Price 226-229p
NAV 260.07p 12th December 2024
12.5% Discount to Net Asset Value |
Indeed. Difficult not to smell a rat. |
One way to prop up the nav.. |
There is some colourful commentary in this report. Quite a contrast to most with mention of "Christmas in Valueland", "THE DARKSIDE" and "SURVIVE & THRIVE".
A decent enough read but this AO. (nice history) buy:
"We value the business in our central case at GBP1.5 billion and we were able to purchase our stake at a GBP446m valuation. "
Oooerr gavnar!
Still, nice to read something different to get a feel for what folk are doing.
All imo
DYOR |
Yes, it's paying off - FRAS seemingly the only retailer not getting hammered by rising utilities, rising wage costs, rising production & shipping & materials (no pun intended) costs.
Now what would impress me is if ARR took profits. |
Not so stupid now having that amount with fat Mike hey! |
ARR's always interested me in a "why pay the fees when you can just buy the few holdings" way, as well as for the frequent premium.
But has recently been on a discount, albeit likely ruined today by FRAS being down 9%. 26% of the IT at last HL count, which is jaw-dropping. BDEV 17%, Castelnau 16% (the rump of illiquid punts), EZJ 11%, RYA 8%, LLOY 6%, BWY 5%.
Just don't fancy it going into a consumer downturn, but give me a 20% discount & I'm in. |
I think they only put it on early September and wasn't much exposure initially, expect they were surprised how quick it moved in their favour. It certainly creates a lot of extra volatility to the daily/monthly NAV. It's probably worth somewhere around 20p of NAV currently and it will either expire worthless or be worth around 70p to NAV. It's been at a discount of around 10% recently which I think makes it a good buy, given that it has traded at a premium at points this year. |
That's really interesting, thanks @Molrey. I bet not many ARR holders know about their exposure to an interest rate hedge.
Is probably the one thing you can't easily replicate in your own portfolio! Otherwise, I've never seen the point of holding ARR when you could just buy the individual shares.
(HL doesn't include the interest rate hedge, which must be why they have the likes of FRAS so much higher). |
It was their interest rate hedge (14.7% of Portfolio at the end of October) It was originally around 1% of NAV and had gone up circa 15X by my calculations which has really propelled the NAV up over the last 2 months. Yesterday's interest rate decision must have reduced the value of that derivative holding considerably. The monthly factsheet has Frasers at 16.5% Short Sterling (14.7%) Castelnau Group (12.7%) Easyjet and Barratts both around 11%. So around 66% of the trust is across those 5 holdings. |
What spaffed the NAV yesterday?
This is such a strange beast. I see they put 17% of the fund into Castelnau Group, listed last month, Gary Channon's Phoenix Asset Management the investment manager to the co, & it needed an ARR shareholder vote.
That's not even the largest holding: there's 23% in Mike Ashley's FRAS. Also 15.5% EZJ, 9% RYA, 7% LLOY.
Ah - and whilst that's about it, that's because Castlenau holds the shares ARR previously held in DTY, Hornby, & Stanley Gibbons. |
Good bounce from £1.80 but a reminder in the IC that the top two holdings are a quarter of the fund - EZJ & SPD. Not sure I'd be betting the farm on those.
DTY would be much higher but for the dire performance.
RYA 4% of the fund too.
And for a fund that supposedly buys things at "..Less than half their intrinsic value", having 5.5% in GSK seems odd. I fail to see GSK doubling. Or the highly rated JDW. |
If the trust was wound up tomorrow you wouldn't receive the NAV, that's for sure. No way you'd receive current market prices for HRN, CPP, DTY, SPD, SGI, RQIH, RDW, VSVS so yes should trade at a discount |
Have to laugh - they've basically read my post(s).
I'd take issue with:
"The manager has a distinctive investment philosophy and process, which focuses on identifying great businesses at attractive prices".
Also that this is value investing - DTY, over-indebted and subject to two lots of regulatory review? SPD - Mike Ashley's plaything?
I'd expect a 10-15% discount to NAV, not the perma-premium it gets to trade at. |
 Investec sell 2/8/19Slump in performance threatens premium ratingPhoenix Asset Management Partners were appointed manager in January 2016. Since that time, the company has consistently traded on a premium rating and it has been able to increase the number of shares in issue from 10.4m to 64.9m, with the market cap rising from just £16m to £124m. The manager has a distinctive investment philosophy and process, which focuses on identifying great businesses at attractive prices, defined as half their intrinsic value at time of investment. The portfolio is concentrated and turnover is very low.The fee structure is novel. There is no management fee, but an annual performance fee (payable in shares) equivalent to one-third of the NAV total return outperformance of the FTSE All Share, subject to a high water mark and clawback. Due to the underperformance since the management change, no fees have been paid to the manager, and indeed, a significant improvement is required before any fees will be generated.Investec view: The Board and manager deserve credit for reinvigorating the fortunes of the company.However, a function of the philosophy and a highly concentrated portfolio is that the performance is likely to materially diverge from the benchmark, and investors must be comfortable with this risk profile. At the end of June, the three largest holdings were easyjet, Sports Direct and Dignity; these represented 28% of NAV but have been a material drag on recent returns.Since January 2016, the NAV total return is 24.4% vs. a benchmark total return of 44.3%; we note that these numbers include a material enhancement from the share issuance program, and obviously reflect no management fee.For longer-term performance, the manager highlights that the Phoenix UK Fund has generated a total return of 487% since launch in 1997 vs 195% for the FTSE All Share, equating to an annualised outperformance of 3.5%. We have included this track record on page 2. This highlights how the performance diverges from benchmark but notably the relative chart highlights that the long- term record is flattered by three exceptional years in 2000, 2002 and 2003, a period when the fund grew from £18m to £45m.Although we would expect a less hostile environment at some point, value investing remains a very lonely place at the moment. Against this backdrop, we struggle to reconcile the current premium rating, which we believe looks vulnerable. We initiate with a SELL recommendation. |
If HL's holdings list to be believed, ARR got 9% of the fund in SPD. For "Buffetology", they seem to invest a lot closer to Buffet's UK punt on Tesco!
Top 10, which is most of the fund:
Easyjet
SportsDirect
Dignity
Randall & Quilter
Lloyds
Bellway
Tesco
GSK
VSVS
Redrow
Seems to be quite a few bad performers in there, not least the top 3 which are 28% of the fund.
Same point as previously - why buy ARR at a premium when you could buy the holdings. |
Questor in DT recommends them today:
Looking at their website, they don't have a portfolio list. They have an up-to-date primer, which has a table showing comparison with All Share index and it's quite impressive: |
Merryn Somerset Webb recommends in FT this weekend. Anybody know what they invest in at the moment? |
Credit where its due, they've performed well (much as the market has). Still a premium mind, and still greatly preferable to just replicate the holdings. |
Tempted to call this the single most over-rated IT on the market, but realistically it's only Top 5.
Cannot understand who'd want to pay a premium (& an annual management charge of 2.58% according to HL, though I think that's wrong) for a Trust with so few holdings - just buy them yourself! If you believe Barratts, Bellway, Lloyds, Tesco, SPD, JDW, MRW, GSK, Vesuvius & Hornby are good buys, then buy them, don't buy ARR. That's 89% of the portfolio covered (inc 5% held in cash), and would give you a much better yield. Then just keep an eye on their Top 10 for changes, there's unlikely to be many.
Sports Direct, lol.. Tesco also highly dubious (the claim "Buffettology" - Buffett got out), & Lloyds is a long after the govnt sell down, not before IMO. Hornby I don't follow, Vesuvius I like, Glaxo is over-distributing and has become one of the "bond proxies" that won't be this high indefinitely. The housebuilders I like but not for a quarter of the portfolio. They're deep value but they can't run on forever. I keep hearing how we're not building enough houses but hear very little about how that was the case when the housebuilders were 90% lower. Sure, they won't get done by debt this time - IMO it'll be either input costs (labour, already in shortage, going to get much worse nearer to Brexit) or adverse legislation (eg forcing land with PP to be built on, not land-banked).
And all that, for an 8p premium? Strewth. NAV 161.7p, yours for 171p.
Edit - no, they really do charge 2.58% pa, and worse:
"The ratio is calculated excluding finance costs but including operating expenses charged to capital and applied to the average NAV of the year. Expenses of a type not expected to recur under normal circumstances are excluded from the calculation"
So potentially even higher in reality. About the only arguments for ARR are 1. You've no time to monitor your portfolio (though ARR claim very low churn); 2. You're investing tiny amounts, where the fixed commission charge on buying the Top 10 is outweighed by the single commission on buying ARR at a premium, but even that doesn't apply if you're a long-term holder: -2.58% pa will really eat into returns.
Edit - and I accept the argument that if you buy on a premium, but also get to sell at the same premium, then in some ways it's irrelevant. But it's not irrelevant to the portfolio yield, nor the risk that a premium becomes a discount when you come to sell.
To give an example of the effect of 2.58% charges (and they're at least that, more likely higher):
Assume everything grows at a very tidy and consistent 10% pa compound, 100k invested. Buying the shareholdings individually:
100k
110
121
...
£259k after 10 years.
Buying ARR, ignoring the premium:
100k
107
114
...
199k after 10 years
So a £60k difference, or 60% of the initial amount invested, just for a 2.58% charge. And that's after only 10 years. (Yes - I've ignored the extra commission costs, say £100 vs £10, with a change or two each year. I've ignored the effect of tax on the divis, and the cost/hassle of reinvesting where those holdings don't have a reinvestment scheme. But £60k!! Also, if you're putting the 100k into ARR at a premium, you're getting more in yield buying the holdings, which would cover some extra commissions to reinvest). |
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