Job Curtis: five stocks I’ve bought for City of London Investment Trust | Summary and Q&A

TL;DR

City of London Investment Trust focuses on investing in consistent and dependable companies with strong brands and market-leading positions.

Key Insights

• 🥺 City of London Investment Trust focuses on valuation-led investing and seeks reasonable valuation reflecting future prospects.
• 🥺 Consistency, strong brands, and market-leading positions are desirable qualities in companies.
• 💪 Strong balance sheets and investments in future growth are crucial for resilience and future dividends.
• 🥺 Dividend cuts may lead to reduced holdings or switches to companies with better prospects.
• 🎏 The trust has invested in NatWest, finding its dividend stream attractive.
• 👨‍💼 Switches have been made from companies like BHP to Glencore due to uncertain outlook and attractive commodity trading business.
• 😮 Inflation and interest rate rises may lead to challenges for heavily indebted companies.

Transcript

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Questions & Answers

Q: What qualities does City of London Investment Trust look for in companies?

The trust seeks consistent companies with strong brands, market-leading positions, and a focus on investing in their own future growth. It also prefers companies with strong balance sheets.

Q: How does City of London Investment Trust handle dividend cuts?

In the case of dividend cuts, the trust may reduce its holdings, particularly if there has been a significant share price underperformance. However, if the company still has good recovery prospects and a strong brand, the trust may retain a smaller holding.

Q: Can you provide an example of a successful switch made by City of London Investment Trust after a dividend cut?

During the pandemic, the trust reduced its holding in Shell after a massive dividend cut. However, it switched to Total Energies, which had better crisis management and did not cut its dividend. This switch proved beneficial as the oil price recovered.

Q: Has City of London Investment Trust been investing in smaller companies?

The trust has explored the small and mid-cap segment but hasn't found many opportunities that meet its criteria. It has made selective investments in medium-sized British companies and alternative funds like Round Hill Music.

Summary & Key Takeaways

• City of London Investment Trust follows a valuation-led investment approach and looks for companies with consistent performance and strong brands.

• The trust prefers companies with strong balance sheets and focuses on those that invest in their future growth.

• When facing dividend cuts, the trust may reduce its holdings or switch to other dividend-paying companies with better prospects.