Lindsell Train Investment Share Discussion Threads

[spectoacc] 20/6/2022 20:12

Wish I'd found somewhere with borrow! Mind you, the first short would have taken nerve, it kept going up first.

(FGT - don't think HL account for divis, so in fairness it's up say 2% pa compound over 5 years over & above the +2% HL state.)

Must be an element of opportunity cost with the Train picks - RELX, DGE, EXPN etc all good co's, but some big fall elsewhere on both growth & value. Not in it, but something like PSN is either an unexpected value trap or outright cheap, & is one of many. Not convinced the L-T stocks are there yet.

[topvest] 20/6/2022 20:05

Yes, fair point, although the OC are only about 0.6% so if you can buy FGT on a discount its probably worth it. I never really intended to sell most of these, as I like Nick Train's approach. I just think he's facing inevitable redemptions.
Wish I had sold more at £17!

[spectoacc] 20/6/2022 10:23

Yup - a premium on the way up due to the success attracting more money making L-T Ltd increasingly valuable. And the reverse on the way down. LTI really should be on a discount already IMO.

FGT now up 2% over 5 years, so not quite down over every time period going back half a decade :)

RELX, DGE, Mondelez, LSEG, ULVR, BRBY, SDR, SGE, EXPN, Remy - none going bust, all could do well. But have they given back enough of their bubble valuations? P/Es still look on the high side to me, or at least not yet "cheap". I want cheap, after the bursting of a bubble.

Other than the difficulty of divi withholding taxes on Mondelez (easy to resolve) & Remy (not sure), why not buy the holdings and save the LTI fee. Those 10 are c.83% of FGT, & been a long while since Mr Train had a good new idea (I recall FEVR, PZC, & think there was another largely forgettable one recently).

[topvest] 20/6/2022 10:02

I have sold down most of my residual holding here. I'm thinking of reinvesting the proceeds into topping up FIGT. This has been a very good investment over the last decade. The trouble is with one strategy asset managers, when the strategy goes out of favour for a few years then outflows are likely to follow so operational leverage doubles the downside. The Annual Report implies that it may well be a tricky few years and the dividend might need to be cut. I've kept a very small shareholding and will top-back up again if the risk reward ratio starts looking more favourable again. For what its worth, I still believe in the Lindsell Train mindset for c8-10% per annum long-term.

[m_kerr] 16/6/2022 22:29

plenty of investors felt up until very recently that all you had to do was buy quality shares, ignore the price (and pay 30-50 times earnings), and watch the p/e multiple go up and up. reality has caught up somewhat, and sentiment has left a number of tech stocks with wide moats and strong balance sheets trading at very cheap valuations (meta, nintendo etc).

[spectoacc] 16/6/2022 07:04

Thought Fundsmith would have done better tbh - Smith not afraid to chop & chainge, unlike Train who's a one-trick pony (think PSON).

FGT is down over all time periods from 1 week to 5 years - and yet we've had a decade-long bond proxy bull market. At least LTI is well up over 5 years (but well down the equivalent over 3).

LTI deserves a discount of at least 10% IMO, albeit there's nothing greatly wrong with the holdings.


Edit: missed this:

"The trust said the boutique was also looking to lift its 25% cap on remuneration as a proportion of costs in order to pay and incentivise the up-and-coming executives, whose numbers had grown from 19 to 25 in the last 12 months."

And that L & T have committed for 7 more years before retiring. Should be just the right amount of time to remove all the pervious outperformance :)

[topvest] 15/6/2022 18:28

Quality growth has sold off big style over the last year or two. Lindsell Train cannot out-perform in such a market. Even "God" would lose in markets at certain times, with the best end portfolio possible. Trouble is investors lose their bottle and shift to another style which has been winning in the last year. Performance will improve at some point, but its anyone's guess when. Fundsmith have been doing pretty badly as well. When the discount rate increases by 2% in a few months, valuations come down.

[steve3sandal] 15/6/2022 16:08

I can’t disagree with you ge1.

[giltedge1] 15/6/2022 15:30

Added at 10.60, 5 - 10 Year Performance excellent, dividend yield 5%, with more to come, as not full income at Lindsell Train distributed. Trading below NAV. Looks a good place for solid blue chip exposure at a good yield.

[steve3sandal] 15/6/2022 07:27

I'm particularly interested in this part.The Board recommends paying a dividend for the year to 31 March 2022 of £53.00 per share, up 6% from last year and reflecting the small increase in LTIT's net profits. This is made up of an ordinary dividend of £51.12 and special dividend of £1.88 in respect of the proportion of LTL's income that was earned from performance fees. This is the minimum dividend that the Company must pay to maintain the Company's Investment Trust status.

[spectoacc] 15/6/2022 07:05

Share price total return per Ordinary Share*^ -20.0%

Net Asset Value total return per Ordinary Share*^ -2.3%

MSCI World Index total return (Sterling) 15.4%

UK RPI Inflation (all items) 8.9%


Let's not blame them for the first line - that's the premium coming off - but -2.3% vs +15.4%, aren't they meant to buy value?

[m_kerr] 10/6/2022 13:30

apologies - i misread the annual report - you are correct:

'Particularly pleasing was the growing support from US-based investors for the US domiciled Lindsell Train Global Equity LLC, which garnered net new assets of over £940m.'

[steve3sandal] 09/6/2022 21:59

M_kerr with respect your numbers are wrong. LTI has about £20bn under management. The US fund has £27m invested. LT is much more profitable than your £20m. Have a look on Companies House for Lindsell Train Accounts. I’m pleased you’re a long term shareholder, me too, but I’m not currently all in.

[m_kerr] 09/6/2022 21:33

i'm talking long term specto. yes it's been a period of underperformance, but look at the longer term record. they demonstrated support for the strategy by launching a new american fund, roughly £1bn AUM IIRC. a 0.5% management fee yields £50m of revenue. 40% margin equals £20m profit, not a bad business to be in. most businesses would have to invest £250m of capital to get to those levels.

[spectoacc] 08/6/2022 06:55

But how "high growth" is it when they're losing AUM? Admittedly along with many others, but the L-T strategy has had problems all of its own these past 18 months (end of the bond proxy trade).

[m_kerr] 07/6/2022 17:39

doesnt matter if it's spun off or not, point is it's a high return (47% return on capital), high growth business, and a trailing dividend yield on valuation of about 10%. so i'm talking about cash returns over time.

there's not really a comparable business on the stock market so i don't think comparing LTL to jupiter, for instance, is a valid one.

[spectoacc] 06/6/2022 19:53

@m_kerr - LTI surely isn't "very cheap" unless you think the L-T business is going to see value realised (eg spun out), or profits sustainably grow (rather than losing AUM, which is what seems to have been happening as the funds underperform).

Cheap would be a decent discount to NAV, or L-T Ltd incorrectly valued. Many of the listed asset managers that bulls of LTI/L-T Ltd made comparisons with, have tanked.

[steve3sandal] 06/6/2022 18:52

I’m waiting on the Jan 22 LT Accounts before I make my next move. Published June in 2020 and Sept in 2021. Sooner the better really. I’m expecting a repeat of Jan 21 based on average AUM in the periods. This would largely support a £40/45 dividend. Last 3 LTI buys £1126, £1056, £1019 for me.

[m_kerr] 06/6/2022 18:34

this is very cheap IMV.

it's difficult to know how to value lindset train limited. nick train himself is 62 and won't go on forever. you never know what's round the corner health wise either. woodford had a business worth probably £500m but lost the lot. this one seems managed for sustainable outperformance though.

over a 10 year period though it should generate lots of free cash flow. fund management is a very scaleable operation with low capital requirements which means profits are turned into cash. over time stock markets generally go up, and lindsell train have an excellent long term record.

IMV stock markets became very complacent in november / december. still in the middle of a pandemic and yet stocks (particularly US) were sky high, leaving no margin of safety. the correction came as no surprise to me as i liquidated a significant %age of my portfolio at the start of the year. over time LTI will be a great investment IMV, but buying highly priced stocks is not risk free as many people seem to think.

[spectoacc] 19/5/2022 20:37

Been looking at FGT recently - not a buyer yet - & Train's claim that a co that makes 10% ROCE pa over 30yrs will have a share price performance not dissimilar.

And comparing that to the barely +10% FGT has done in the past 5 years.

Question is, does that mean FGT's holdings are poised to spring back, or is it mean reversion from the +193% FGT has done over 10 years.

The latter for me. P/e's still seem too high on the bond proxies, not least the likes of ULVR, with margins it's already struggling to defend.

LSEG seems a straight punt on Refinitiv, DGE seems a great but pricey co, RELX another def a long at the right price.

So no Train stocks or ITs for me yet.

Good luck, only needs a bounce back in sentiment.

[steve3sandal1] 19/5/2022 18:28

I bought a few yesterday under the 16/5 NAV. I think premium spec has gone given the latest director methodology though personally I'm happy to use 2.25% of AUM as my proxy. I really like the holdings and think the LT results likely to support the dividend. We will find out next month. I last bought around here in 2018. Bizarre that chocolate was down 7% yesterday.

[spectoacc] 12/5/2022 21:09

Curious whether holders think the L-T business might be fairly valued now (it previously being used to justify the up to 80% premium). Bought into LIO for the first time this week & it's not alone in looking cheap now the market has re-rated asset managers.

LTI now down over all time periods to 3yrs (-c.43%, up c.42% over 5 years.

If that premium can just disappear, I'd add it to the list. One day it'll be a buy.

[giltedge1] 08/4/2022 15:12

Hello Steve,

Thanks for detailed analysis. I like the portfolio & management, they have seen it all crashes, ups & downs over last 30 years. so they know what survives. If you analyse portfolio most have at least doubled over last 10 years, even laggards & been around for a century in some cases. Last few years not so good compared to MSCI Index, but I read this as temporary & an opportunity to add.
LT management advised main cost in LT is variable salary, so as FUM goes up & down P&L remains constant or improving.
Also LTIT receives dividend, obviously not full entitlement, If equity accounted would bring in their share of profits, over the Dividend 25% or so, so Income of trust would be higher than under current accounting policies.
Portfolio is high quality which is also the other main attraction & concentrated so easy to follow. Also if you invest in LT funds would receive 1 - 2% dividend. With LTIT receive 4%. but obviously with more volatility. I am happy to hold at current prices

[steve3sandal] 08/4/2022 12:43

Ge1, I certainly hope the laggards will turn up as this is a quality share portfolio in my view. I’m reluctant to buy at a notional premium though, whilst LT AUM continues to drift. Some combo of redemptions and those shareholdings well off highs.
However I’m happy to revisit the LT valuation. They still determine LT profitability at £42m. In YE Jan 20 which is the latest we have LT had a Pre Tax Profit of £79m and a post tax profit of £60m in round numbers. AUM in that period went from £17m to £21m so not over egging the last 12 months situation here which has moved from £23m to £20m. I would think that LT Jan 22 Net Profit might outturn at £60m after tax. If I apply that notional undervaluation to the new formula we are really looking for 2.25% of AUM as possibly appropriate. So on that basis it’s probably fair to think the current 10% premium is actually more like fair value if not a tad under.
I’m not chasing at £1250 something but I will probably add at £1150/1175 ish if Mr Market wobbles again.

[giltedge1] 08/4/2022 09:34

Portfolio doing well DGE, LSE significant gains, laggards turning up Nintendo, Paypal.
£12 breached, shares tightly held so can spike upwards on little news. Suggest add before too late.