The FTSE 250 is home to dozens of investment trusts. These are set up and run by portfolio managers, meaning the trust is made up of a host of other financial assets. The value of these assets help to determine the share price of the trust. Here are two that look cheap to me at the moment.
Getting exposure to private equity
Recently, the share price of Apax Gobal Alpha (LSE:APAX) hit 151p, a level not seen since 2020. The trust is down 14% over the past year and trades at a 31% discount from the latest net asset value (NAV) reading. For reference, the NAV refers to the value of the assets held within the trust.
Apax Gobal Alpha invests in private equity. In other words, the managers put money into firms that aren’t publicly traded. It targets companies in a variety of sectors, such as tech and healthcare. The aim is that the investment will grow in value, which Apax can sell either to another shareholder or by taking the firm public.
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I think the stock is cheap for two main reasons. One is the fact that there’s a large discount between the latest NAV and the share price. Granted, the current NAV is from Q4 last year, so it needs to be updated, but I still expect it to be significant.
Another reason is that investors have become more concerned about private equity of late, given that most investments take several years to mature. I think this reflects broader uncertainty about the market in general. This is a risk. Yet over time, I expect this to improve when economic growth/boom period hits the UK and the world in general.
Hunting for more gems
The second stock is the Blackrock World Mining Trust (LSE:BRWM). The stock has dumped 30% over the past year.
Unlike Apax, the share price only trades at a modest 6% discount to the NAV. But it’s the large share price fall that makes the stock look cheap to me. Some of the largest holdings in the trust are Rio Tinto, Glencore and BHP Group.
I recently wrote about Glencore specifically, detailing how the lower output and realised prices for metals have dragged the stock lower. Yet from a long-term perspective, I think the fundamentals of the business are sound.
We’re in a normal commodity cycle. I expect demand for precious metals to pick up again if the Chinese economy starts to outperform (a huge consumer). This should help Glencore and similar stocks to rally. As a result, it should push the mining trust higher with it too.
I like the fact that the trust has a diversified spread of holdings across different mined products.
Of course, a risk is that natural disasters and other supply shocks negatively impact output going forward. Yet this is a risk inherent in mined goods and can’t be reduced, unfortunately.
Both trusts look cheap to me right now and I think investors should take a deeper look at both.
