WE ’ RE INVESTING IN UGLY DUCKLINGS …
The Scottish Investment Trust buys companies shunned by the rest of the market in the expectation they will grow into “ fully fledged swans ”
A T THE SCOTTISH
INVESTMENT TRUST , we take a contrarian approach to global stock markets .
We are high-conviction investors and focus on stocks that are out of favour with mainstream investors , as we believe these offer the greatest potential for long-term gains . This is because popular stocks tend to be overvalued – while out-of-favour stocks are often too cheap . We aim to exploit this inefficiency for our shareholders . The investment environment is inherently cyclical . We see cycles in industry fundamentals , corporate behaviour , analyst views and investor sentiment . These cycles are closely linked : when an industry ’ s fundamentals have been strong for some time , management teams , analysts and investors tend to be overly optimistic about its future . This leads to irrational investment decisions . Some of our best opportunities arise at the opposite point in the cycle – when a downturn leads to excessive pessimism about a company ’ s prospects .
When this happens , we can buy stocks precisely when the profit opportunity is greatest .
AN INNOVATIVE INVESTMENT APPROACH We believe investment returns are driven by a change in a company ’ s prospects and an accompanying change in market perceptions . Often good companies are overly admired and consequently become overvalued . A company that has been badly run or is down on its luck may offer much more potential for improvement and , eventually , for outstanding
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