting rapid growth relative to price), and an operating margin of 55%. Even more impressive, its free cash flow margin is 74.8%, meaning it retains nearly 75p of every £1 of revenue as cash. The post The FTSE 100 may be soaring, but these two trusts still look heavily undervalued appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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. Motley Fool UK 2025
Yahoo
05-04-2025
- Business
- Yahoo
With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio
The FTSE 100 is a safe bet when it comes to picking shares, but it seldom offers the best yields. To add a bit of 'oomph' to a passive income portfolio, it pays to dig a bit deeper. Today, I've uncovered two mid-cap shares on the UK's smaller indexes that could provide lucrative dividend returns. But I'm not just going on the yield — both these shares have impressive return on equity (ROE) and a price-to-earnings growth (PEG) ratio below one. This shows they use their equity efficiently and are well-priced relative to earnings growth. Let's dive in. Polar Capital (LSE: POLR) seems like a small outfit on the face of things, with a market cap of only £400m. But it's a major London-based fund manager with upward of £23bn in assets under management (AUM). Not only that, its AUM has grown almost 10% in the past year — during a period when many fund managers have experienced reduced AUM. One risk is that the fund is largely focused on healthcare and technology, much of which derives revenue from the US. With new trade tariffs in place, these stocks may suffer, passing on losses to Polar Capital. Price performance might not look that great at first; it's up less than 10% in the past five years. But when adjusted for dividends, the full return on investment (ROI) rises to 57.23%. That equates to an annualised return of 9.86% per year — not bad! Of course, there's no guarantee that performance will continue. But annual dividends have increased 80% in the past 10 years, which is promising. Currently a meaty 11.4%, its dividend yield typically fluctuates between 7% and 15%. Twenty Four Income Fund (LSE: TFIF) is a relatively young investment company established in 2013 in Guernsey. Its focus is on European asset-backed securities (ABS) with low liquidity and high yields. This strategy gives investors exposure to a segment of the fixed-income market that is often overlooked yet potentially valuable. Consequently, the fund maintains a high and stable yield between 9% and 10%. Over the past decade, its final dividend has grown from 6.38p to 9.96p at a rate of 3.4% per year. However, the focus on asset-backed securities (ABS) and mortgage-backed securities (MBS) also adds a moderate level of risk. Not only can they lack liquidity, but they are also sensitive to the quality of the underlying loans. If borrowers default, the fund's income and capital could be affected. Reduced income can lead to dividend cuts. As is common with dividend-focused funds, the share price has enjoyed only moderate growth of 30% in the past five years. However, total returns reach almost 87% when adjusted for dividends, equating to annualised returns of 13.3% per year. While both the above stocks have experienced historical losses due to market downturns, I think they are worth considering for the high and reliable dividends. For investors looking to build a steady passive income stream, a reliable dividend history with consistent growth is a key element to look for. The post With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Polar Capital Plc. 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. Motley Fool UK 2025 Sign in to access your portfolio
