Smithson Annual Report

[Dod101]

...is now available on its website. I have held it from launch and whilst it briefly double bagged, as noted on another thread, it is currently only around £16.50. Unlike many of my holdings, it has not recovered from the dip post year end. It is of course a growth trust which explains quite a lot since these are clearly out of favour at the moment.

There are only three directors which is very small for a trust of this size, and one might have thought that at least another couple might be nearer the mark to get a decent spread of views, but of course Fundsmith will not want that and it is very much 'their' IT. The OCR is outrageous at 1% and the Chairman has the gall to comment that 'The Board seeks to manage and where possible to improve the OCR'. Well they are not being very successful, are they? I feel a letter to the Chairman coming on.

That means that Fundsmith, on year end NAV, was due to receive something like £30 million. Obviously it may not be as much as that but is in that order. This is for a trust with a very low turnover, with I think only two sells and buys last year and an avowed 'do nothing' policy. Just take a look at that figure again. What sort of expenses will they have? How much do you suppose Baillie Gifford, another growth investor, would charge?

We all know that high charges eat in to investment returns and on that basis alone, I am wondering about holding on to Smithson.

Dod

[scrumpyjack]

...is now available on its website. I have held it from launch and whilst it briefly double bagged, as noted on another thread, it is currently only around £16.50. Unlike many of my holdings, it has not recovered from the dip post year end. It is of course a growth trust which explains quite a lot since these are clearly out of favour at the moment.

There are only three directors which is very small for a trust of this size, and one might have thought that at least another couple might be nearer the mark to get a decent spread of views, but of course Fundsmith will not want that and it is very much 'their' IT. The OCR is outrageous at 1% and the Chairman has the gall to comment that 'The Board seeks to manage and where possible to improve the OCR'. Well they are not being very successful, are they? I feel a letter to the Chairman coming on.

That means that Fundsmith, on year end NAV, was due to receive something like £30 million. Obviously it may not be as much as that but is in that order. This is for a trust with a very low turnover, with I think only two sells and buys last year and an avowed 'do nothing' policy. Just take a look at that figure again. What sort of expenses will they have? How much do you suppose Baillie Gifford, another growth investor, would charge?

We all know that high charges eat in to investment returns and on that basis alone, I am wondering about holding on to Smithson.

Dod

Well it must be quite expensive for Terry to commute first class from Mauritius! Anyway you are paying for his 'judgement', not the hours spent, and if he can get away with it, why not? It is one reason I have never invested in his funds/trusts.

[Dod101]

...is now available on its website. I have held it from launch and whilst it briefly double bagged, as noted on another thread, it is currently only around £16.50. Unlike many of my holdings, it has not recovered from the dip post year end. It is of course a growth trust which explains quite a lot since these are clearly out of favour at the moment.

There are only three directors which is very small for a trust of this size, and one might have thought that at least another couple might be nearer the mark to get a decent spread of views, but of course Fundsmith will not want that and it is very much 'their' IT. The OCR is outrageous at 1% and the Chairman has the gall to comment that 'The Board seeks to manage and where possible to improve the OCR'. Well they are not being very successful, are they? I feel a letter to the Chairman coming on.

That means that Fundsmith, on year end NAV, was due to receive something like £30 million. Obviously it may not be as much as that but is in that order. This is for a trust with a very low turnover, with I think only two sells and buys last year and an avowed 'do nothing' policy. Just take a look at that figure again. What sort of expenses will they have? How much do you suppose Baillie Gifford, another growth investor, would charge?

We all know that high charges eat in to investment returns and on that basis alone, I am wondering about holding on to Smithson.

Dod

Well it must be quite expensive for Terry to commute first class from Mauritius! Anyway you are paying for his 'judgement', not the hours spent, and if he can get away with it, why not? It is one reason I have never invested in his funds/trusts.

Indeed. I do not blame him. I am concerned about the independence of the Board.

Dod

[jimmyfromlargs]

Yes SSON is a bit of a watch item for me. I thought I had bought into another Terry Smith growth story……its lack of recovery is a bit troubling.

I was touchy about trying I had placed some money into FEET another of Terry’s it was a supreme dud….after 3 years if went nowhere. Maybe its a rock star success now….

Is your concern the high cost of the OCS, or the fact that there is no growth……….both are troubling but if the growth does not resume then I’m out.

But I cannot detract from the success I have had, and would like to replicate with Fundsmith T Equity Accum….high OCS or not.

[BullDog]

Sounds like a sell for Dod101.

I too bought at launch. After being delighted with the rather quick double bag, I share the disappointment this year. I am not overly concerned about SSON. After all, the investments are in the main very high quality companies. They haven't changed. The one I really do not like is Fevertree but that's not enough on its own for me to sell just now. Keeping an eye on it.

[simoan]

I find it amazing how falling share prices amplify short-termism. Why not take a long-term view and take the opportunity to buy more at lower prices when the trust is at a discount to NAV? It contains many very good companies that are not going to go bust.

I just don't understand the psychology of investors, and never have. As Howard Marks re-iterates in his latest newsletter, investor sentiment doesn't move in cycles, it's like a pendulum that spends very little time at the mid-point of it's swing and strays from over optimism to extreme pessimism. Investors that can stay nearer the midpoint will be the most successful in the long run.

[Lootman]

I find it amazing how falling share prices amplify short-termism. Why not take a long-term view and take the opportunity to buy more at lower prices when the trust is at a discount to NAV? It contains many very good companies that are not going to go bust.

That is what I have been doing. I was buying throughout January and February, and into early March. My portfolio is now at an all-time high valuation as a result. So even in a fairly short period of time, buying during these dips makes sense.

I have eased off the buying now that 50% of the market loss has been regained. Volatility can be your friend.

[BullDog]

I find it amazing how falling share prices amplify short-termism. Why not take a long-term view and take the opportunity to buy more at lower prices when the trust is at a discount to NAV? It contains many very good companies that are not going to go bust.

That is what I have been doing. I was buying throughout January and February, and into early March. My portfolio is now at an all-time high valuation as a result. So even in a fairly short period of time, buying during these dips makes sense.

I have eased off the buying now that 50% of the market loss has been regained. Volatility can be your friend.

Well done. I am completely unable to time things so I have given up trying, pretty much. I had a recent luckily timed purchase of Throgmorton somewhere near it's recent low but it's minor stuff. I think I am presently sitting around 3% or so down from a portfolio all time high. So I'm OK.

[Dod101]

I would not like to be associated with short termism. Of my 30 shares, including ITs I have held 10 of them for at least 25 years and two or three for 30 years. Caledonia for instance is still held in certificated form and I of course hold the original contract note dated 10 June 1992. The holding has not been touched in that period and neither have there been any corporate events as far as the shares are concerned so I still have the original 1000 shares that I bought on that day. HSBC goes back even longer. I have held them one way or another since 29 April 1991.

I am simply thinking about Smithson as I do with all of my shares. Now that there is a decent profit in the holding I can take a look critically at the corporate governance and I was discussing what I see as the shortfalls in that. As I commented, like most growth funds, they have rather stalled for the moment, that is all.

Dod

[simoan]

I find it amazing how falling share prices amplify short-termism. Why not take a long-term view and take the opportunity to buy more at lower prices when the trust is at a discount to NAV? It contains many very good companies that are not going to go bust.

That is what I have been doing. I was buying throughout January and February, and into early March. My portfolio is now at an all-time high valuation as a result. So even in a fairly short period of time, buying during these dips makes sense.

I have eased off the buying now that 50% of the market loss has been regained. Volatility can be your friend.

Well done. I am completely unable to time things so I have given up trying, pretty much. I had a recent luckily timed purchase of Throgmorton somewhere near it's recent low but it's minor stuff. I think I am presently sitting around 3% or so down from a portfolio all time high. So I'm OK.

But this isn't about timing the market, it's about sensible pound-cost averaging over a period of time with an eye on the mid to long term performance, not the short term. Good investors welcome lower prices and discounts to NAV whereas poor investors anchor to the amount something has fallen, wish they had sold at the top and then feel like chucking the towel in at the bottom. We should all try and avoid the latter.

[Lootman]

I find it amazing how falling share prices amplify short-termism. Why not take a long-term view and take the opportunity to buy more at lower prices when the trust is at a discount to NAV? It contains many very good companies that are not going to go bust.

That is what I have been doing. I was buying throughout January and February, and into early March. My portfolio is now at an all-time high valuation as a result. So even in a fairly short period of time, buying during these dips makes sense.

I have eased off the buying now that 50% of the market loss has been regained. Volatility can be your friend.

Well done. I am completely unable to time things so I have given up trying, pretty much. I had a recent luckily timed purchase of Throgmorton somewhere near it's recent low but it's minor stuff. I think I am presently sitting around 3% or so down from a portfolio all time high. So I'm OK.

The thing is, I don't really see it as timing anything. It is more buying in response to falling prices. I often use limit orders so I really have no idea when the trade will execute - or even whether it will execute at all. Only at what price if it does.

Of course this won't work if the security price declines all the way to zero. Individual shares can do that (although I have only experienced that once) but funds should always recover as long as the market does anyway.

I bought Smithson at the launch, and then bought the same number of shares again during the Covid crash, when it went down to close to its launch price. Not tempted to buy more, nor to sell.

[Dod101]

Sounds like a sell for Dod101.

I too bought at launch. After being delighted with the rather quick double bag, I share the disappointment this year. I am not overly concerned about SSON. After all, the investments are in the main very high quality companies. They haven't changed. The one I really do not like is Fevertree but that's not enough on its own for me to sell just now. Keeping an eye on it.

It should have been a sell for me but I held on. I see that today it is quoted at £13.37.

Dod

[BullDog]

Sounds like a sell for Dod101.

I too bought at launch. After being delighted with the rather quick double bag, I share the disappointment this year. I am not overly concerned about SSON. After all, the investments are in the main very high quality companies. They haven't changed. The one I really do not like is Fevertree but that's not enough on its own for me to sell just now. Keeping an eye on it.

It should have been a sell for me but I held on. I see that today it is quoted at £13.37.

Dod

Truly dreadful this year, no denying it. But it'll come back into fashion. It bounced back very quickly from the covid meltdown. This time I think it more likely more of a slow grind, but the economic outlook might have to brighten up before it turns round. As it surely will.

[BullDog]

I find it amazing how falling share prices amplify short-termism. Why not take a long-term view and take the opportunity to buy more at lower prices when the trust is at a discount to NAV? It contains many very good companies that are not going to go bust.

That is what I have been doing. I was buying throughout January and February, and into early March. My portfolio is now at an all-time high valuation as a result. So even in a fairly short period of time, buying during these dips makes sense.

I have eased off the buying now that 50% of the market loss has been regained. Volatility can be your friend.

Well done. I am completely unable to time things so I have given up trying, pretty much. I had a recent luckily timed purchase of Throgmorton somewhere near it's recent low but it's minor stuff. I think I am presently sitting around 3% or so down from a portfolio all time high. So I'm OK.

But this isn't about timing the market, it's about sensible pound-cost averaging over a period of time with an eye on the mid to long term performance, not the short term. Good investors welcome lower prices and discounts to NAV whereas poor investors anchor to the amount something has fallen, wish they had sold at the top and then feel like chucking the towel in at the bottom. We should all try and avoid the latter.

Indeed. After my previous quite recent Throgmorton purchase at what looked a bargain price, I just bought more at an even lower price. At today's price, even the typically low yield on Throgmorton looks OK.

[Dod101]

I should have trusted my instincts and sold but alas I still hold it. Now down to £12.73.

Dod

[Dod101]

Gave up on Smithson today at £1.27. Should have done it long before but I still came out with a 27% profit. As I said earlier I do not like the governance nor the very high management charges and I will not just sit and watch the profits ebbing away.

Dod

[simoan]

Gave up on Smithson today at £1.27. Should have done it long before but I still came out with a 27% profit. As I said earlier I do not like the governance nor the very high management charges and I will not just sit and watch the profits ebbing away.

Dod

This is remarkably short term thinking. You need to question the whole psychology of "I will not just sit and watch the profits ebbing away". I assume you only feel like this because it pays a very small or no dividend? Maybe if it was paying a 5% dividend you'd feel very differently, which makes no sense IMHO. A reduction in capital always matters, regardless of any income generated. You may well have just sold near near the bottom with the IT on a 11% discount! If you've ever read "The Art of Execution" (one of the great investing books IMHO) then this is a bona fide losing strategy. Although I'm not over the moon with some of the holdings, and never really have been (i.e. Domino's and Rightmove) I'd be more inclined to buy more than sell at such a discount, and may in fact do so myself.

All the best, Si

[monabri]

Gave up on Smithson today at £1.27. Should have done it long before but I still came out with a 27% profit. As I said earlier I do not like the governance nor the very high management charges and I will not just sit and watch the profits ebbing away.

Dod

This is remarkably short term thinking. You need to question the whole psychology of "I will not just sit and watch the profits ebbing away". I assume you only feel like this because it pays a very small or no dividend? Maybe if it was paying a 5% dividend you'd feel very differently, which makes no sense IMHO. A reduction in capital always matters, regardless of any income generated. You may well have just sold near near the bottom with the IT on a 11% discount! If you've ever read "The Art of Execution" (one of the great investing books IMHO) then this is a bona fide losing strategy. Although I'm not over the moon with some of the holdings, and never really have been (i.e. Domino's and Rightmove) I'd be more inclined to buy more than sell at such a discount, and may in fact do so myself.

All the best, Si

I did ( top up) last week.....I reckon that Smith is a better " stock picker " than I.

[Dod101]

Gave up on Smithson today at £1.27. Should have done it long before but I still came out with a 27% profit. As I said earlier I do not like the governance nor the very high management charges and I will not just sit and watch the profits ebbing away.

Dod

This is remarkably short term thinking. You need to question the whole psychology of "I will not just sit and watch the profits ebbing away". I assume you only feel like this because it pays a very small or no dividend? Maybe if it was paying a 5% dividend you'd feel very differently, which makes no sense IMHO. A reduction in capital always matters, regardless of any income generated. You may well have just sold near near the bottom with the IT on a 11% discount! If you've ever read "The Art of Execution" (one of the great investing books IMHO) then this is a bona fide losing strategy. Although I'm not over the moon with some of the holdings, and never really have been (i.e. Domino's and Rightmove) I'd be more inclined to buy more than sell at such a discount, and may in fact do so myself.

All the best, Si

Yes I have read the Art of Execution and understand very well what it is saying. Call it short term thinking but as I said earlier in the thread, I am rather prejudiced against Terry Smith anyway, what with the very high charges, and as I said, I do not much like the corporate governance either. I hold Scottish Mortgage and will continue to do so, for two reasons, one its charges are very low and secondly I took a lot out of it during its meteoric rise a couple of years ago. That is my only reason for buying out and out growth shares, and I made the mistake of not doing the same with Smithson.

Incidentally Smithson does not pay a dividend; Scottish Mortgage pays a very small one, partly from capital. I do not buy growth shares for the dividend though.


Dod

[simoan]

Gave up on Smithson today at £1.27. Should have done it long before but I still came out with a 27% profit. As I said earlier I do not like the governance nor the very high management charges and I will not just sit and watch the profits ebbing away.

Dod

This is remarkably short term thinking. You need to question the whole psychology of "I will not just sit and watch the profits ebbing away". I assume you only feel like this because it pays a very small or no dividend? Maybe if it was paying a 5% dividend you'd feel very differently, which makes no sense IMHO. A reduction in capital always matters, regardless of any income generated. You may well have just sold near near the bottom with the IT on a 11% discount! If you've ever read "The Art of Execution" (one of the great investing books IMHO) then this is a bona fide losing strategy. Although I'm not over the moon with some of the holdings, and never really have been (i.e. Domino's and Rightmove) I'd be more inclined to buy more than sell at such a discount, and may in fact do so myself.

All the best, Si

Yes I have read the Art of Execution and understand very well what it is saying. Call it short term thinking but as I said earlier in the thread, I am rather prejudiced against Terry Smith anyway, what with the very high charges, and as I said, I do not much like the corporate governance either.

Obviously, biases and prejudices are hard to overcome but generally are not helpful, and often harmful, for making good investment decisions. I'm not aware the corporate governance or charges of Smithson IT have changed adversely recently, so can't understand why that forms part of your reason for selling now.

I hold Scottish Mortgage and will continue to do so, for two reasons, one its charges are very low and secondly I took a lot out of it during its meteoric rise a couple of years ago. That is my only reason for buying out and out growth shares, and I made the mistake of not doing the same with Smithson.

Incidentally Smithson does not pay a dividend; Scottish Mortgage pays a very small one, partly from capital. I do not buy growth shares for the dividend though.

Dod

Again, you are displaying a bias because you have done well from Scottish Mortgage in the past. However, that doesn't mean it will do so well in the future, and I believe the long-term fund manager has retired recently, which is often not a positive sign for future performance. And in fact it has significantly underperformed Smithson in the past year.