If a stock market crash sorts out the winners from the losers, then I think you should check out these two incredible investment trusts. Both were thrashing their rivals before the great sell-off in March, and have thrashed them in the six months since.
If you had the foresight to buy them during the 23 March crash, you will have doubled your money.
I’m a big fan of investment trusts. They pioneered low charges long before their unit trust rivals, and regularly beat them for performance as well. Few have done better than Scottish Mortgage Investment Trust (LSE: SMT), which has thrashed the UK’s most popular managers Terry Smith and Nick Train, before and after the stock market crash. Over the last five years, it has returned a mighty 314% (against 154% for Fundsmith Equity and 125% for Lindsell Train Global Equity).
Post-stock market crash triumph
What makes this outperformance even more impressive is that it has invested in broadly the same universe of global stocks, in particular US technology giants. Scottish Mortgage’s top 10 holdings include Tesla at number one, followed by Amazon, Netflix and Spotify, as well as Chinese tech stars Alibaba Group and Tencent Holdings.
The investment trust crashed in March just like the rest of the stock market, but the subsequent fight back has been terrific. It’s up 108% since then, according to figures from wealth platform AJ Bell. I’ve written in praise of Scottish Mortgage before, while adding the proviso that it may flounder when the tech rush finally fades.
There’s little sign of that right now, as employees and consumers rely on their screens for conference calls, online shopping and entertainment during the pandemic. But I think you should still check what exposure you already have to US technology before you buy it, to avoid over exposure. Scottish Mortgage can’t crush all-comers forever. Nothing does.
Another Tesla fan
I haven’t written about Edinburgh Worldwide Investment Trust (LSE: EWI) before, something I now consider a severe omission. It has returned 240% over the past five years and had a good pandemic, bouncing 98.3% since the stock market crash, according to AJ Bell.
This market crash hero invests in a global portfolio of entrepreneurial companies with a market cap of less than $5bn at time of initial investment. It also has outsized US exposure, which makes up more than 60% of the fund and largely explains its stunning performance. The UK accounts for just over 15% of the fund, with the rest spread between Europe and Asia.
Coincidentally, Tesla is this fund’s largest holding too, with the UK’s very own Ocado Group in second place, but the remainder are lesser known names (at least to me) such as Zillow, Chegg and Teladoc.
Both these investment trusts trade at a slight premium to net asset value. This is hardly surprising, given their runaway performance and popularity.
Their long-term outperformance is impressive and could continue. But remember that both rely on a buoyant US economy and tech sector to keep rattling along.
However if you’re looking to geographically broaden your portfolio after the stock market crash, they could be a great place to start.