Gervais Williams: there’s plenty of overlooked shares with high yields

TL;DR

Javas Williams, manager of the Divase Income Investment Trust, discusses his investment approach, preferring mid and small-cap companies. He highlights undervalued stocks, caution on cyclical sectors, and the potential of energy and mining stocks.

Transcript

hello and welcome to our latest Insider interview today in the studio I have with me Javas Williams for manager of the divase income Investment Trust Javas thanks for coming in today it's a pleasure to be here so to kick off Javas could you summarize your investment approach for the Investment Trust so the trust is an income fun It's a UK invested ... Read More

Key Insights

• 🔬 The Divase Income Investment Trust follows a multicap approach, investing in UK quoted companies for sustainable income growth.
• 👲 Small-cap stocks have been overlooked but offer attractive valuations and growth potential for investors.
• 👋 Javas Williams suggests that mainstream FTSE 100 stocks, particularly in the energy and mining sectors, are often undervalued and can provide good dividends.
• ❓ The trust is cautious about cyclical sectors due to expectations of an economic slowdown and a potential UK recession.
• 🥹 Portfolio activity in 2023 has been cautious, with more existing holdings sold than new holdings added.
• 💪 UR Group, a utility company supplying the corporate sector, is highlighted as an example of an undervalued company with strong growth prospects and dividend potential.

Questions & Answers

Q: What is the investment approach of the Divase Income Investment Trust?

The trust focuses on generating sustainable income growth by investing in a mix of large, mid, and small-cap UK quoted companies. Javas Williams prioritizes companies with good income growth potential and combines it with underlying income for attractive returns.

Q: Are there specific sectors where the trust is finding value opportunities?

Javas Williams identifies the overlooked small-cap segment as particularly attractive. He highlights energy and mining stocks, which offer low valuations and good dividend prospects. Additionally, some mainstream large-cap financial stocks also provide high yields and growth potential.

Q: Is there any caution regarding certain sectors?

While energy and mining stocks offer opportunities, Javas Williams is more wary of cyclical businesses that are dependent on economic growth. He foresees an economic slowdown and a potential recession in the UK, prompting caution in cyclical sectors.

Q: Can you mention some undervalued stocks with attractive dividend growth?

Javas Williams highlights PayPoint, a company involved in financial transactions in corner shops, with a dividend yield of around 6.5% and steady dividend growth. He also mentions XPS, a financial sector company advising pension schemes, which experienced impressive dividend growth of nearly 177% last year.

Summary & Key Takeaways

• Javas Williams manages an income-focused investment trust that primarily invests in UK quoted companies, including mid and small-cap stocks.

• The fund is skewed towards smaller companies, with about 60% of the portfolio in the small-cap and AIM market.

• While the mainstream FTSE 100 has performed well, small-cap stocks have been overlooked and offer compelling opportunities.