Buy, hold or sell

Merchants Trust has a yield of more than 5% and a long track record of dividend increases, having swelled its payout every year since 1982.

Total returns have, however, been held back by long-standing high-interest debt on its balance sheet, the earliest tranche of which is set to expire in January 2018. Still, manager Simon Gergel's value-oriented stockpicking has steered the trust through stormy seas.

Buy - Antofagasta

Gergel bought into FTSE 100 mining company Antofagasta in April following a disappointing period for commodity stocks.

Weaker demand for commodities such as iron ore and copper from China, in combination with the halving of the oil price between June 2014 and January, means that many mining and energy firms have seen their share prices tank over the past 12 months.

In the year to 30 June Antofagasta's share price fell more than 11%, weakness that Gergel took advantage of, as he believes that despite the naysayers, the prospects for copper - Antofagasta's main business - remain strong.

"We are still wary of some commodities, but we think copper is still attractive. There is limited new supply as new mines tend to be delayed and expensive, while demand for copper is well spread. Copper goes into electronics, power stations, electric cars etc, and it's growing; copper is not completely dependent on Chinese infrastructure," says Gergel.

The manager says this growing demand means that copper supply may well soon move into deficit, which will help boost prices. He believes Antofagasta is well-placed to take advantage of this, due its strong balance sheet and almost non-existent debt - important plus points for a cyclical company.

Hold - GlaxoSmithKline

Gergel has held pharmaceutical giant GlaxoSmithKline for well over five years and it is currently his third largest holding at 5.5% of his portfolio. In recent times, however, the company's performance has been disappointing, with shares down close to 15% in the year to 30 June.

Challenges have included loss of revenue from drugs that have gone "off-patent", meaning that other pharmaceutical firms have been able to produce generic versions at much lower costs, while competition has also increased and pricing has been squeezed in Glaxo's respiratory drugs division.

However, Gergel says a recent deal to acquire Novartis's consumer healthcare and vaccines divisions is improving the company's prospects, which is why he is happy to hold onto Glaxo.

"Around 40% of Glaxo's sales now come from its consumer products and vaccines businesses, and these are very steady with good long-term growth opportunities. What could have gone wrong has gone wrong for Glaxo, but going forward things look more interesting," says the manager.

Gergel's principal reason for holding rather than buying is the firm's already prominent position within his portfolio; however, he adds that should the valuation come down and/or the company begin to deliver on its promises, he could be tempted to add more.

Sell - Hammerson

Property investment trust Hammerson made its way into Merchants' portfolio in October 2013, when Gergel picked up shares for 510p at a 10% discount to net asset value (NAV), which he saw as an attractive prospect.

"When we bought Hammerson the rental yield on its properties was about 5%; given their high quality, we thought that yield was too high. We assumed that as the economy picked up it would go down, and that the portfolio was well underpinned with a good selection of assets," says Gergel.

Fast-forward to 2015 and the manager says that the company's valuation has become much fuller, with shares rising around 30% over an 18-month period. Having reduced his position over a period of months, Gergel finally sold out completely between 670p and 690p in April, locking in profits ahead of what he believes could be a tricky period for property.

"We are slightly worried that as interest rates start to rise again the underpinning of prime properties might suffer," he says. Shares in Hammerson fell more than 8.2% between the end of March and the end of June, trading at around 617p on 30 June.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.