Manchester & London MNL

[GJHarney]

Browsing the AIC site I noticed that Manchester & London was the 'normal' (i.e. non-specialist) IT with the largest discount to NAV (21.8%). Looking at it's reasonably concentrated holdings (mainly US and UK based international large caps) I found myself liking (and holding elsewhere) most of them. The ongoing charge is 0.88%, which is middling, so while I realise that this is a fairly small IT in terms of total assets, and its long-term performance is not great at all (but it has done ok in the past year), what gives here? If the current holdings are on the whole good ones then given the discount is this one worth a punt for that alone, or does it have a dark side that I should know about first?

[harryhoudini]

Browsing the AIC site I noticed that Manchester & London was the 'normal' (i.e. non-specialist) IT with the largest discount to NAV (21.8%). Looking at it's reasonably concentrated holdings (mainly US and UK based international large caps) I found myself liking (and holding elsewhere) most of them. The ongoing charge is 0.88%, which is middling, so while I realise that this is a fairly small IT in terms of total assets, and its long-term performance is not great at all (but it has done ok in the past year), what gives here? If the current holdings are on the whole good ones then given the discount is this one worth a punt for that alone, or does it have a dark side that I should know about first?

Hi GJ,

I saw this flagged in the current edition of IC so had a closer look.
It recently changed its investment policy to invest in Technology stocks and this has been the cause of recent improved policy.
However, dividends are a bit volatile due to their new policy: techs don't pay much in cash and the trusts own policy is: (from the annual accounts)
The Company's income is comprised of both (1) dividend income from investments (considered ordinary investment income to be paid as ordinary dividends) and
(2) income from trading activity which includes gains and losses on the trading of Shares and equity derivatives,
net of commissions, interest and other costs expensed (considered trading income to be paid as special dividends).
This makes the dividend inconsistent as it depends on the managers trading success- last year was a good one but its unlikely to be repeated consistently.
One of the managers owns c63% of the share.
I looked at the top 10 which includes Polar Capital and Scottish Mortgage Trust. All 3 trust hold Facebook, Amazon and Alphabet in their respective top 10, perhaps an undesirable concentration on these 3 stocks.
I like the concentrated portfolio- 27 stocks comprise 86% of the portfolio at 31 July 2016.
I invest mainly for Income- SIPP in Drawdown for natural yield.
The Trust does not, (possibly cannot ever,) meet my income criteria see above.
However, I am minded that last year I looked at Monks Investment Trust, after a manager change when the discount was >12% its discount has narrowed to <5% - I missed out because of my income criteria.
So depending on any insights from other comments its still in view for me
Lastly for a larger holding, 2500 shares, you get entered into a draw for Wimbledon tickets- The portfolio holds 2 debentures entitling them to tickets which they ballot their shareholders but excluding the 63% holding. There are 13 pairs of tickets in the ballot.

regards
hh

[Lootman]

I looked at the top 10 which includes Polar Capital and Scottish Mortgage Trust. All 3 trust hold Facebook, Amazon and Alphabet in their respective top 10, perhaps an undesirable concentration on these 3 stocks.
I like the concentrated portfolio- 27 stocks comprise 86% of the portfolio at 31 July 2016.

How many of those "27 stocks" are investment trusts like the two mentioned? If it's really becoming a fund of funds then I personally would not have much use for that. I can pick investment trusts myself.

Moreover, does the cited discount include the discounts on the underlying ITs? If not then the real discount might be even higher.

Either way, this thing has been on a high discount for a long, long time. Given the closed, quirky nature of MnL and it's sad history of poor performance, I can't see getting excited about it now. Especially if it is buying shares like Amazon, with no yield and trading at over 100 times 2017 earnings, in an attempt to chase performance.

[harryhoudini]

Hi Lootman
The list of holdings can be found here as at 31 July 2016http://www.manchesterandlondon.co.uk/attachments/120.pdf. Some are other investment vehicles but I do not think the size holdings justify a fund of funds tag. I don't know enough about the World Wide health trust nor the SME lending holding. (Sorry not able to copy and paste in a legible form.)

regards

hh

[GJHarney]

It is definitely not a fund of funds and it only holds two IT's (Scottish Mortgage & Polar Tech):

Top 10 Holdings
Amazon.com Inc 5.90%
Alphabet Inc A 5.27%
Heineken NV 4.27%
Facebook Inc Class A 4.09%
GlaxoSmithKline Plc 3.72%
Microsoft Corporation 3.63%
Polar Capital Technology 3.63%
Apple, Inc. 3.54%
Syngenta AG 3.36%
Scottish Mortgage IT 3.27%

Top 25 holdings are in the Dec 2016 factsheet: http://www.manchesterandlondon.co.uk/attachments/111.pdf

I'm more interested in growth rather than income, so a 20% discount to own those holdings (although I'm not familiar with Alphabet) seems on the face of it to be extremely attractive, but then there doesn't seem to be a stampede of people taking advantage?

[mc2fool]

although I'm not familiar with Alphabet

Alphabet is what you thought was Google. In brief, Google was a company with lots of subsidiaries and Alphabet is a restructuring of that such that Alphabet is the company with lots of subsidiaries, of which Google is one. Page & Brin still run the whole show. http://money.cnn.com/2015/10/02/technol ... -alphabet/

[harryhoudini]

It is definitely not a fund of funds and it only holds two IT's (Scottish Mortgage & Polar Tech):

Top 10 Holdings
Amazon.com Inc 5.90%
Alphabet Inc A 5.27%
Heineken NV 4.27%
Facebook Inc Class A 4.09%
GlaxoSmithKline Plc 3.72%
Microsoft Corporation 3.63%
Polar Capital Technology 3.63%
Apple, Inc. 3.54%
Syngenta AG 3.36%
Scottish Mortgage IT 3.27%

Top 25 holdings are in the Dec 2016 factsheet: http://www.manchesterandlondon.co.uk/attachments/111.pdf

I'm more interested in growth rather than income, so a 20% discount to own those holdings (although I'm not familiar with Alphabet) seems on the face of it to be extremely attractive, but then there doesn't seem to be a stampede of people taking advantage?

Hi Again,
Not wishing to be picky but Worldwide Health Trust at 3.2% of the portfolio is also an investment Trust- so that's 10.1% of the portfolio. SMT trades at or above net assets, Polar at around asset value and WWH at small discount. Still not a fund of fund.
Yes, 20+% is a big discount,the question is how the gap narrows- share price increase, or a fall in the asset value.
I am going to give it a long think as I am on holiday for a month now.

regards

hh

[dlp6666]

There was some recent forum chat about MNL here > http://moneyforums.citywire.co.uk/yaf_p ... 9_MNL.aspx

[GJHarney]

Well I invested, and look what happened: Discount closed, and ended up one of the best performing ITs in 2017. I actually think this may end up trading at a premium.

Yep, me too, I invested last Feb, today I am showing a 41.54% return in that 11 months, while the discount has narrowed to only -1.3% from nearly -22% when I went in, quite spectacular really