Stifel has advised investors to consider taking profits from their investment company holdings following a significant rebound from the initial panic over U.S. tariffs in early April. The firm noted that 42 investment companies have seen their values rise by over 25% since President Trump announced extensive tariffs, which initially caused market declines but later led to a recovery as the administration adopted a more pragmatic negotiation stance.

The report highlighted that discounts in the investment sector have narrowed to approximately 13%, down from 16% at the end of December. Stifel analysts pointed out that 50 London-listed funds are now trading at discounts of 5% or less to their net asset value (NAV), with around 100 funds close to their one-year share price highs. The Association of Investment Companies, which represents the sector, has 295 members.

Analyst Iain Scouller expressed concern about the recent market advances in the U.S., UK, and Europe, particularly as summer approaches, a time when thin trading can lead to market volatility. He referenced Warren Buffett's advice to be cautious when others are overly optimistic and suggested that investors should start considering the long-term outlook for company earnings and associated risks. Scouller recommended that contrarian investors might benefit from taking profits and increasing cash reserves while waiting for more favorable valuations.

Several investment trusts have shown significant gains, such as Manchester & London (MNL), which has surged 66% since April 8 and is currently 14% below NAV. Seraphim Space (SSIT) has also performed well, rising 59% from its all-time lows two years ago, although it remains below its peak from 2021. Other notable gainers include Baker Steel Resources (BSRT), up 49%; Geiger Counter (GCL), up 48%; and Downing Renewables Infrastructure (DORE), which has increased by 46% following a bid from its largest shareholder.

On the other hand, several UK equity trusts have also seen substantial increases, with Lowland (LWI), Shires Income (SHRS), and others rising between 25% and 27% as the domestic stock market begins to recover from a prolonged period of stagnation.

For investors seeking value, Stifel pointed out investment companies whose shares have either seen modest declines or have risen less than 10% in the past three months. Castelnau Group (CGL), a £265 million special situations fund, has fallen 8%, with its discount widening to 21%. Similarly, Majedie (MAJE), a £128 million multi-asset fund, has slipped 3% and is trading close to a 12% discount, slightly wider than its one-year average.

In summary, while many investment companies have rebounded significantly, Stifel's analysis suggests that it may be prudent for investors to lock in profits and reassess their positions in light of potential market volatility ahead.