Smithson SSON

[NoBidNoOffer]

I bought Smithson SSON on Thursday morning when it was trading at £9.09 which is well below the funds initial launch price in 2018. I could not say no to that price as I’ve been eying it a different price points since the crash. I almost doubled my holding and Friday it had closed at £10.36, which was a morale booster. If it falls below £10 again I’ll be buying more.

Moderator Message:
Moved here from HYP-P where it was off-topic as per that boards's guidance. - Chris

[ADrunkenMarcus]

I am a fan.

SSON is 42% of my SIPP.

I didn't have any accumulated cash dividends, or would have topped up too. I saw it below £10 but didn't realise it was that low.

Best wishes

Mark.

[monabri]

I'd have a look on Monday next. With the DOW closing down 4.5% I would expect a fall in the shareprice.

[Dod101]

I have just received an email from Smithson. The AGM is tomorrow at the Barber Surgeons Hall in London. The Hall is closed and anyway Smithson does not expect anyone to attend the AGM so it is to be held on the pavement outside of the Hall attended by the Chairman and accompanied by a family member who is an independent shareholder. That makes the quorum apparently. He will be clutching the proxies received and will conduct the formal business there and then.

Strange arrangements for strange times.

Dod

[ADrunkenMarcus]

Strange arrangements for strange times.

Indeed.

I will look forward to the managers' presentation some other time, I hope.

I checked this afternoon and found that SSON has now risen to 44% of my SIPP. As you can imagine, in normal times I would have been looking forward to the AGM and any news from it.

Best wishes

Mark.

[Dod101]

They also said that Simon Barnard's presentation will be on the company's website although they did not say when but presumably after the AGM. You could look for that.

Dod

[ADrunkenMarcus]

Thanks Dod.

[doug2500]

One thing I don't understand about Smithson is how they can avoid paying any dividend?

Even FEET pays a token divi to satisfy IT rules, how can Smithson not pay anything, surely they have some income?

To be clear, I don't want a divi and they've always said they are about capital growth not income but I understand as an IT they have to pay out a proportion?

[ADrunkenMarcus]

One thing I don't understand about Smithson is how they can avoid paying any dividend?

Even FEET pays a token divi to satisfy IT rules, how can Smithson not pay anything, surely they have some income?

To be clear, I don't want a divi and they've always said they are about capital growth not income but I understand as an IT they have to pay out a proportion?

I think they will have to at some point.

SSON started with a 4 percent free cash flow yield that had grown at 16% in the preceding year. Last I heard, the free cash flow yield was down to 3.4 percent but I suspect it's risen again with recent market declines.

As I reported at the interim stages, the Company’s principal objective is to provide shareholder returns through long-term capital appreciation rather than income. It should not therefore be expected that the Company will pay a significant annual dividend and it is likely that no interim dividends will be declared, but the Board intends to declare such annual dividends as are necessary to maintain the Company’s UK investment trust status.
The Company’s revenue earnings for the period were £0.26 million, equivalent to 0.26p per share. In accordance with the above policy, the Directors are not recommending a dividend and therefore all earnings will be retained in the Company for reinvestment. As the primary objective of the Company is capital growth, it should not necessarily be assumed that any dividends will be paid in future years. For the avoidance of doubt, the Directors do not intend to use the capital reserve to pay dividends.

Best wishes

Mark.

[Lootman]

One thing I don't understand about Smithson is how they can avoid paying any dividend?

I doubt that paying no dividend is a formal objective of the fund. Rather that income is not a priority for the fund nor for those who invest in it.

Funds that invest in overseas markets and/or smaller companies typically have higher expenses. My assumption would that any dividends the fund receives covers those expenses and no more.

[dealtn]

One thing I don't understand about Smithson is how they can avoid paying any dividend?

I doubt that paying no dividend is a formal objective of the fund. Rather that income is not a priority for the fund nor for those who invest in it.

Funds that invest in overseas markets and/or smaller companies typically have higher expenses. My assumption would that any dividends the fund receives covers those expenses and no more.

The dividends received, and those paid are different things. It would be on odd investment objective to set the expenses by reference to its dividend income.

I don't know the legality but presumably to maintain UK investment trust status requires some form of dividend payment to be made to investors (perhaps only in a single class). They wish to maintain such status, so will make a token dividend payment, despite it not being an objective.

[Lootman]

One thing I don't understand about Smithson is how they can avoid paying any dividend?

I doubt that paying no dividend is a formal objective of the fund. Rather that income is not a priority for the fund nor for those who invest in it.

Funds that invest in overseas markets and/or smaller companies typically have higher expenses. My assumption would that any dividends the fund receives covers those expenses and no more.

The dividends received, and those paid are different things. It would be on odd investment objective to set the expenses by reference to its dividend income.

I don't know the legality but presumably to maintain UK investment trust status requires some form of dividend payment to be made to investors (perhaps only in a single class). They wish to maintain such status, so will make a token dividend payment, despite it not being an objective.

It is not an investment objective or requirement to not pay a dividend. Nor are the underlying shares chosen for their low yield, nor are expenses "chosen" on such a basis. And if dividends exceeded expenses then they would be obligated to pay out 85% of them. They could also pay out dividends from capital if they wished.

It is just the prevailing assumption that investors in this fund don't want income. Some wealthy investors actually dislike income because of the tax event it causes. Berkshire Hathaway has never paid a dividend, nor Amazon nor Google. Not everyone wants dividends despite the bias in favour of them on TLF and TMF..

As it happens the expenses do exceed the dividends received. The management fee alone is 0.9% per annum and so with other expenses you can probably assume total expenses exceed 1% a year. Global smaller companies is not generally considered a sector for income and so it makes sense to deduct expenses from income first, rather than take them all from capital.

[midgesgalore]

I bought Baillie Gifford US Growth Trust (USA) at launch in March 2018.
They have never paid a dividend although the growth prior to the current coronavirus crisis was an impressive 60%, one of the few not in the red.


midgesgalore

[mike]

RNS update this afternoon

https://www.investegate.co.uk/smithson-inv-trust--sson-/rns/market-update-30-3-20--date-of-agm-/202003301441260930I/

Simon Barnard, portfolio manager, commented: "The portfolio has held up well in relative terms during this challenging period. Although we own one travel related company which has been hit hard by the reduction in flights and hotel stays, we also own several healthcare related companies, including a company which makes respiratory equipment, which have benefited from an increase in demand related to Covid-19. The high quality of the companies which we own, including the very low levels of debt within these companies, means that they should exit this crisis in a strong position.

[ADrunkenMarcus]

No sign of the presentation on the SSON website, as yet.

Best wishes

Mark.

[Tigger]

Presentation now seems to be live at https://www.smithson.co.uk/tv.

[ADrunkenMarcus]

Thanks Tigger, will watch tonight with a glass of whisky or something pleasurable!

[ian56]

This year's AGM presentation by Simon Barnard and Will Morgan is now available at https://www.smithson.co.uk/tv for those interested. Still very happy with this, my second largest portfolio holding (after Fundsmith!), which was bought in its entirety at IPO.

Ian

[ADrunkenMarcus]

Cheers, Ian.

SSON is 47% of my SIPP so I have a modest interest in it as well.

Best wishes

Mark.

[Humeau]

Given that both Fundsmith and Smithson invest in moaty businesses, you might be interested to get acquainted with a guy called Pat Dorsey. He runs a highly focussed fund, Dorsey Asset Management and is similar in style but more aggressive than Mr Smith.

He gave a good Google talk which is on YouTube and three very interesting podcasts which you can find on 'Invest like the best with Patrick O'Shaugnessey.'

He has 40% of his $800m in two positions. FB and SMAR. I like both companies and think they have bright futures and are reasonably priced. He has returned 30+% over the last three years and I think he will do well in the future.

Exposure to his thinking will certainly help Fundsmith and Smithson investors.