Lindsell Train Investment Share Discussion Threads

[mozy123] 16/7/2019 08:51

specto - fear not we have 81 years left!

tempted with some of the shares today for sure.

[topvest] 16/7/2019 08:44

Blimey - a profit warning from AG Barr. Even the best companies, have a tough year from time to time!

[spectoacc] 16/7/2019 07:40

BAG going to get me off to an early good start @Mozzy123:

"DGE £34.40 p/e 29
LSE £56.60 p/e 32
BARR £8.70 p/e 27
ULVR £50 p/e 23"

Vs.

"IMB £20, p/e 7, LLOY 58p p/e 10, ITV 109p p/e 7, NRR £1.71 yield 13%"

[trytotakeiteasy] 15/7/2019 11:27

Last NAV here was £10.68 on 5 July. Will be interesting to see what the next NAV is and also at the end of this month after the value of LTL is updated. Obviously, equity markets are doing well so far in July. I imagine we will come close to £11 NAV when the updated valuation of LTL is given in early August. We shall see.

[mozy123] 12/7/2019 08:35

Just updated my LTI model

The fall in LTI has reduced the implied value of the manager from £1.1bn to £650m

Pre tax profit, id estimate at between 50m and 60m for 2019. So hardly a stretched valuation now.

[spectoacc] 12/7/2019 07:27

Agree @topvest, but the issue is that a move back to say a p/e of 15 (which wouldn't take much in the way of disappointment) sees 40% off NAV, AUM etc. Mind you - LTI come off nearly 40% already!

As for the Teslas, Slacks, Pininterests, Ubers etc...don't get me started!

[topvest] 11/7/2019 17:45

High quality stocks are expensive but not absurdly so in my view. It’s the disruptor bubble in the US that is more concerning. Both will be hit in a bear market, but the former will recover (unlike the latter).

[spectoacc] 11/7/2019 16:21

Agree with both above - negative seems the new normal for bond yields, and it call all last much longer/go much further than any of us expect.

It is, however, a bubble, and has created a bubble in "Train" stocks. I've certainly been wrong on it for long enough, having never held LTI or Smith or any of the others. But damned if I'm going to buy them now :)

(@Mozy - I'm a connoisseur of Woody, I've been calling him out since 2016 & tho it's taken over 3 years, am full to the brim with schadenfreude).

[dab26] 11/7/2019 15:45

So long as their cashflows can continue to support their operations, debt and therefore their yields sustainably, I think Riverman identifies the crucial point.

This too will pass ... but 'when' is the question.

No time soon would be my bet, but what the hell do I know.

I didn't see the Japanification of the West coming and I bet I won't, in advance, see it going either.

Regards.

[riverman77] 11/7/2019 15:37

Ultimately what's driving the valuations of these type of shares is bond yields - which just keep getting lower and lower. 10y bunds at record lows of -0.4%. If you think yields likely to stay low for a long time - and we have seen in Japan that they can - then I can see the likes of Unilever and Diageo just going higher and higher.

[mozy123] 11/7/2019 14:53

They all look like Woodford stocks! Hes done really well owning them apparently! haha :)

[spectoacc] 11/7/2019 13:57

Actually I think the highest p/e one - LSE - looks relatively "cheap". A unique asset, possibly a trophy asset.

ULVR looks so-so. DGE looks very pricey, BARR too.

Not interested in picking 4 to outperform - the point is that those 4 are distinctly toppy, and whilst I don't know when they'll fall to more reasonable valuations, I'm confident they will. Then the virtuous circle of growing assets, growing AUM, growing profits, becomes a vicious circle. That isn't priced in to a still-huge LTI premium.

LTI to trade at a discount at some point? I reckon so :) There's a massive, massive disconnect in the market atm, but I'd accept the argument that there has been for ages, and it's only got bigger - and it's made the names of Lindsell/Train & Terry Smith over the best part of a decade.

Now if Train sold all those and bought say IMB £20, p/e 7, LLOY 58p p/e 10, ITV 109p p/e 7, & , um, NRR £1.71 yield 13%, then I might be interested (or accuse him of buying value traps). But that would be too much like picking 4 :)

[mozy123] 11/7/2019 13:44

Fair enough - put it to the test.

Name your 4 value stocks that will outperform that portfolio and we will come back in 80 years :)

Oh and btw unilever looks cheap in that list :)

[spectoacc] 11/7/2019 12:48

DGE £34.40 p/e 29
LSE £56.60 p/e 32
BARR £8.70 p/e 27
ULVR £50 p/e 23

All great businesses, but they were great businesses on p/e's of 15, and will be again IMO. And well before the end of this century :)

[mozy123] 11/7/2019 12:24

Specto - Later this century. Well I have a long investment horizon but im not too bothered what Unilever will be doing in 2100, even Nick Train wont care! :)

Quality and long runways.

We could go on and on but will leave it at that. We have diferent world views.

[nimbo1] 11/7/2019 11:51

Not at £20...who knows at £12.50...much better bet though...

[spectoacc] 11/7/2019 11:33

It's valued on unsustainable cashflow growth tho - like all similar co's, the "bond-like" trade has inflated p/es beyond what is reasonable. I don't think ULVR can grow greater than the market indefinitely - I accept it can grow indefinitely - but that's a different argument really. My argument is that the "bond-like" trade will run its course, if it hasn't already, and that a drop from a p/e of 23 to one of 15 is a mighty fall in s/p.

I like your "$2 a day" argument but I'm going to counter that with falling world population later this century.

Goodbye massive L/T & Terry Smith outperformance when the bond-like trade ends & goes into reverse. Is that priced into LTI?

[mozy123] 11/7/2019 11:26

Specto - Unilever its been compounding for the last 100 years. Half the worlds population lives on $2 a day. Imagine what unilever will sell to them in the future! :)

ROCE at unilever is 27% Its a quality business and it should have a quality rating.

Future cash flow is the basis of all long term business valuation. They will never float it, but it produces large % cashflows, and that flows to its holders. There is limited need to re-invest cashflows.

Unilever is valued on the basis of its cashflow, as is all business, apart from a few tech unicorns.

[nimbo1] 11/7/2019 10:37

bought some of this - looks like this is going to revisit near enough nav (so probably won't). Very keen to buy plenty if this gets near £10/11...

[mozy123] 11/7/2019 09:59

Specto - fair points but very gloomy re LTI and LTL. Agree Woodford is finished.

No other brokers are in the same position. LT was dropped due to the share holding % of HL stock. Unless nick train starts buying unlisted brokers, or AJ Bell shares...

What i agree with is that brokers will be regulated more and thier poverty 50 type lists will be axed. Clients will have to do thier own work.

Fundsmith was never on a hl list and that hasnt stopped it becoming the biggest fund in the uk.

Buying and holding high ROCE, High defensive business, growth at the right price type strategy has become unfavourable at times but history shows its the right strategy over the long term.

I played about in the value sector alot, its alot easier just buying unilever and letting it compound for you instead of chasing from one undervalued to another.

The only question for LTI in my mind is what value do you give a business that will make PBT of in excess of £45m (probably more like £58-60m with £21.6bn AUM)

The average forward p/e in the Ftse is around 16 times, and 18 times on the s&p500

Its a similar question about the real estate tesco has. Whats it worth if tesco went bust. Not as much, but is tesco going to go bust? Are Nick train and Mike Lindsell going to retire. Why would they?

Terry Smith has Julian Robins. Nick Train has James Bullock. Time will tell but LTI is undervalued without question imo.

[spectoacc] 11/7/2019 09:33

@Harry - WEIF, & WIM, are dead. Redemptions were running at c.£10m a day BEFORE the publicity from the gating. WEIF down over 1, 3 & 5 years, in a bull market, and c.50% below a tracker over 3 years. They can't sell down many of the unlisted holdings - for some there is literally no market - nor the rump of dreadful stuff like RM2 (now suspended), EVE (tiny), Northwest Bio, CIR etc.

They won't lift the suspension in September IMO.

They are indeed getting out of some things at "just a couple of % discount" - eg NRR yesterday at 165p. But now look at the NRR chart, and what it's done in anticipation. Plenty of others (eg WHR, RENE) they've got out of at a few p under, but:

1. Sale prices are lower than even the existing chronically low NAV
2. The cash will all go to redemptions, and some.
3. The unlisteds will breach the ceiling even more than previously
4. The unlisteds are due heavy revaluation downwards IMO - eg Benevolent AI said to be raising money at less than half Woody's valuaion
5. No one will remain in a fund where all the liquid stuff has been sold and only the unsellable cr*p remains.

So - WEIF, and by extension WIM, are finished. Woody's only hope is to leave it gated as long as possible - a year or more IMO - in the hope "something" turns up. Perhaps Industrial Heat discovers cold fusion?

@Mozy123 - fair point - but how many other brokers might pull a similar trick to HL? And at the very least, AUM will be "less than it would have been" thanks to HL's decision. And also ignores the point that the L/T method can't work indefinitely, and that if HL does get regulated in the way I expect, they're not a good pick for the fund - with knock-on to performance & AUM. It's been a very virtuous circle - what happens if/when it goes into reverse?

(No position in LTI).

[harry the haddock] 11/7/2019 09:14

on woolford, i was told some much more encouraging news over the weekend by someone who deals extensively with them.
a) they expect to lift the suspension of trading in September
b) they'd been able to sell several very large holdings at a surprisingly good price - just at a couple of % point discount
c) there is a lot of money trying to find a home and they are having a good level of interest in what they're trying to off load

[mozy123] 11/7/2019 09:13

Specto

The business is not going to make less money moving forward. For that to happen clients would need to withdraw money and AUM shrink. LTI accounts states LT had 16.4bn AUM at the point LTL made £45m pre tax. As of the Last Nav update, AUM now stands at £21.6bn so PBT will be higher this year, unless clients pull £5.2bn which seems very unlikly. HL clients wont even have close to that figure.

Fund flows will slow from HL for sure. But from other brokers? Not a chance.

AUM is 60% institutional and 40% retail. How much do clients of HL have? Clients of HL are exposed to £1.6bn of Woodford so cant see it being too much higher. Anyone have any clues on this point?

[spectoacc] 11/7/2019 07:38

@steve3 - best of luck - my issues with LTI are 3-fold:

1. The asset management business is going to make less money going forward - inevitably - due to HL dropping their rec. Indeed, the whole Unit Trust business may be in trouble post-Woody. Woody still has a long, long way to run IMO.
2. How is value for the asset management business ever realised? Will Lindsell/Train live as long as Buffet/Munger?
3. Is the trade that has made Lindsell/Train and Terry Smith going to continue forever? Just how much more stretched can p/e's get on the "moat defensives"? Train is well aware of this and frequently warns about it, but I've yet to see him sell one.
4. (Had to be a 4th). HL is a big holding, I think HL is a few years away from seeing its rent-seeking huge profit margins eroded. That knocks both reputation and NAV. Note Train's been buying more on the dip, much as he did with PSON.
[Edit - 5. Why not just buy the small number of holdings? The bet on LTI is solely that the asset management stake is worth far more than it's in the books for - or rather, that the income stream from it is. And that said income stream will continue to grow (and for that matter, continue!).]