Herald Investment Share Discussion Threads

[quepassa] 19/7/2017 13:56

What an ASTONISHING 6 months Performance and a strong and buoyant outlook.

The fund increased its NAV by a whopping 14% in six months since December

In my opinion, when funds are flowing into Europe at such a great rate of knots, the massive discount to NAV of 22% looks grossly over-done and under-appreciated by the market.

This is a major bargain in my view. At a time when the discounts on so many trusts have narrowed dramatically, it appears to me that Herald is overdue for correction and it would not surprise me if the discount-to-NAV halves or more in very short order.


ALL IMO. DYOR.
QP

[bukko] 18/7/2017 08:55

The fund is structured to yield a small dividend which is sufficient to pay management fees.

[nimbo1] 13/7/2017 11:51

could be a breakout coming here. should probably be on a sub 10% discount anyway.

[axotyl] 23/6/2017 12:41

Thanks, QP, some research and reading to do....

I've found HL's website useful, and presentation succinct:

[quepassa] 23/6/2017 12:22

It's just the focus of their investment portfolio.

they are set up to specialise in smaller-cap tech stocks and generally the companies in that sector pay very limited dividends and are much more growth orientated rather than dividend-paying.



whereas a trust on the FTSE 100 would comprise companies like RDSB, Voda and Insurance companies which pay high dividends but are generally low growth.

you wouldn't expect a high divi from HRI but you would hope for big growth amongst their portfolio companies.

no dividends are pocketed by the trust. however, all investment trusts take management fees. that's how they make their money. that's why they do it. they are money managers who take a management fee for their services and expertise.

A 1% annual fee is not a particularly high one as some Trusts can charge 2%, and a limited few charge less than 1%. They take their ongoing fees and charges out of cash flow - whether from dividend monies the Trust receives or proceeds on sales of investments.

it doesn't really impact share price. it impacts more performance. A trust which makes a TOTAL ANNUAL RETURN (divi's plus growth in value of portfolio) of 5% and takes a management fee of 1% leaves investors with a return of 4%. Obviously a Trust which levies annual fees of 2% would leave investors with 3%.

Yes, of course, low fees and excellent performance are great but you need to find them and do your own research.

have a good look Herald's useful investor website which tells you all about them and how they operate. Under the rubric "Funds" , click on Investment Trust and also look at their Monthly Fact Sheets

hXXps://www.heralduk.com/

ALL IMO. DYOR.
QP

[axotyl] 23/6/2017 12:02

That's really useful, QP. (Just added the NAV/Price charts: )

So, next question, if you can bear it, is why the paltry HRI dividend?

I realise that dividends with smallcap companies can be negligible or with investment trusts are any dividends just pocketed by the trust?

Also, they take a management charge of 1% of net assets. How is that extracted, and does it affect the share price?

I'm not complaining. I just want to understand the background.

I guess I can get on the 'phone and ask them.

[quepassa] 23/6/2017 11:20

Look at this FASCINATING article from two days ago by highly regarded MONEY OBSERVER magazine.

Two things.

1. It gives the top ten Investment Trusts where discounts have narrowed over just six months. Some of these are amazing. For example StanLife Equity Income has gone from 10.3% discount to 2.3% discount.

2. More importantly perhaps , this same article specifically highlights HRI as particularly being in bargain territory and looking cheap, in Kyle Caldwell's fascinating and not-to-be-missed "Bargain Hunter" columns.


hXXp://www.moneyobserver.com/our-analysis/investment-trust-bargain-hunter-three-cheap-specialist-trusts-wide-discounts


ALL IMO. DYOR.
QP

[quepassa] 23/6/2017 11:07

This is another Trust I invested in less than two years ago.

JPMorgan Smaller European. -JESC

The discount narrowed from almost 20% to 10% now.

Read the following Edison Research and look at the graphs on JESC

hXXp://www.edisoninvestmentresearch.com/research/report/jpmorgan-european-smaller-cos4/full

Whilst the small-cap Tech sector is volatile, HRI are extremely well-spread by sector and by geography.

Their wide discount-to-NAV appears to me to be out of line with their NAV by far too wide a margin, especially at a time when major money flows are going into Europe where HRI have big exposure.

ALL IMO. DYOR.
QP

[quepassa] 23/6/2017 10:51

because the discount to NAV fluctuates.

in the case of HRI, the current discount-to-NAV is particularly wide by historic measures at the moment and has the possibility to narrow. many Investment Trust discounts-to-NAV have been narrowing of late.

I have bought some specialist trusts in the last 2 years with a 25% discount-to-NAV which have subsequently narrowed to 5%. This can be highly attractive when you get your timing right..

So you can get the underlying (hopefully increasing) performance of the Trust combined with the added kicker a narrowing discount to NAV.

ALL IMO. DYOR.
QP

[axotyl] 23/6/2017 10:23

Looking at previous performance, this looks a no-brainer.

QP, apologies for my ignorance, I can see there's a wide discount to NAV, but how does this affect the investor? There're negligible dividend(s)so we're looking at capital appreciation - why is discount (or premium)to NAV relevant?

HRI NAV/Price: -

[quepassa] 22/6/2017 16:14

Have taken good size.

Unusually wide discount-to-Nav.

Especially for such a relatively large and liquid fund of some £900million.


ALL IMO. DYOR.
QP

[amt] 24/3/2017 10:09

Strange how one of top performing investment trust is at a 19% discount when the average discount in sector has fallen. Anyway fabulous performance since 2008 and since Brexit stupendous.

[rambutan2] 13/10/2016 03:08

Agree. Had 284 holdings on Jan 1, reduced to 259 at Sept 30. So 25 gone, just under a 10% reduction.

[riskvsreward] 12/10/2016 19:10

It is definitely a good strategy if the trust can sell out from their large number of holdings the non-performing laggards and use the proceeds to buy back their own shares. This will surely enhance greatly the performance as the likelihood of those laggards to appreciate more than 25% which is what the buyback instantly returns is very low.

[rambutan2] 12/10/2016 18:05

Has bought back and cancelled 2.38m ords in 2016 up to close today ie approx 3% of shares it started year with. And all at 15-20%+ discount. Nice value add.

[riskvsreward] 23/9/2016 08:03

Good record, good value and I like the buyback which gets £10.5 by paying £8.16, instantly enhancing the value by about 30%.

The only thing I am not so fond of is it has too many holdings, about 260 shares in the portfolio, which maybe too cautious and shows lack of conviction. However as long as it delivers, who cares.

[tiltonboy] 23/9/2016 07:58

There has always been a wide discount on HRI, but this does seem anomalous, given the track record.

[amt] 23/9/2016 07:21

Why is it that Scottish Oriental trust has same net asset value but the shares are one pound higher. All the money from the ARM sale has to find its way into tech shares so perhaps give a boost to UK tech and help Herald increase its Net Asset value along the way. Discount over 20%

[luckymouse] 31/7/2016 21:36

LT breakout

[noiseboy] 04/5/2016 22:38

I noticed John Baron has sold out today, Not much happening here!

[amt] 30/3/2016 08:20

Massive discount and yet nav has done very well over the last few months. Seems to have been overlooked by the market

[wokingblade] 18/2/2016 17:59

HRI back to a very juicy discount on NAV, just bought in. I think Katie Potts knows what she is doing after seeing her at Mello in Derby. Mr Market just offered an interesting entry point. I'll take a steady 8% NAV growth from Katie and let the discount shrink to add some jam on top.

[amt] 08/5/2015 10:56

20% discount to net assets here. Seems very odd for such a good long term performer.

[hawks11] 08/2/2014 06:34

I just saw this and decided to add this piece in case anyone looks in. I do not hold any at present.
hxxp://citywire.co.uk/wealth-manager/a-dozen-investment-trust-picks-for-2014/a728348?ref=wealth-manager-shooting-gallery-list#i=5