Smithson: new Fundsmith Investment Trust to launch

[Lootman]

The presence of a Communication Services holding when that sector wasn't present in the published IU is the only valid point raised. It's probably something simple, eg. a reclassification, or the IU has already evolved slightly. Why not ask the managers?

Yes, the Communication Services Sector is a new one, introduced by S&P in the last couple of months. It replaces the old Telecomms sector which was dominated by just two shares (AT&T and Verizon).

Now it is much bigger and broader, still containing T and VZ, but also FaceBook, Google/Alphabet, Walt Disney, Netflix, Comcast and others drawn from the phones, comms and media spaces.

I suspect that is the simple reason why Smith didn't mention it back then.

[simoan]

I might speculate that it was the market dislocations that happened around the time of the offer and launch that impacted such decisions. What we saw in October going into Novermber was a significant fall in tech names (and some other sectors like industrials and energy). Whilst defensive sectors like consumer staples and utilities held up well and even rose in some cases (Verizon, McDonalds).

In such circumstances the managers might have decided to back up the truck for tech names and eschew the non-cyclical names.

Yes, this sounds a plausible explanation but is not exactly consistent with "no market timing". And it's wrong to assume that technology is not cyclical, it is, it's just that no-one can remember the last time it had a significant down cycle apart from those of us who have worked in the industry long enough. There's no doubt with the current make up of the fund that if the Nasdaq catches a cold it will end up severely under the weather. Investing is about making risk adjusted returns and as I've made clear I do not want to have too much exposure to US listed IT companies currently, even where it is held in a collective investment.

No-one could have known the exact make up of the fund following deployment of the IPO money, despite what the clairvoyants are telling us, other than what was indicated in the IPO document. As it turned out it looks far riskier than I had anticipated being overweight in one industry, and I have taken real money off the table as a consequence. It's a perfectly valid standpoint given I know the make-up of my portfolio and no-one else does, and not worthy of the outright derision and condemnation expressed here. I think it's likely I will reduce my holding further in the coming days.

Si

[monabri]

Here's an article on SSON from Citywire - 4th December.

https://citywire.co.uk/investment-trust ... ider+Daily

[flyer61]

A New Zealand Company represents 3.1%. I had thought it might be Gallagher (world leader in electric fences) but this is a private Company.
Scratching my head!

[Lootman]

A New Zealand Company represents 3.1%. I had thought it might be Gallagher (world leader in electric fences) but this is a private Company. Scratching my head!

If this were a fund management company that I trust less than Smith, I'd be a bit dubious about odd-looking private investments showing up in a retail fund. Retail funds can be the destination of unwanted dross that a fund manager ends up with sometimes, as retail investors notice the least and complain the least.

Private investments and failed IPOs often find their way to the dumping ground that is retail funds, particularly if the same manager is also running institutional funds and partnerships, which always have a higher profile and priority.

But I would add that I have no reason to believe that Smith would engage in such tricks, nor even if he runs non-retail funds in parallel.

[simoan]

A New Zealand Company represents 3.1%. I had thought it might be Gallagher (world leader in electric fences) but this is a private Company.
Scratching my head!

Well, there are not many companies in New Zealand that would have a market cap to meet the minimum limit indicated in the prospectus. I believe it is Fisher & Paykel Healthcare. Current PE ratio of 33.

Si

[Walrus]

A New Zealand Company represents 3.1%. I had thought it might be Gallagher (world leader in electric fences) but this is a private Company.
Scratching my head!

Well, there are not many companies in New Zealand that would have a market cap to meet the minimum limit indicated in the prospectus. I believe it is Fisher & Paykel Healthcare. Current PE ratio of 33.

Si

I sold out of the Smithson Trust. It's held up pretty well and I haven't lost anything, but I just don't think this is one for me, it's too tech heavy for my portfolio and I'm not comfortable overweighting this sector currently.

[simoan]

I sold out of the Smithson Trust. It's held up pretty well and I haven't lost anything, but I just don't think this is one for me, it's too tech heavy for my portfolio and I'm not comfortable overweighting this sector currently.

As I mentioned I sold 50% of the shares I got in the IPO because I didn't like the heavy IT sector weighting either. Given that the fund managers have no track record it's incredibly difficult to justify the 11% premium to NAV and the current share price seems absolutely nuts to me!

All the best, Si

[Walrus]

I sold out of the Smithson Trust. It's held up pretty well and I haven't lost anything, but I just don't think this is one for me, it's too tech heavy for my portfolio and I'm not comfortable overweighting this sector currently.

As I mentioned I sold 50% of the shares I got in the IPO because I didn't like the heavy IT sector weighting either. Given that the fund managers have no track record it's incredibly difficult to justify the 11% premium to NAV and the current share price seems absolutely nuts to me!

All the best, Si

Yes, I was kind of surprised when I saw the premium it was trading at. The premium has basically prevented a chunky loss and I was happy to get out with a small gain on the IPO.

Whether I will deploy the funds or not I'm undecided, think I'll be looking toward a consumer staples etf maybe.

[Dod101]

I find selling at this very early stage very odd. When I subscribed I was buying into the expertise of Terry Smith and his team. I am not going to try to second guess them now. I have no concern about whether the Trust sells at a premium or a discount or really what is held by it. I intend to revisit it in about a year and then see how it is doing.

Dod

[Walrus]

I find selling at this very early stage very odd. When I subscribed I was buying into the expertise of Terry Smith and his team. I am not going to try to second guess them now. I have no concern about whether the Trust sells at a premium or a discount or really what is held by it. I intend to revisit it in about a year and then see how it is doing.

Dod

Dod I initially invested based on it being a 200m trust, I was apprehensive when it was increased 4 fold.

The incresed tech slant doesn't fit my portfolio weightings and an 11 percent premium on the holdings feels a decent price to exit having lost nothing.

[simoan]

I find selling at this very early stage very odd.

Well I don't but then I suspect I am a more active investor than the buy and forget types on here. I've already made clear why I sold at the beginning of December. It's a completely valid reason and without knowing the make up of my portfolio you're in no position to judge. To be frank, I suspect I am better at selecting IT sector shares to invest in than Terry Smith, particularly having seen him slag off the investment case for Apple at the Fundsmith AGM several years ago.

In my experience it's pretty unusual for any Trust to trade at a 10% premium, let alone one with no track record of success. Investing is about making risk adjusted returns and I personally do not like the risk profile of Smithson IT which is higher than I'd anticipated and so reduced my holding to reflect that. That is all.

Si

[Dod101]

I respect investor's right to sell whenever they like and it is their decision but as I said, I am investing in Terry Smith and his team rather than any particular investment. He will not get it right all the time and certainly I take Walrus's is point about the size of the trust. As far as risk profile is concerned, I do not look sec tors very much in my portfolio. If Smithson is higher risk that is probably know bad thing for me as I am I think generally a very low risk and conservative investor.

Dod

[simoan]

I respect investor's right to sell whenever they like

So why did you say it was "very odd" then?

What I find odd is holding an investment that the whole world knows for a fact is overvalued by 10%, particularly where it is only backed up by some undying faith in someone they don't know, based on a track record that does not exist. Even then, let's not forget that Terry Smith is not the fund manager of Smithson IT but two people with no public record of successful investment. it's also a fact that the Fundsmith Emerging Equities Trust has been a dog to date - he's added no value whatsoever once you take into account the depreciation of sterling and investors would have been far better off holding an ETF.

Si

[Dod101]

I respect investor's right to sell whenever they like

So why did you say it was "very odd" then?

I can respect an investor's right to sell when they like and I can think their action very odd at the same time. Nothing contrary about that.

A number of trusts sit at a premium more or less all the time. There is usually a reason and in the case of Smithson I should think it is because more people wanted a slice of the Trust than were able to get in at the IPO and no one or very few are selling. I know very well what simoan is saying about Smithson and for all I know his comments may be justified but I subscribed to Smithson with a five year view in mind and so far see no reason to deviate from that. I did not bet the farm on this; it is an unknown, on the whole I do not like 'star' managers, and as Woodford has shown, 'conviction' managers can get it wrong, at least in the short term. If I lost the lot it would not worry me but I think that very unlikely, and I thought it would be interesting to get in on the ground floor. We will see.

Dod

[simoan]

I can respect an investor's right to sell when they like and I can think their action very odd at the same time. Nothing contrary about that.

Dod

So if someone doesn't share the same opinion as you about an investment, it's OK for you to call their actions odd? That's a very strange outlook and a bit rude and condescending tbh. If you just want to read posts that confirm your own biases, then fine, but that does not make other alternative opinions "odd".

Si

[Dod101]

Si is a bit like a dog with a bone. I am simply saying that we are all entitled to our opinions. I think half the world is wrong but never mind. No more on this.

Dod

[monabri]

I can respect an investor's right to sell when they like and I can think their action very odd at the same time. Nothing contrary about that.

Dod

So if someone doesn't share the same opinion as you about an investment, it's OK for you to call their actions odd? That's a very strange outlook and a bit rude and condescending tbh. If you just want to read posts that confirm your own biases, then fine, but that does not make other alternative opinions "odd".

Si

I don't think the decision to sell is 'odd' in this case. I looked at SSON before the launch date and I couldn't really determine what companies were going to be in the fund. This lack of clarity was explained (to me) as being in order to stop others purchasing shares in the individual companies in advance. the explanation was logical ..IMHO.

Now, with the main components of the fund 'visible', some people have determined that they are not comfortable with what they've bought...fair enough - I tend to agree with them.

SSON seems to have bought companies which appear, based on a view of their future cash flow, to be 'overvalued' [Verisk/Check Point/Masimo/CDK/ Ansys/Cognex/Halma]. Some of the companies have quite high debt levels compared to their size [especially CDK global...!!...what the heck?]. A comparision of their predicted earnings growth indicates that they will grow at a rate lower than their relevant sector average.

So, I decided - 'not for me'.

[Lootman]

Now, with the main components of the fund 'visible', some people have determined that they are not comfortable with what they've bought...fair enough - I tend to agree with them.

There might be other legitimate reasons to sell. An investor might have merely been in the issue for a quick profit. Somewhat moot given the market behaviour since launch but cutting potential losses is valid. After all, the market decline may continue and an investor may feel over-exposed and an IT at a fat premium could be a good candidate for selling in that case.

Also it is possible that some investors applied for a lot more shares than they really wanted, assuming that applications would be scaled back, which they weren't in the end. In which case lightening up is appropriate.

So I don't know if a sell decision is "odd" but I do think that any investment in this launch was based on the history of Mr Smith. We've seen cult status bestowed upon fund managers before e.g. Bolton and Woodford in the UK, and Lynch and Miller in the US. Sometimes it works and sometimes it doesn't.

[OhNoNotimAgain]

We've seen cult status bestowed upon fund managers before e.g. Bolton and Woodford in the UK, and Lynch and Miller in the US. Sometimes it works and sometimes it doesn't.

Can you not find an example of one that did work?