Investments

STS Global Income and Growth: Purchasing quality at a reduced price

By Kaylie Pferten 11 Nov, 2025
STS Global Income and Growth: Purchasing quality at a reduced price
If investors want to diversify away from mega-cap tech, they should think about STS Global Income & Growth

With a combined market capitalization of over £22 trillion, the Magnificent Seven group of US mega-cap stocksAlphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Teslamake up roughly 23 percent of the MSCI World index and 37 percent of the S&P 500. Because these few tech giants have performed well over the last five years, the majority of investors are probably heavily invested in them. It might be time to remove some money from the market, though, as it appears to be getting more and more frothy.

As a result of mega-cap tech consuming capital at the expense of other companies, some intriguing opportunities are now emerging in various market niches. One way to invest in these less expensive stocks and limit exposure to more volatile market segments is through the STS Global Income & Growth Trust (LSE: STS).

STS Global Income & Growth provides high-quality earnings.

The 2834 names in STS's relatively concentrated portfolio were chosen for their quality, income potential, predictability, and resilience. According to James Harries and Tomasz Boniek of Troy Asset Management, who have been running the strategy since early 2020, it emphasizes companies with potential for steady earnings and dividend growth, which should lead to less volatility. With a similar mandate, the same pair also oversee the Troy Global Income Strategy, which since its inception in 2016 has produced an annualized volatility of 9.1 percent, as opposed to 11.2 percent for the MSCI World index.

British American Tobacco (BATS) and CME Group are currently the largest holdings. According to Harries, BATS offers the "unusual combination" of a superior company trading at an alluring valuation. The operator of the biggest futures and options exchange in the world, CME, is a reputable company that provides a 4% yield made up of both regular and special dividends. Nike was added more recently by the managers, who bought the company when it was "out of favor" as a result of tariff issues and strategic errors. It was a classic quality value play because the shares had dropped 71 percent from peak to trough.

Given that "global investors have shunned the UK," the trust has an opportunistic 33 percent weighting to the UK. On closer inspection, though, only 6% of sales originate from this market. Therefore, what we are saying is that we are taking advantage of globally valued assets listed in the UK; we are not making any statements about the UK economy. A "

Avoiding technology is STS Global Income & Growth.

Due to the fact that the majority of tech companies do not pay dividends, technology only makes up 10% of the portfolio. With a net asset value (NAV) return of 36.3 percent compared to 49.3 percent for its benchmark, the Lipper Equity Global Income index, STS has, nevertheless, underperformed the market in recent years. However, STS's portfolio is far from costly, even though the rest of the market is beginning to appear pricey. The MSCI World's average price-to-earnings (p/e) ratio was 21 at the end of October, while the trust holdings' average was 18. The market yield was two percent, while the estimated yield was three percent.

Additionally, Harries and Boniek have been successful in adding reputable brands to the portfolio at competitive prices. The portfolio's return on capital is 16%, compared to the market's 9%, and its overall operating margin is 28%, compared to the market's 14%. Reckitt, Novartis, Roche, Unilever, Nestl, and Accenture are among the quality names in the portfolio that are trading near or at the bottom of the ten-year p/e range.

Harries asserts that purchasing at "lower valuations means less volatility." The team has managed to "build asymmetry into the portfolio" despite the fact that many excellent companies are currently "out of favour for whatever reason." "Limited downside and long-term decent upside" is the goal.

STS provides an alternative for investors looking for quality, value, and income in a market that appears to be overextended and overexcited. The trust offers a dividend yield of about 3.5 percent and is currently trading at a slight discount to NAV.