Jam2Day wrote:
So it boils down to that old chestnut, have the IT investing community got it wrong or are the markets simply overvalued ?
It wasn't so long ago that a few of the AIC sector IT's mentioned in the article were trading on chunky
premiums to their underlying assets, as we can see in the example chart below for Greencoat UK Wind (UKW) -
Source - https://www.trustnet.com/factsheets/T/j6yi/greencoat-uk-wind-plc/Whilst it's
always pertinent to be asking ourselves if market pricing of any potential investment is being valued correctly, as an income-IT investor I tend to concern myself with that question with much more focus when things are being
over-priced to their underlying NAV's, rather than when they're being under-priced, because at least in a discount situation like we see in many cases today, and as covered by the moorfield's linked article, you're not fighting against a clear
over-valuation headwind to start with...
In addition to the above, and in relation to your '
have the IT investing community got it wrong' question, I think it's worth reminding ourselves that many investors in IT's do so as part of a long-term income-investment strategy, and the recent rapid rise of interest-rates has not only led to a valuation adjustment in
underlying assets by many of these IT's (as explained in this separate AIC article -
https://www.theaic.co.uk/aic/news/cityw ... ds-falling), but it's also opened up what some income-investors might see as 'reduced risk' alternatives for some capital allocation, away from market-facing investments and into improved
cash-based returns.
Taking all of the above into account, I'm of the view that there's
always valuation-risk questions that we need to ask ourselves, but I'm normally happier to take on that risk in IT-based
discount situations much more readily than I am in IT-based
premium situations, and so for me, the
more important time to be concerned was during the previous couple of years for many of these IT's that have seen a comparable swing from premiums to discounts, and where that underlying valuation headwind has, at least for now, turned in our favour...
Cheers,
Itsallaguess