Lindsell Train Investment Share Discussion Threads

[giltedge1] 28/7/2023 08:54

Hello Steve, thanks for your comments, yes transfer of LT shares, which yield 10%, at a knock down price is not agreeable to me either. I presume board considers it in the best long term interests, most successful companies pay share options & bonuses, but not as visible as LT, as so few staff. I don't see the need, as staff well paid & I can see NT & ML staying around for a much longer time than they have disclosed, of course they have so much at stake.
Anyway yesterday was great, hope we can hold on to gains & retail clients stay on board & increase stake, interesting to see FGT NAV today, should be good. I am staying onboard at 12% of my SIPP, as I think underlying portfolio great, just need to push FUM back to £20B.

[steve3sandal] 27/7/2023 17:05

Thanks ge1 good news today and evidently the underlying holdings must be operating well. I’ve always liked this collection and I imagine they will largely be more valuable in 5 years time. My gripe is that us LTI shareholders are not getting anything like fair value for our holding in LTL and I had partly invested on the basis that we eventually would. We’ve debated the directors approach to the valuation which also continues to ignore the large cash reserves usually reflected in Enterprise Values but ignored in setting sales/transfer to insiders. Train and Lindsell can do what they want with their shareholding but in my view it is unfair that the LTI Board consider it acceptable to sell down LTL and at the same time reflect that LTI income will be disadvantaged. They aren’t obviously doing the best thing fir LTI shareholders imo. A few people hold LTL shares but they aren’t having to sell them to the managers to feed the Profit Share Scheme. Why is LTI obliged?
Whilst I have made great returns from holding LTI I’m getting to the point where there is no edge to studying the metrics here. I’m thinking I’d be better off studying elsewhere. I took LTI from a few back to 10% of my portfolio at around the current share price so I’ve the option to rotate elsewhere. I find the share price usually goes up ahead of the XD as the share price is pregnant with £51. Those people selling at £984 are almost selling at £934. With an NAV of £1056 which is probably higher today, that looks daft. GLA.

[giltedge1] 27/7/2023 14:58

Update on todays main movers;

RELX +5%
BURB +3%
EXP +3%
SAGE +2.5%
FGT +2%
DGE +1.5%
ULVR +0.7%
LSEG +0.5%

LTI unmoved surprisingly some sales at £1025.

What is your opinion Steve?

[giltedge1] 27/7/2023 09:15

More good news for portfolio after results, RELX up 4% good result, SDR good result as well unmoved as yet, ULVR consolidating after good result, buyback to come, LSEG up 1% moving up the chart, FGT almost at all time NAV high. Steve I would hang on can see £1100 by year end + Div.

[giltedge1] 25/7/2023 08:51

Nice move by ULVR this morning up 5%, one of LT main shares & mine as well. Most shares in Fund now going in right direction. I too not happy with transfer of LT shares to staff, & selling at in my opinion knocked down price, I think 10% yield. Not that new staff, add much value, could run LT portfolio at home on a spreadsheet, so few holdings.
I am hopeful we are going forward from here, as fund prices & FGT moving close to ATH.

[flyer61] 24/7/2023 11:29

See where you are coming from S3S. We ultimately end up with an FGT! and a dividend like it has. Will take a while but this seems to be the direction of travel.

[steve3sandal1] 24/7/2023 10:28

So Profit Share Scheme RNS which informs little. We have had to sell 29 shares to the managers. I guess that means Nick and Mike sold around 87. There were 17 still in Treasury. So perhaps the scheme has bought 143. That's less than I thought and our dilution this year nearer 0.5% than 1%. Still we can't replace the asset cash flow or dividend with anything quoted. My direction of travel is out but not at current prices. Mirrors retail AUM dwindling. Am losing the faith in LTI after 14 years and actively researching alternates.

[giltedge1] 21/7/2023 09:11

Good to see sales this morning at 1020/1030, not sure why has taken time, all portfolio shares doing well, HL good uplift (not held by this fund) adds to positive LT sentiment. Mentioned in past undervalued. Gresham House taken out at much higher rating, even though pretty poor performer in terms of returns. Hopefully we can move forward from here.

[giltedge1] 15/7/2023 14:37

Nice rises by LSEG, EXP, BURB on Friday, Market has misspriced BURB, shares of this quality very rare. Huge gross margin markup to the punters. Feel good share robbing the rich not the poor. Portfolio moving in right direction need to clear 1020 hurdle to move forward.

[giltedge1] 14/7/2023 07:46

Good to see FUM steady in June, better than I was expecting, NAV now 1050. All shares are steady & rising, good gains by Exp, Sage & Nintendo. Only laggard Paypal, should have been sold, when at ridiculous highs 2 year ago, (even I can see that). Not sure why US fund holds Ester Lauder, a poor cousin of L'Oreal (a fundsmith staple). I think that is a Madeline & James pick, so no shares for you both!. Also I questioned why Global fund holds LSEG & DGE good shares but a duplication from UK fund, doesn't make sense. Anyway apart from these minor complaints, hopefully can rise from here. Hoping price stays same, when xd.

[flyer61] 12/7/2023 14:29

Spec my take on HL's point was that it was to do with the investment process not the actual BOD/shareholder relationship. Like most people I don't want them to start loading up on 'junk' but to stay laser focussed on a small selection of 'quality' Companies. Ergo why I argued HL should butt out. If they wanted to explain how LTIT shareholders were being stiffed then I would be happy to listen.

Your point about money being withdrawn from the stockmarket I think is spot on. DB beneficiaries are getting fewer and fewer and many people are now using their DC schemes to live off....my guess some are taking way more than they should. Also people selling equities to pay down their mortgage debt as the winds change.

Yep sign me up for the LTIT investment team! I'll take some of that.

Stve3 like you it is now at best only fair value so i'm not buying but continue to hold.

[steve3sandal] 12/7/2023 13:52

Right I think I have been barking up the wrong tree. This Profit Share Scheme (PSS) might not be too bad if I have NOW got my head round it.
Lindsell Train Limited Jan 23 Accounts haven’t been published yet so some level of guesswork. The staff PSS operated last year 31/Jan/22 I presume at a level of 8% of Net Profit or on an earlier ad hoc basis. As a result of that I’m guessing certain staff bought 33 additional shares per the Accounts.
LTL Management Accounts to Jan 23 show an increase in Other Director and employee shareholdings by 125. These were sold from Treasury where there are now only 17 left.
From this current year the PSS will award at 15% of (post tax) net profit. All things being equal which they won’t be as FUM are down, I might expect the PSS to require certain staff to buy about twice as many shares, say 250.
Of this LTIT a will be required to sell a 25% of 250, and Messrs Lindsell and Train to sell 75% of 250. So LTIT would sell about 1% of its 6450 holding to employees at the prevailing 31 Jan YE directors valuation. Call it 63/64 shares at £12,000 around £750k which LTIT would presumably use to add to the listed holdings.
Importantly these PSS should not materially impact the net profit of LTL as these payments transfer future rewards from the founders and the 25% of fees Cap on salaries remains in place. For now. The Board could increase the Cap perhaps to 45% which would impact on the Dividend flow to LTIT. Increasing the Fees Salary cap to 45% would not impact their LTL share valuation as that already reflects the theoretical 45%.
If the cap stays at 25% then I need to move on, there are far more important things I need to to to get my own portfolio moving forwards instead of backwards.
I’ve always disagreed with the directors LTL valuation methodology and it seemed quite perverse to value a growing, high Gross Margin business on a modest PE, ignoring the Enterprise Value implied by the cash on the balance sheet, and a stonking dividend yield. However the valuation of holdings and strategies has reset and around £1000 LTIT is probably only fair value. I’m not selling or buying here. I’m not going to berate anyone for the PSS either!

[spectoacc] 12/7/2023 06:44

I got lost early on @steve :)

But the gist seems correct, and HL were right all along.

Ignoring the unfairness of it (you might just about accept a gift to Mr L & Mr T, albeit not for the past 5 years, but to new managers? What are they paid for? Who wouldn't want that gig?), I'd be more concerned going forwards about the amount of money leaving the market.

It's been going on since 2021 and is accelerating - end of ZIRP as @EI says, fiscal drag cutting incomes, savings being spent due to inflation, savings being spent on paying down (or just paying) the mortgage, lower pension contributions, Opportunity Cost of FRB's paying 6%.

Add to that, the L-T performance not being particularly attractive anymore.

Only positive - if the govnt succeeds in forcing pension funds to invest more in the UK. If some of that doesn't go into LTI, it should at least go into their holdings.

Otherwise, a decade and a half of tailwind (more money for the whole industry to manage, more in particular for L-T) is now a headwind, with the risk of further valuation falls.

[essentialinvestor] 11/7/2023 23:45

My DGE holding is looking limper than a vicar's handshake atm,
but I live in hope ;.

The combo of ZIRP and supportive FX are no longer. Cable nearing 1.30.

[steve3sandal] 11/7/2023 22:54

Another disappointing NAV update Down £100k to £17,5Bn, with the management company LTL falling in value again (small). That the NAV is up to £1053 suggests the holdings are up in value but net redemptions continue.

So looking at the elephant in the room and doing back of the envelope calculations……. If Post Tax Profits are £55m next year, possibly won’t be this high if redemptions exceed any uplift in holdings valuation, the aspiring management get 15% of this in equity. That’s c£7.5M. I’m not an accountant but guessing 1/shareholders get 85% of PTP as dividend to retain IT status….assuming the NAV doesn’t fall precipitously. And 2/ that the equity transfer does not impact the P&L, Lindsell and Train will gift 75% of £7.5m to James’s and Maddie et al.

Apparently we meekly gift 25% to subject to AGM voting which won’t make any difference so we gift LTL shares worth £1.875m. Our holding of LTL is valued by directors at £80m and is 40% of £200m @ £1000 p/share. So we’re gifting about 2% of our equity to them pa assuming the business performance stands still. That’s not huge and not a huge knock to the dividend of LTI which largely depends on the LTL dividend. But, but, but there are absolutely no performance criteria so the managers can achieve nothing and still be handsomely rewarded. This is wrong and unfair. Any more enlightened contributions gratefully received before I scold the Board.

[giltedge1] 20/6/2023 11:42

Michael Lindsell back buying helps sentiment.

[essentialinvestor] 16/6/2023 08:11

ULVR payout ratio is too high imho, however agree they look reasonably placed.

Unilever may face criticism from certain quarters for ..brands with purpose etc,
but those individuals might take a look at KHC and their dismal recent performance -
arguably a failure to adequately innovate and reposition towards higher growth categories.

[spectoacc] 16/6/2023 06:45

@giltedge1 - I'm not in Buffett either :) He's so large that his pool of investments is very small, no great surprise he's invested in Apple.

Think I can be moderately confident ULVR, LSEG, RELX are no Apple. But fair point - the salience heuristic, isn't impossible eg ULVR becomes a trillion pound co eventually. Logically, it will given enough years.

[giltedge1] 15/6/2023 20:48

@specto Buffett has 40% of his funds in Apple a 3 Trillion Co. Makes Ulvr, Dge, Lseg look like a small cap. What future for Buffett funds?.

[giltedge1] 15/6/2023 14:45

Main holdings all up today ULVR, LSEG, RELX but sentiment against at moment, need FUM to push upwards, & then will rise, small free float, so can have a swift rise if all stocks firing. Am in too deep to add, average 1050, had div last Yr so slightly down. Last trade a few years ago, sold at nearly 1400, so not impossible to make a good return. Keeping the faith, as an aside a NT share, BARR looks a great buy at £4.87.

[spectoacc] 15/6/2023 06:35

I've no FGT either :)

Re 10 years - raises an interesting point. Will be fluffing my stats, but saw an article listing LTI as one of the best performing ITs over I think 20 years (not sure to what date), returning something like 17x your money.

What's not to like? Well - knowing Mr Train will change very little in the portfolio - what chance another 17x? Or say 10x:

LSEG, £48bn
DGE, £75bn
ULVR, £100bn
RELX, £49bn


I know compounding is a powerful force, and never say never, but can you see LSEG at half a trillion, DGE at £750bn, ULVR at a trillion, RELX at half a trillion? I just can't.

Elephants don't gallop. Which doesn't mean they're not still decent investments, but wouldn't you rather be at the single-digit p/e small/mid cap end? OK perhaps not just yet, but when the end of ZIRP crash has played out.

[topvest] 14/6/2023 21:47

Well the outlook is a tad more challenging. I agree that FGT is a better play in the short-term and I now have about x6 the holding in FGT versus LIT. I only have 1/15th of my original holding after having 6 bagged on this overall. Could have done better, but its been a good holding since 2009. Think I will keep my small holding for now. The trouble with single style investment managers is that when they go through a sticky patch and lose momentum its not going to turn around particularly quickly. I'm inclined to agree that the "glory days" are over for Nick Train unless he stays on for another decade or so!

[spectoacc] 14/6/2023 13:38

@giltedge1 - I have done, but taken a slight loss due to the stamp duty.

Good luck holders - I still rate (most) of the holdings, but have upped the size of the discount I need before I get back in.

IMO the Train/LTI glory days are behind them, albeit you'll never lose your shirt. Maybe someone once said the same about Buffett, but he's the exception that proves the rule (& it's Charlie Munger I'm the fan of, Buffett without the PR).

[giltedge1] 14/6/2023 10:35

Just to update stats, P&L £55M after tax latest LT Accounts YE 31/01/2023 at end of yesterdays results.
FGT 5 Yr 26% 10Yr 140% May 2023 fact sheet.
Man U takeover going through, small holding in Global Fund, adds to sentiment strategy correct. Most major holdings now steady or rising.
@specto can sell out if negative as you bought a few days ago @998, quick profit.