North American Income Trust – As headwind turns tailwind

North American Income Trust (NAIT) adopted its income strategy in May 2012 and, for most of the nearly 11 years that this has been in place, it appears that there has been a headwind to value investing in the form of easy money policies. However, following a marked uplift in inflation, bringing with it rises in interest rates, the market looks to have re-embrace value stocks. This has been to NAIT’s benefit, pushing it up its peer group rankings over the last year, as most funds in the North America sector now have a growth bias.

While US inflation has been falling for some months now, it remains at an elevated level and perennially-low interest rates could be a thing of the past. If so, NAIT might be well positioned for an extended period of outperformance. Its quality bias could also provide some comfort if the economic backdrop were to become more challenging. In the meantime, a 3.4% yield means that investors are paid to wait, plus its discount leaves it modestly cheap versus its longer-term averages.