Terry Smith explains..........

[ADrunkenMarcus]

ADrunkenMarcus,

Perhaps some overlap in what we look for. You shared four holdings and I purchased two today. Reckitt Benckiser and Kone. I wouldn't have looked into them if it wasn't for your note. So thanks for that.

I wish you luck with both holdings. I was glad to top up Kone this month after first buying in April 2017. I got it slightly cheaper this time and lowered my average cost. I do have a few lesser quality holdings, as you might notice from last year's portfolio review: viewtopic.php?f=56&t=5335 I'll do an update shortly for the year just passed.

Best wishes

Mark.

[Pendrainllwyn]

Thank you Mark. More homework! Will take a look.

I used to hold Renishaw but sold after a strong run made it fall a long way down my rankings. Haven't held the others.

Pendrainllwyn

[ADrunkenMarcus]

I used to hold Renishaw but sold after a strong run made it fall a long way down my rankings.

I like Renishaw. I got it in 2011 at a 4.5% dividend yield. At its recent peak, the share price was up 565% and I've had a third of my original capital back in dividends. The compound annual growth rate then stood around 32%. It does look much more expensive now, though.

Best wishes

Mark.

[Pendrainllwyn]

Mark, thanks again for sharing your portfolio. You have invested in some quality companies - a consistent high ROE is a recurring theme. I can see you have done very well on a number of these investments and at current prices some don't appear (to me at least) to offer an attractive entry price. I like Victrex at these levels but I hold Croda International in the same sector and I am very happy with Croda. There are a few others that look interesting so will give those some more thought.

After my purchase of Kone and Reckitt Benckiser I need to re-build my cash position so I am in no hurry. Alternatively, I could sell some existing positions. I am torn between my preference for holding for the long-term and keeping, indeed reducing, the number of positions I have. As I have gained experience and confidence I see the benefit in being more concentrated. I should acknowledge the influence Dod's stamp collecting comments have had.

You may have noticed that Kone issued their Q1 results this week: http://www.kone.com/en/Images/KONE_Q1_2 ... -72181.pdf Net Income down, as Kone expected, but sales and orders up 10.6% and 6.8% respectively on a same currency basis. Happy with the position.

Pendrainllwyn

[ADrunkenMarcus]

Mark, thanks again for sharing your portfolio. You have invested in some quality companies - a consistent high ROE is a recurring theme. I can see you have done very well on a number of these investments and at current prices some don't appear (to me at least) to offer an attractive entry price.

I think that's certainly true and many have benefited (from my perspective) from a higher rating as well as continuing cashflow and dividend growth. I got Diploma on a 3.4% dividend yield in 2012 and it's now closer to 2.1% despite double-digit CAGR dividend growth; Reckitt Benckiser was on a 3.6% dividend yield in 2011 when I purchased and, even now, it's only down to 2.9%; Spirax-Sarco Engineering had a 5.7% dividend yield in 2015, including the special, or 2.1% without and now down to 1.6% despite cumulative dividend growth of 27%; much of Rotork was acquired on a 3.4% dividend yield and it's now down to 1.6% despite modest dividend growth; Victrex was yielding 3.2% when I added in April 2016 but it's now down to 2% despite 15% dividend growth. From a long term perspective, I wish to buy and hold and I will gain more from the quality of the companies and their underlying growth, but the prices are not what they were in 2015-16.

I appreciate the update on Kone, Pendrainllwyn. It seems to have been taken well as it has risen several percent in the last few days and the strengthening of the Euro relative to the Pound (or the weakening of the Pound, whichever way it was!) transformed a modest capital loss for me into a gain. I was glad to top up Kone this April at a lower price than my first tranche of shares bought a year previously. Kone seems reasonable value to me.

I agree with you on concentration. How about a nightclub policy? 'One in, one out'? I currently have 19 shares in my dividend growth portfolio but the top two account for 33% and the top ten (80%) make up a huge proportion so in that sense I am much more concentrated than the average holding size might imply.

Best wishes

Mark.

[Pendrainllwyn]

A nightclub policy! Nightclubbing is not exactly my thing but interestingly that's exactly what I have been doing for the past 6 months. I have made myself sell a stock (sometimes two) if I want to add a new name. I now have a name for this approach!

I do find it progressively harder each time I need to cull. Must persist.

Appreciate your input.

Best wishes,
Pendrainllwyn

[xeny]

The " Terry Smith show" was over an hour long. I sat through it.

Here's a short 15 minute video that I think is worth a viewing if you are considering an investment in TS.

https://youtu.be/IFQxHCL9CHs

given the video's presenter doesn't even understand the t class eligibility structure (it's at least £1000 initially, minimum of £250 subsequently for lump sums or at least £100/month, not both) my faith in his analysis is limited.

[Dod101]

[
I appreciate the update on Kone, Pendrainllwyn. It seems to have been taken well as it has risen several percent in the last few days and the strengthening of the Euro relative to the Pound (or the weakening of the Pound, whichever way it was!) transformed a modest capital loss for me into a gain. I was glad to top up Kone this April at a lower price than my first tranche of shares bought a year previously. Kone seems reasonable value to me.

I note the enthusiasm for Kone, presumably as a result of the holding by Fundsmith. At least as good a lift manufacturer is Schindler and with a ROE (not sure if that would be the same as Capital Employed) of 29% not to be sniffed at. I was in Hong Kong recently and Schindler is everywhere and I see that like Kone, they are also well represented in Mainland China. Schindler is still substantially owned by the founding families after 140 years I think it is (71%) and I like that. They also account in Swiss Francs rather than what is shown in the Kone report as MEUR (by which I assume they mean the Euro, although I do not what the M is for)

No idea of yield for anyone interested in dividends.

Dod

[OLTB]

At least as good a lift manufacturer is Schindler

Schindler's Lifts?

Cheers, OLTB.

[Dod101]

Indeed Schindler's Lifts, not Schindler's List. Of course like Kone, they do not just lifts/elevators, but escalators and moving pavements or whatever they are called, common in airports. Apart from Schindler and Kone, the other biggie is Otis and there are a number of Japanese ones.

Dod

[PinkDalek]

... No idea of yield for anyone interested in dividends. ....

Kone's dividend yield on the Class B shares was 3.76% (prior to withholding tax) last April when ADrunkenMarcus was discussing them here:

viewtopic.php?p=42888#p42888

As per over there the recent annual dividend was increased by 6.45% and the current yield appears to be 3.96%:

http://www.hl.co.uk/shares/shares-searc ... -npv-ord-b

[Pendrainllwyn]

MEUR - Million Euro

[Itsallaguess]

Apart from Schindler and Kone, the other biggie is Otis and there are a number of Japanese ones.

Shouldn't we be a little wary regarding companies in this type of work?

I mean, the market isn't exactly cyclical, but it's definitely got it's ups and downs....

Itsallaguess

[Dod101]

Apart from Schindler and Kone, the other biggie is Otis and there are a number of Japanese ones.

Shouldn't we be a little wary regarding companies in this type of work?

I mean, the market isn't exactly cyclical, but it's definitely got it's ups and downs....

Itsallaguess

Ah So, as the Japanese say

Dod

[flyer61]

Itsallaguess

I am considering starting a position in 3M (MMM). Anybody any thoughts on this one? My watchlist with 'Seeking Alpha' is very useful for keeping an eye on TS's picks. The aim is to buy when they are down and 3M has certainly come off it's recent highs. Recent guidance is lower from the Company. The Company strikes me as having everything Buffett etc love. Broken up I wonder if the sum of the parts is greater than the present MV.

Whilst we can see TS's list of biggest 10 does anybody have a list of the rest?

[ian56]

Itsallaguess

I am considering starting a position in 3M (MMM). Anybody any thoughts on this one? My watchlist with 'Seeking Alpha' is very useful for keeping an eye on TS's picks. The aim is to buy when they are down and 3M has certainly come off it's recent highs. Recent guidance is lower from the Company. The Company strikes me as having everything Buffett etc love. Broken up I wonder if the sum of the parts is greater than the present MV.

Whilst we can see TS's list of biggest 10 does anybody have a list of the rest?

Not sure if this is by any means completely current or correct but what I have gleaned from going through the short form reports at https://www.fundsmith.co.uk/documents where acquisitions and disposals are detailed:

3M (MMM), Amadeus (AMS), Automatic Data Processing (ADP), Becton Dickinson (BDX), Colgate Palmolive (CL), Diageo (DGE), Dr Pepper (DPS), Estee Lauder (EL), Facebook (FB), Idexx (IDXX), InterContinental Hotels (IHG), Intuit (INTU), Johnson & Johnson (JNJ), Kone (KNEBV), L'Oreal (OR), Microsoft (MSFT), Nestle (NESN), Novo-Nordisk (NVO), Paypal (PYPL), Philip Morris (PM), Reckitt Benckiser (RB.), Sage (SGE), Stryker (SYK), Waters (WAT).

E&OE!!

There must be at least four others currently if the above is even correct.

[flyer61]

Many thanks ian56, I will do a bit of digging to see if I can work out the other 4. I think Pepsico might be one of them.

[ADrunkenMarcus]

I note the enthusiasm for Kone, presumably as a result of the holding by Fundsmith. At least as good a lift manufacturer is Schindler and with a ROE (not sure if that would be the same as Capital Employed) of 29% not to be sniffed at. I was in Hong Kong recently and Schindler is everywhere and I see that like Kone, they are also well represented in Mainland China.

I'd need to check but KONE's return on capital employed has been in the 30s and 40s (%) and I think their balance sheet was stronger, so if Schindler has debt then the 29% return on equity would be lower in terms of return on capital employed (including debt). I think KONE is number 1 in China but Schindler is likely not far behind.

Best wishes

Mark.

[Dod101]

That is interesting Mark. I lived in Hong Kong for a long while and Schindler was the only one there and nothing has changed so I guess I am a bit biased by familiarity. I expect if Fundsmith looked at (and bought) Kone they would have looked at the whole sector. The fact that Schindler accounts in Swiss Francs usually puts a damper on their foreign earnings but at the same time, as a sterling user, it is very attractive. I have been looking at Nestle for the same reason.

Dod

[langley59]

3M (MMM), Amadeus (AMS), Automatic Data Processing (ADP), Becton Dickinson (BDX), Colgate Palmolive (CL), Diageo (DGE), Dr Pepper (DPS), Estee Lauder (EL), Facebook (FB), Idexx (IDXX), InterContinental Hotels (IHG), Intuit (INTU), Johnson & Johnson (JNJ), Kone (KNEBV), L'Oreal (OR), Microsoft (MSFT), Nestle (NESN), Novo-Nordisk (NVO), Paypal (PYPL), Philip Morris (PM), Reckitt Benckiser (RB.), Sage (SGE), Stryker (SYK), Waters (WAT).

E&OE!!

There must be at least four others currently if the above is even correct.

I believe there is also the following:
Unilever
Visa
Pepsico
Intertek