The company’s half-year results showed that reduced-risk products such as heated tobacco continue to grow rapidly and are likely to become an increasingly important part of its business. Moreover, its pricing power, which derives from the relatively inelastic nature of demand for cigarettes, and defensive credentials make it well placed to generate improving returns during the current period of stagflation.
Greencoat UK Wind, the renewable energy generator, has also produced a modest positive total return. Its shares declined by 1.4pc but received two dividends since May, which amounted to 2.5pc of the purchase price, resulting in a 1.1pc total return.
Political risk remains heightened towards the renewable energy sector, as the government’s sudden focus on fiscal discipline prompts new taxes, as discussed here yesterday.
In Questor’s view, the company’s aim to increase dividends at least in line with inflation and the stock’s 5pc yield compensate for the damage likely to be done by higher taxes over the medium term.
Our holding in Monks Investment Trust generated a 3.6pc total return, almost all of it from capital growth. This is welcome, if somewhat surprising in view of its focus on growth stocks during a period of rapidly rising interest rates and weak market sentiment.
In August, Monks agreed to merge with the Independent Investment Trust; the combined fund will continue to be run by Baillie Gifford. It currently trades at an 8pc discount to net asset value, which suggests it offers good value for money on a long-term view.
Clearly, the mini Wealth Preserver portfolio has been in existence only for a short time. However, in Questor’s view it offers a useful introduction to assets that could help investors to maintain, or even grow, the value of their portfolio in real terms during the current period of high inflation.
Assessing when rapid price rises will ease is clearly a fool’s errand. However, it would be unsurprising for interest rate rises to have a noticeable impact on the rate of inflation once the often-overlooked time lags have passed.
Questor says: hold
Ticker: SGLN, BHP, BATS, UKW, MNKS
Share price at close: £28.22, £24.61, £33.27, 154.4p, 989.5p
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