New Star Investment Share Discussion Threads

[topvest] 11/4/2016 20:27

Think you will live to regret building a big stake in this. Alliance Trust is far better. This an orphan fund. Rubbish performance, no dividend, no interest and a controlled company. I'm sure we will get a £1 back, but when? Could be years off!

[coolen] 11/4/2016 11:39

Am I correct in thinking that new rules are coming into force requiring substantially more disclosure, including geographical and offshore trust beneficiaries, from anyone known to be a major shareholder in an investment trust?

May not help the share price, but might give an insight into this guy's thinking.

[rndm355] 11/4/2016 10:41

27% over 20 years is 1.2% compounded annually. Better than nothing, but we are talking about a horribly illiquid share here where minority owners have no power at all. I don't know if the discount fully compensates for that.

The underlying investments are not bad anymore as you suggest, Fundsmith is the second largest and that could do well if it sticks around in its current form for the long term. Apart from that there are a bunch of run of the mill funds. Lots of layers of fees to keep the City in business.

If you don't care about illiquidity and can hold forever then it is not a bad proposition but you might be holding for a very long time and while I do think you have a good chance of beating a FTSE tracker with that >1.2% tailwind, it's not guaranteed. Fundsmith has had a great run already and are the rest of them very likely to do so going forward?

[buttanc] 11/4/2016 10:14

Have bought another 25k at 73.11p, had to sell some ATST to fund them.

In response to the previous posts, and further explaining my reasons for investing:

Looking at a pessimistic scenario that it takes 20 years to close the discount, the admin expenses of NSI (circa 1% annually) would reduce NAV by 18%. You would then have have a NAV of 97p or 33% above your purchase price of 73p today. Apply a 5% discount for the cost of liquidation and you come out with a 27% gain purely related to the discount.

On top of this, your NAV gains are leveraged. So each year, your percent return will be increased by the discount (so in year one the discount is 63%, and if the underlying NAV rises 5%, that is a gain of 5.9p on your 73p or 8.1% NAV return).

You can play around with the assumptions, but even well beyond 20 years you make a handsome increase on the underlying return on the investments when the discount closes, and you benefit from free leverage throughout.

If you can hold indefinitely, the only foreseeable reason this will let you down is if the underlying investments perform significantly worse than alternative investments. This may happen, but I'm happy with their current investment mix.

Another investment of mine has some similar issues. SVM, is similar in having a poor past record and a large discount, but with revamped investments that are both quoted and liquid. It has an extra disadvantage of being very small, but is investing in smaller UK companies which I like as a sector. Again there is potential for the unwinding of the discount and in the meantime your NAV returns are leveraged.

Our differing views of the NSI investment case are really about whether to look at share price or NAV. For my long time horizon, NAV seems the better measure for my circumstances.

[rndm355] 10/4/2016 01:36

It would be more profitable to buy Mr D's life insurance policy (or someone of the same age and health.) Cos that's basically what you're speculating on here. The underlying investments aren't as bad as they were before but then the fees for Brompton make it an expensive funds of funds. I wouldn't consider it cheap unless it had a 50% discount to NAV.

[topvest] 09/4/2016 20:32

Yes, agreed if liquidated in a year. If its in 10 years then that 50% return doesn't look great. I bought mine for 64p in 2009. Dreadful return.

[buttanc] 09/4/2016 09:26

topvest

If you hold, I hope you'll have a pleasant surprise in time. My scenario is that at some time New Star will go into wind down. Let's assume it achieves a return of 95% of NAV (latest 118.83p). This is conservative as the vast majority of its investments are quoted and liquid. It costs 73p to buy today. So a new investment would make a 54% return if liquidated tomorrow.

From Trustnet, the NAV growth for the last five years is a disappointing 10.5%, reflecting the historic asset mix they have chosen. However, this has changed and I'm happy that the current investments have as good a chance as any of making decent returns in current markets.

So my "cracking" case is based on the current asset mix underpinned by a potential 54% boost if liquidated. Your post prompted me to look at the current investments in more detail and I like what I see, so will look to buy some more next week.

[topvest] 08/4/2016 18:10

I wouldn't agree that it's a cracking investment given zero yield and zero capital return. Nevertheless we will no doubt get a 30 per cent uplift if the discount goes. I will hold for that but certainly won't be buying any more.

[buttanc] 08/4/2016 13:33

This is indeed one of the strangest ITs on the market. It seems Duffield wants the market price low for his own reasons, and through his own holding and the low market volumes he can achieve this.

However for those with a long horizon he is unintentionally creating a great opportunity. I have bought into it slowly including another 8000 today.

It is a hopeless investment if you want liquidity or to sell on any foreseeable timetable. But if you're happy to buy and hold until it is in his or his successors interest to close the discount, then this is a cracking investment in my view. It is in my SIPP, and I hope to live long enough to wake up that morning when I can realise it at or near NAV.

[tiltonboy] 07/4/2016 20:42

It's run for his own benefit, not shareholders. He should put a buy-back in place and keep the discount at no more than 10%.

[jhan66] 07/4/2016 19:56

Harsh tiltonboy.
Thought provoking but very harsh

[tiltonboy] 07/4/2016 16:42

edwardt,

Unfortunately no catalyst for it to change.

Now, if Johnny D was to fall under the wheels of a bus, I think you might find the share price a few coppers better.

[edwardt] 07/4/2016 15:43

119p nav versus 72p share price - this one is a real first on me!

[edwardt] 24/3/2016 09:39

agree with all that apart from your use of the word 'my' in relation to the board, I am afraid it is his board - so much for independence and fiduciary duty by the other board members!

[jhan66] 26/2/2016 13:49

`During the period under review, the Company's shares continued to trade at a
significant discount to their NAV. Your Board has explored various ways of
reducing this discount but no satisfactory solution has been found. The
position is, however, kept under continual review by your directors.'

Hi John, How's MY Board doing these days? Still exploring & continuously reviewing?
I only ask because I notice Fundsmith which is a mighty 10% of the portfolio has now breached £2.40. That's 2.4x the starting price a handful of years ago. If NSI was 114.96 NAV & 36%+ discount at the start of the year I'm estimating we might be closing in on 40% now.
So listen, I have a bit of spare time. Let me know if you'd like some help on that continual review. I'm sure I can come up with one or two ideas to share out that excess.

[edwardt] 30/11/2015 13:19

I am 39, he is 76.

[tiltonboy] 25/9/2015 11:23

rndm35,

Cynically correct IMO. An annuity on the time horizon of Duffield!

[rndm355] 25/9/2015 11:17

Wow, a dividend! But very very small even versus the bid-offer spread.

"Your Directors have explored various possibilities with a view to reducing this discount but no satisfactory solution has yet been found. This position is, however, kept under continual review by the Board."

I can't believe they are still asking us to believe this.

The catalyst could still be many years away so it's right that the discount is extraordinary. I'd bet that no comeback will be attempted at this stage and that it's all about IHT and the fees to Brompton.

[topvest] 12/8/2015 11:23

To be honest I think this vehicle has a few purposes for Duffield. Firstly its helpful from a tax perspective and secondly it's used as a wealth preservation vehicle. Finally it generates some much needed fee income for Brompton Asset Management which is now starting to make a profit and manages £0.6bn - £1bn.

I was hopeful that he may use this trust for something else, such as listing Brompton, but I think that unlikely. Brompton Asset Management does seem to be making steady progress though with its Multi-Asset management approach. This vehicle could be a much better "shop window"! Duffield is probably now getting a bit old to list another asset management group, but you never know!

[coolen] 11/8/2015 21:28

"Double Bubble": memories of the "Splits" scandal, perhaps ?

I wonder if the "no fees" aspect could be influenced by tax in that moving what amounts to family cash from left to right hand as "fees" might trigger a net outflow to HMRC ?

I confess to not having had sight of their accounts.

[edwardt] 11/8/2015 17:14

taken from their accounts - the question I ask myself is what about indirectly? I hope there is no double bubble here....

The Group's investments include seven funds managed by Brompton or its
associates totalling GBP14,761,000. No investment management fees were payable
directly by the Company in respect of these investments.

[edwardt] 07/5/2015 17:02

as i am 38, i will sit it out!

[coolen] 15/4/2015 21:33

No apparent investor attraction. So could the resultant discount be an IHT wheeze, albeit in due course ?

[jhan66] 15/4/2015 16:51

Agreed Edwardt.

He's 75 in two months.

[edwardt] 15/4/2015 16:42

the discount here is now almost laughable - the trust owns open ended funds for god's sake. how old is Mr Duffield?