Lindsell Train Investment Share Discussion Threads

[greatballsoffire451] 13/5/2019 20:16

Some sense has returned to this stock today. The premium of late has been unsustainable and totally bonkers.

[topvest] 13/5/2019 20:12

Absolutely. Reading a book on T Rowe Price at the moment, the legendary US growth investor who died in the 80s. He sold his firm for US$2m or so when he retired. Its now managing over US$1 trillion and valued at US$20bn on a PE of 14. T Rowe Price clearly lived on using the founders principles.

Lindsell Train is a small investment manager, but has the potential to grow significantly. As to the valuation, I do not know. It's clearly valued highly at the moment and subject to volatility (as today), but it's a growth stock.

I have certainly invested wisely a decade or so ago, but was I wrong banking profits on 75% of the shares? Yes...probably should have held more for longer, but I'm too much of a value investor.

[henryatkin] 13/5/2019 17:03

If Train & Smiths strategy fails there's not much hope for the rest of them.

[spectoacc] 13/5/2019 15:15

@topvest I'm struggling to resist a "Has the LT business just fallen about 15%" post :) :)

Quality stock, but one in a bubble I say ;)

Question is, at what price is it a long..

[topvest] 10/5/2019 21:02

The business has internal candidates being primed to takeover from Nick Train in due course and at least one of these has a significant holding. It might not be the same, but the portfolio probably won't need changing much and can "run-off' over 20 years or so. I personally think, Lindsell Train Limited could eventually make £100m of profit per year on £200m of turnover. Fundsmith is close to that and Marathan Asset Management also. That's the reason that this is so highly valued. 24% of that in dividends is £24m a year. I was convinced myself that this was way overvalued, but I'm not so sure. It's certainly a quality stock.

[spectoacc] 10/5/2019 07:24

@topvest - agree re tech! The bubble that keeps on inflating. I gather Uber's prospectus acknowledges that there's 1. No profit in sight and 2. That they may never make a profit. Pininterest, Lyft, Tesla.. The list goes on.

Will be quite a few managers looking forward to the day when Train's (& Smith's) strategy starts to fail.. ;)

[riverman77] 09/5/2019 22:12

The thing you're not factoring in is that Nick Train is the business. If and when he retires it will be worth a fraction of its current value. Also can't see how the value could ever be realised, whether through an IPO or takeover. For these reasons I certainly wouldn't value it any more highly than the wider asset management sector.

[topvest] 09/5/2019 21:28

Agreed - most diversified IMs are on a P/E of c10, some are on 15 (like Polar Capital). Impax is on 18.

I'm not saying its cheap (remember that I reduced my holding this week)... far from it. Then again Amazon is on a P/E of over 60 and will probably never pay a dividend, but everyone is loading up on ridiculous FANG and disruptor businesses on crazy valuations. What is more stupid!

Of course, I am biased as Investment Management seems to me to be one of the best businesses in the world. If you are really good then a ROCE of > 50% and net operating profits of > 50% is achievable. Lindsell Train's ROCE is going to be close to 100% in 2019...beat that!

Valuation is largely subjective.

For what it's worth, I would be inclined to value Lindsell Train Limited on a P/E of at least 15. I think that the directors' valuation of under 10 is very cautious versus what the business would be valued at if it listed tomorrow. The Lindsell Train's and Fundsmith's of this world are simply better than most. Nick Train is one of the world's best for doing absolutely nothing....which is very difficult to do when you are a fund manager!

[spectoacc] 09/5/2019 20:33

@topvest - it's largely uninvestable and unrealisable tho. Look at the p/e's the listed asset managers are on - certainly not 20 - and now value a one-trick one, with managers not that many years off retirement age (tho I note they're not the only managers - and have been highly successful! And as you say, may want to keep going).

However - who's to say the LT & Fundsmith method will still be as successful in say 5 years time? Buffett's just bought into Amazon :) They've done amazingly well buying (and sitting on) bond proxies, but the IC recently had an interesting piece on what happens if/when (it's when) these very highly-rated co's eventually slip up. To pick eg DGE, which they all hold, the p/e is 27 and yield 2%. Market cap £77bn. ULVR, which they also all hold in size, is p/e 22, yield 3%, mkt cap £122bn. Do they grow forever? Maybe, but likely not.

(The IC's argument was more nuanced, and actually maybe it was in MoneyWeek - "When they're doing well, there's huge fund flows into the strategy, pushing up the prices of the stocks to a point where any disappointment has a big effect. Later, the money starts to flow back out again". Or words to that effect).

But again, main point - when is that LT value realised, or is the only value the cut of the profits? £62m starts to seem about right. No manager - even Buffett - is successful indefinitely. (Actually - maybe Soros, but he could change strategy with a change in wind direction).

And - what changed today to add 7%? Isn't that alone an indication of the bubbly nature of LTI?

[topvest] 09/5/2019 20:22

This is all about what 24% of Lindsell Train Limited is actually worth. Market cap suggests its worth about £250m and the rest of the portfolio about £100m, rough numbers. Directors had it in at £62m last year. I think the directors' valuation is very cautious and understated as the investment philosophy could continue for a long time. Let's face it Nick Train doesn't have to do a lot other than read (which he enjoys) and buy something every 2/3 years, so he could go on for another 20 years+.

Market suggests 4x the directors' valuation which is clearly stretching it a tad, but is it actually? - see below. Answer is probably somewhere in between. Nevertheless, Lindsell Train and Fundsmith are the best investment managers in the UK and have a highly distinctive product.. Lindsell Train also has scope to manage a lot more than it currently does.

The Lindsell Train Limited year end is January and so we should see their results in a month or so. Last year they made a profit after tax of c£30m on c£60m of turnover. This year/sometime soon I suspect they will make a profit of c£50m. Lets look at a valuation of 24% * £50m * P/E of 20 (reflecting a high growth business) = £240m. BINGO that gives you the current share price! The market is basically valuing Lindsell Train Limited as a high growth business. The directors value it using a very conservative methodology of an average of 1.5% of AUM (should be 3% in my view) and a P/E ratio of 11.8. This is definitely low for such a wonderful business franchise.

[spectoacc] 09/5/2019 19:59

@DrRobin - that's a fair point, I should have said "reported" NAV.

Undoubtedly clear that LTI's holdings didn't jump by 7% today tho!

In fact, a quick glance at the top 5:

1. LT Ltd (obviously, and c.45% of the IT)
2. DGE
3. LSE
4. AG Barr
5. ULVR

Nos.2-5 all fell today.

[drrobin] 09/5/2019 16:39

SpectroAcc - The problem is that the NAV announced today was calculated on 3rd May, the previous NAV announced on 1st May was calculated on 26th April.

Therefore you can't say the NAV has gone down by £2 and the shares climb £140, a lot could have happened in 6 days.

The NAV doesn't seem very reliable for this investment trust.

There are probably other reasons why this is going up. The price curve for LTI is roughly in step with FGT (run by Lindsell Train), but that is down 0.8% today. FGT follows the NAV very well, so it is not LTI's interest in FGT which has pushed the price back up, unless it is rocketing tomorrow?

[spectoacc] 09/5/2019 16:31

It's weird, for sure - but the inability to short may have something to do with it. But I don't see why LTI don't issue more shares - their investments are plenty liquid enough (ex the management co), and it'd make the management co stake a smaller % of the fund, making it less opaque overall.

Many ITs have discount & premium control - if there's one that needs it, it's LTI.

Edit - well done @steve, fantastic ride you've had.

[steve3sandal] 09/5/2019 16:27

Held nearly 10 years but let my last ones go this afternoon in this second spike of the day. Wonder who is buying, they’re persistent that’s for sure. I have no idea whether common sense will prevail or if something else is afoot.

[spectoacc] 09/5/2019 16:15

NAV drops £2, shares climb £140 - glad I'm not short :) :)

[spectoacc] 08/5/2019 13:36

I'd short it if I could, but is unborrowable everywhere I tried.

[topvest] 08/5/2019 12:01

This has 12 bagged since I started this thread. Happy Days!
I will have to admit to having sold 75% of my original holding though on the way. Still more than happy to keep a holding though and will never sell out completely.

[topvest] 17/4/2019 18:12

The big question mark is .... how much is Lindsell Train Limited worth? Clearly it’s a big number and the valuation incorporated in the NAV is definitely on the cautious side. Time will tell I suppose. The fact that Lindsell Train Investment Trust is the only way of getting exposure to the Investment Manager has exacerbated the demand for a relatively illiquid trust.

[riverman77] 17/4/2019 16:50

Yes it must be a tricky call. The likelihood is that it probably will go up even further in the short term as markets aren't aways logical, but I'm pretty sure the premium will be a lot lower in say 5 years time

[drrobin] 17/4/2019 16:30

Riverman & Kenmitch, agree totally. I have held this trust for 12 months and keep thinking of selling every time the premium keeps edging up. There has been some dips, early June 18, late Dec 18, early March 19 but the share price has bounced back quickly.

I know what will happen if I sell, it will really rocket, so for the present I am sitting tight. I do watch this trust price more than anything else I have, so that might suggest something?

Anyway up again today 2.5%, yipee.

[kenmitch] 16/4/2019 22:24

JackRuss2 and if anyone isn’t clear about the 70% premium.

Nick Train warned last December that the share price was overvalued. Then NAV was £835 and the share price was £1210. So investors were paying £1210 for something worth £835!!

Here’s a link to his warning.



Now the premium is much higher still. NAV has gone up £900 but now the premium is over 70% and share is £1650. That’s a crazy overvaluation. One day it will surely end in tears for investors who bought the bubble. This Trust has a great record but it is inflated by the ridiculous premium to NAV.

The ever growing premium is the main reason for the share price soaring, instead of, as is normal, their investments going up fast. If this was a normal investment trust trading around par the share price would only be £900.

And some Investment Trusts are trading at big discounts. E.g Riverstone is at 30% discount. If Lindsell train was at a 30% discount the share price would be £630.

[riverman77] 16/4/2019 21:28

I fail to see why the investment management company is valued so highly. 5.6% of AUM (the figure mentioned in a post above, not my calculation) is very high in anyone's book - 2-3% is typical for the sector.

Furthermore its value will surely never be realised - I can't see how this could IPO or be bought out. It's also totally dependent on a couple of individuals, so when they eventually retire there'll probably be no company left. I guess they could hand the reins to someone else, but Nick Train is a very unique talent, so I can't really see this happening. In these circumstances surely it should be at a discount not a premium?

[topvest] 16/4/2019 20:34

This has come a long way since I started this thread in 2009. What a share this has been!

[jackruss2] 16/4/2019 19:02

Thx for that DrRobin

[drrobin] 16/4/2019 17:22

Yes and no.
Yes - 70% premium is very worrying, look back at their historical premium, it has never gone over this. Mid 2016 it was the same high premium, it fell towards the end of 2016, the share price also fell, but soon recovered, indicating the NAV (and premium) were not particular accurate. Inother words the NAV came up.

No - 46% of LTI is invested in Lindsell Train Limited and if they don't quote net worth all that often (or at all) then it is very difficult to assess.

Historically Premium has been around 30%.

I am holding LTI for the present, 5.xx% increase today, nice.