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UK construction companies have caught the attention of the investment team at the Aberdeen Small Companies High Income trust.
The trust raised its stake in Morgan Sindall following a 12% fall in the group’s profits in February, as the group warned the construction industry will face a tough few years.
However Phil Webster, manager of the trust, took the opportunity to increase his holdings and says the company has a number of attractive points, such as a £3.2 billion order book equivalent to 18 months of sales, overlooked by most investors in the current climate.
The trust has a diverse make up of blue-chip equities and preference shares in small and lesser known companies, which Webster says help boost the trust’s dividends.
Balfour Beatty is one of the portfolio’s preference shares with a 10.75% return and Interserve has been a play on the Middle East construction sector for the trust.
Despite the companies' rank in the trust’s portfolio Webster emphasises that the investments are as a results of seeking strong companies, rather than a view on the sector.
The trust is currently trading at 115p, a 17.8% discount to its net asset value of 139.9p and has given a total return of 98% on its net asset value over the past three years and lost 35% over the past five years.