BlackRock Income and Growth Investment Trust (BRIG) announced its annual results for the year ended 31 October 2024. The company delivered an NAV total return of 18.1%. benchmark index which returned 16.3%. The share price total return was 13.2% leading the discount to widen from 8.7% at the start of the year to 12.9%.

Commenting on the perfomance, the manager noted:

“The company outperformed its benchmark Index during the period as a result of strong security selection in the financials sector with standout performance from 3i Group, Standard Chartered, NatWest and Intermediate Capital Group. Having been one of the company’s largest contributors during 2023, 3i Group continued to deliver very strong NAV growth, supported by its largest asset, Action, the European discount retailer. Action grew its earnings strongly once again and continued its expansion across Europe. Action boasts €825m in cash reserves and has successfully completed a refinancing of €2.1bn highlighting the company’s strong fiscal management and readiness for future opportunities.”

Discussing the outlook for the trust, the manager added:

“Global developed equity markets have continued their broad rallies throughout 2024 following a trend that started in late 2023. Following a lengthy period of uncertainty through the COVID-19 era, with sharply rising interest rates and inflation, equity markets have now settled down. The combination of falling interest rates and supportive macroeconomic conditions including stable labour market indicators presents a benign backdrop for equity markets. The promise of greater fiscal spending in the US, China and parts of Europe have served to buoy equity markets further, although have contributed to rising government bond yields as the spectre of fiscal deficits and inflationary pressures loom large for bond investors.

“More recently, following a period of extended economic weakness, the Chinese Government began a more concerted accommodative campaign aimed at accelerating economic growth and arresting deflationary pressures. Recent policy moves have sought to improve and encourage lending into the real economy with a sizable fiscal easing programme announced. Whilst the scale of the easing is large, western markets and commentators have remained sceptical of its impact and effectiveness whilst awaiting evidence to the contrary. In the UK, the recent budget promised and delivered a large-scale borrowing and spending plan whilst sizable increases in minimum wage and public sector wage agreements likely support a brighter picture for the UK consumer. UK labour markets remain resilient for now with low levels of unemployment while real wage growth is supportive of consumer demand albeit presents a challenge to corporate profit margins.

“With the UK’s election and budget now over, the market’s attention will focus on the subsequent policy actions of the new US administration under Donald Trump. The global economy has benefited from significant growth and deflation ‘dividend’ it has received from globalisation over the past decades. The impact of a more protectionist US approach and the potential implementation of tariffs may challenge this dividend. We would anticipate asset markets to be wary of these policies until there is more clarity as we move through 2025. Conversely, we believe political certainty, now evident in the UK, will be helpful for the UK and address the UK’s elevated risk premium that has persisted since the damaging Autumn budget of 2022. Whilst we do not position the portfolios for any election or geopolitical outcome, we are mindful of the potential volatility and the opportunities that may result, some of which have started to emerge.

“The UK stock market continues to remain depressed in valuation terms relative to other developed markets offering double-digit discounts across a range of valuation metrics. This valuation anomaly saw further reactions from UK corporates with a robust buyback yield of the UK market. Combining this with a dividend yield of 3.7% (FTSE All Share Index yield as at 31 October 2024; source: The Investment Association), the cash return of the UK market is attractive in absolute terms and comfortably higher than other developed markets. Although we anticipate further volatility ahead, we believe that in the course of time risk appetite will return and opportunities are emerging. We have identified several potential opportunities with new positions initiated throughout the year in both UK domestic and midcap companies.

“We continue to focus the portfolio on cash generative businesses that we believe offer durable, competitive advantages as we believe these companies are best placed to drive returns over the long term. Whilst we anticipate economic and market volatility will persist throughout the year, we are excited by the opportunities this will likely create; by seeking to identify the companies that strengthen their long-term prospects as well as attractive turnaround situations.”

BRIG : Stock selection drives impressive gains for BlackRock Income and Growth