High Yield vs Fundsmith Equity

[sackofspuds]

You'd think that High Yield would do comparatively well during this crash. I am keeping an eye out for shares to buy and as we all know it's carnage out there. The likes of WH Smith are down 65% over the last year. Legal & General down 43%, Diageo down 28%. Plenty of others.

Yes, there are some high yield shares that have held up OK. National Grid is up 7% in the last year for example. Sainsbury and SSE are down less than 10% in the last year. Again I'm sure there are others.

However, what struck me was the performance of Fundsmith Equity.

Terry Smith always said he bought quality and it shows.

Fundsmith Equity I Acc
https://markets.ft.com/data/funds/tears ... 1YBW71:GBP
Down 0.42% over 1 year.

For comparison:
Bankers Investment Trust
https://markets.ft.com/data/investment- ... s=BNKR:LSE
Down 19% over 1 year.

I picked Bankers IT because just over 5 years ago, on 11 January 2015, I bought a notional Basket of 7 portfolio and Bankers is showing a 37.76% total gain (including dividends). It's the best performer. Perpetual Income and Growth Investment Trust is down 38.37% over the same period. It's the worst performer. The Basket of 7 I created is down 5.69% over that 5+ year period.

Fundsmith Equity is up 87% over 5 years:
https://www.hl.co.uk/funds/fund-discoun ... ion/charts

True, Smithson IT which only launched last year and specialises in smaller companies, is down 20% in the last year. However, that HYP stalwart British American Tobacco is down 16% so a 20% decline is not too shabby.

I know the point has been made on here before but you could do a lot worse than trust your money to Terry.

[langley59]

I know the point has been made on here before but you could do a lot worse than trust your money to Terry.

I agree and Fundsmith is my largest investment. However its yield is very low and so doesn't really qualify as a high yield strategy. To live off the yield you would need an enormous holding or alternatively you would have to sell units when income is required.

[sackofspuds]

I agree and Fundsmith is my largest investment. However its yield is very low and so doesn't really qualify as a high yield strategy.

Ah yes. There is that

[nmdhqbc]

However its yield is very low and so doesn't really qualify as a high yield strategy. To live off the yield you would need an enormous holding or alternatively you would have to sell units when income is required.

Yep, so the total return is what count here then if you sell some units to live off. Using AIC charting tool which gives total return I get -17.38% for Bankers and the same 0.42% for Fundsmith I inc. So a like for like of taking the low Fundsmith divi and selling some would be a big win for Fundsmith still. Will it continue outperforming forever though is the question. Best to have some in both strategies I think.

[nmdhqbc]

I get -17.38% for Bankers

But only -8.23% for NAV performance.
Also Fundsmith trades once a day at noon. So yesterdays drop in US market is not reflected in the price yet. So maybe that 0.42% vs -8.23 comparison is really a fair bit closer.

[Dod101]

sackofspuds is surely right that High Yield shares should do well during the current conditions, but only if the dividend is maintained and that of course is crucial. In so many cases the dividend is not going to be maintained. Watch out for Shell. They pay a very nice dividend next week but with their shares yielding around 15%, I can see at least a cut coming. Ditto many others. Next has just said this morning with their results for the year that they are proposing no final but will look again at an interim dividend in June.

As for Fundsmith and Smithson they are anything but high yield and so are off topic for this Board and not sure why he would be discussing them here.

Dod

[Dod101]

sackofspuds is surely right that High Yield shares should do well during the current conditions, but only if the dividend is maintained and that of course is crucial. In so many cases the dividend is not going to be maintained. Watch out for Shell. They pay a very nice dividend next week but with their shares yielding around 15%, I can see at least a cut coming. Ditto many others. Next has just said this morning with their results for the year that they are proposing no final but will look again at an interim dividend in June.

As for Fundsmith and Smithson they are anything but high yield and so are off topic for this Board and not sure why he would be discussing them here.

Dod

Dod101, there are quite a few things that Shell will do before cutting the dividend, would be my belief. However, an RDSB dividend cut has to be more likely than at anytime since the 1970's economic meldowns, I'd guess

I hope you are right. We'll see.

Dod

[sackofspuds]

Thought of another thing that may be flattering the price of any Trust or Fund invested primarily in the US; the current strength of the USD.