Edinburgh Investment Share Discussion Threads

[escapetohome] 11/8/2019 15:04

BATS debt not falling ?

Investing in the new business - Vape - , that it is obligated to do to adapt and survive.

[escapetohome] 11/8/2019 14:37

You don’t need McDonald’s to sell hamburgers , you can make them yourself and don’t even need to buy them “online”


But McDonald’s are doing rather well don’t you think all the same!!!

Quality brand, consumers like the product!!!!!

[essentialinvestor] 11/8/2019 12:29

You don't need to be a tobacco company to sell either vape products or
liquids.

There are hundreds, and I mean hundreds of sellers online - with the internet
allowing rapid distribution.

Tobacco companies monopoly has been broken in new generation products.


Why is BATS net debt not falling rapidly if the outlook is so wonderful...?.

[escapetohome] 11/8/2019 09:01

Vape and canny is the new tobacco . Basic business rule they adapt or die.

Vape and canny is the ‘new’ tobacco, tobacco companies have adapted accordingly. There is a future and a bright one.

[contrarian joe] 09/8/2019 20:43

Latest nav excluding undistributed current year revenue with debt at fair value,(the more conservative nav) 628.17,discount 15%,average discount 9.4% over last 12 months, z score -3.42.

[harewood1] 09/8/2019 16:21

Andyj, the bear raid isn't on EDIN, it's on the stocks which Woodford and Barnett jointly hold; these are the best in Woodford's portfolio and the ones he can raise cash on. These aren't the dogs in his portfolio. Woodford is a forced seller on a massive scale - a golden opportunity for the bear raiders like Muddy Waters to make some cash by making a bad situation worse. Hence Burford. Have a look at the trade volumes for the underliers - showers of red but coinciding with the first rumours about the Woodford.

[essentialinvestor] 09/8/2019 15:43

So to give a practical example of the above - Mike sold the holding in Relx
(heavy international exposure) and increased holdings in domestic exposed businesses. This has been an intentional strategy.

Relx is Up about 30% since.

[essentialinvestor] 09/8/2019 15:36

If you look at a stock like Next plc which EDIN hold (I sold some today as it happens)
that's arguably a quality longer term hold with large UK domestic exposure.
However, if we are heading for recession it may be hit hard,
there is a pronounced cyclical element to their business.

Now if we were say 3/4 years in to this expansionary business cycle I
would see Mike's point of view more readily - that is, Brexit uncertainty has
created valuation anomalies which will close following leaving the EU.
But we are 10 years in to this cycle, it's late on any post WW11 data.

[spectoacc] 09/8/2019 15:14

Ha ha we'd best not get started on Woody. Relevant to Barnett mind!

Was searching a while ago for something on FT site re a Woodford stock & came across a post I'd made in 2016 saying that shenanigans with Stobart were enough for me. Good point on RR too. Likewise, Northwest Bio (basically got conned), CIR, RM2.. Every manager has one or two - look how many held Carillion or Convivality - but Neil's were racking up.

Is difficult when someone has had big success by being unpopular for several years - twice - by sticking by their guns, not to at first think "He'll come good". But no more than 2 minutes of research would have shown he wasn't remotely doing what he claimed. And still claims, amazingly.

Sure, "value will out", "the UK is cheap", "great value opportunity". Just that a WEIF top 10 of things like Autolus, Industrial Heat, Proton Partners, Benevelent AI, and - now - Burford, wasn't remotely playing it.

Still a long way for it to run IMO - BUR was unexpected, but revaluation of the unicorns is coming. Woody selling down his WPCT stake without telling anyone was a good one too.

HL have a lot to answer for, though I fear they never will.

[essentialinvestor] 09/8/2019 15:01

Appreciate the view.

SpecA, still can't believe what's happened to Woodford, I saw some of the warning
signs in advance (way back to his holding in RR, where he failed to spot deterioration in free cash flow metrics) but it still seems surreal.
Not shocked by much these days, but I am by that.

[spectoacc] 09/8/2019 14:34

Not comfortable with tobacco weighting. Not comfortable with oil weighting. Not comfortable with Mark Barnett. Not comfortable with long tail of "Woodford stocks". Not comfortable with amount of non-£ exposure (or rather, how badly it's performed in spite of having that tailwind). But - in for the discount & the yield. A case of holding nose & maybe hoping for a bounce on a manager change.

Pluses - low costs, big discount, minor gearing.

[essentialinvestor] 09/8/2019 14:31

SpecA, you just beat me to it as I was going to ask for your view.

If we are facing imminent recession with a big hit to cyclical earnings
then you can make a case for tobacco stocks to (relatively) outperform on say
a 1/2 year basis - however their medium term outlook looks murky, at best.

[spectoacc] 09/8/2019 14:10

Good point @EI re tobacco.

Mark Barnett seems to specialise not so much in unloved areas of the market, as high-risk dying ones. What future tobacco? What future oil majors? Just surprised to see he doesn't hold the large REITs too.

[andyj] 09/8/2019 13:35

I do not see a bear raid, yet anyway. I do see a steady evaporation of trust that this will recover anytime soon. For those of us who plan to hold for the long term it is worth bearing in mind that the share price is now below the price it was in 1998. With plenty of ITs that have risen exponentially since then, the question is why invest in a failing trust?

[harewood1] 09/8/2019 12:30

Agree - I've held big discount trusts in the past but not with liquid assets and income this high. Over the long term, IT Boards try to return the discount to the 'norm'. This is a very old investment trust with a much lower level discount. Post Brexit plus 12 months is about when we might begin to see the dust settle. Difficult to judge anything in the middle of a bear raid though.

[essentialinvestor] 09/8/2019 12:15

IMB + Altria - they also hold.

Investment Trusts often sell on discounts to NAV.
I hold IVI, which sells on about a 17% NAV discount.
IVI is a smaller trust with a circa 9% UK utilities exposure,
so there is arguably a good reason for the IVI wide discount.

When EDIN was enjoying it's Woodford glory days (that's seems such
a strange sentence now, but still true) it sold above NAV at one point, from memory.

[harewood1] 09/8/2019 12:10

Essential investor, interested in your point about tobacco being 13%. BAT is only 6.25% according to Hargreaves. Which is the other tobacco stock? Top holdings - around the 3-7% range are BP, BAT, Legal and General,Burford, Shell, Imperial, Hiscox and Tesco. Interesting to see a real bear raid of this scale going on though. It should be made illegal - the FSA needs to take a hand. EDIN has been at a premium to NAV within the last few years - it is now at 14.7% discount. Raiders make their cash from the rebound so that will be interesting.

[essentialinvestor] 09/8/2019 11:28

Tobacco is a cornerstone of the fund at circa 13%.

Look at the last BATS update: £50 billion in debt allowing for
lease liabilities, around £46 billion without.

On tobacco Mark has commented along the lines of ...the sector looks
like year 2000 valuation metrics..

Except is doesn't - BATS had not gorged on debt back then.
For years they bought back shares reducing their share count,
now that's out of the question because of debt.

19 years ago tobacco companies controlled distribution, the internet
has transformed and broken that dominance in advanced economies.

And more importantly, the sector is being rapidly disrupted by vape devices.

There are hundreds of generic vape devices and nicotine liquids available
On Amazon from non tobacco companies.

Looking in the rear view mirror is not providing a clear view of the road ahead
in this case.

[ec2] 09/8/2019 11:12

Situation not helped by the fact that Barnett also managers three other uk income funds that contain very similar holdings to EDIN. As holders of these funds lose faith and sell out, the positions in these funds can need to be liquidated to raise cash causing a negative impact on the NAV of EDIN. The EDIN discount further increases as investors exit in anticipation of these funds selling assets.

[harewood1] 09/8/2019 10:58

Good points, SpectoAcc, but a couple of caveats. I agree EDIN is a core holding tracker type fund but it has the huge advantage of a big discount (over 11%) and over 4.75 dividend. The trackers aren't paying as much - in fact, there are no tracker investment trusts, now are there?. If the pound rallies following a Brexit deal, I agree £ for $ UK stocks will look less attractive to foreign buyers, but equally, this might be more than offset by the rise in the overall UK market as the ongoing uncertainty fades. It is a long term hold but Barnett does have a strategy and I think on a 2-5 year horizon it might pay off.

[spectoacc] 09/8/2019 09:07

Back in as of today, but quite a few bear points on EDIN:

- For a fund very heavily benefiting from a weak £ (Top 10 featuring BP, BATS, RDSA, Altria, IMB), it's done absolutely appallingly over the past 3 years. What happens if/when a last-minute Brexit deal & a £ rally? Is £ nearer the bottom or the top?

- The tail of EDIN is poor - Woody-style. To give a flavour: Amigo, Eddie Stobart, Redde, IPO, ZEG, RUS, VSL, FCH, HONY, TCG (!!), CIR. They're hidden within EDIN since probably the total of sh*t stocks is only say 5%, but Barnett's picked them all the same. Many will have started out larger.

- Oil and gas exposure. What's the future for BP/Shell? Dunno, but I hold neither of them personally. Oil the next retail? It's 12% of the fund.

- Charges at 0.55% are good - but still half a percent more than a tracker. Portfolio looks like tracker ex miners/banks. Would you pay for Barnett's stock-picking skills, or should he be paying you? Performance suggests the latter.

- Vaguely value, but not really UK value.

[harewood1] 09/8/2019 08:18

This is the Muddy Waters Hedge fund bear attack on Burford following Woodford needing to offload so many of his good, liquid shares which are also ones Barnett holds. Burford has posted a response to Muddy Waters negative note and the share price rose 25%. I bought more EDIN yesterday - there is a lot about the attack online in the Telegraph and investment journals. Burford management invested several million in their own shares - interesting to see if they sue.

[steve3sandal] 09/8/2019 08:17

I’ve only recently invested here for contrarian reasons. I’m aware the value style is supposedly employed here and that value generally is out of fashion. I’m fine with that for part of my portfolio, eg Temple Bar holder. I’m hoping for and expecting change, something that the Board imply in the AA’s. I’d take simple market performance and the discount closing from Board (strategic), Manager, Mandate/Style changes. IMO the BUR thing increases this pressure on the Board despite the Invesco defence yesterday.

The average daily volume is c200,000. Yesterday EDIN bought back another 500,000 shares. They’ve nearly bought back 1.5% of the shares in the past few weeks and it’s accelerating. It hasn’t stopped the discount widening yet but hopefully they are mopping up sellers.

[andyj] 09/8/2019 06:05

In fact we can see the Woodford effect on the price. In the October to January the price fell in tune with the market, briefly breaching 6 gbp. It then recovered some of the fall, rising by around 10% from the low. Then the Woodford scandal broke and in the May correction it quickly returned below 6gbp. As we know markets then recovered throughout June and July, but Edin has gone the other way, continuing to make new lows.A very worrying sign IMO and one the board must recognise.

[andyj] 09/8/2019 05:54

I notice that PLI has also been falling when the market rises recently. I cannot find any holding in BUR there and am beginning to wonder if a run will develop on Mark Barnett. The buybacks are seemingly steadying the price, but they are masking a lengthening list of poor investment decisions.