May was relatively kind to investors with the MSCI World gaining 7% in GBP terms, just pipping your Fund which returned 6.5%. Year to date though (as befitting the still gloomy global headlines), markets remain weak.
In local currency terms the UK’s FTSE 100 index is down 19% YTD, the Japanese TOPIX down 9% and MSCI North America down 6%. But underlying these market moves, multiple tracks are playing out.
Note for example the diverging performance of the US’s traditional S&P 500 index, down 6% vs. its more tech-centric NASDAQ competitor, which is now up 6% in virus-ridden 2020.
Throughout the crisis, positive value has been created by those companies positioned to actually benefit from the disruption; i.e. those placed to exploit the already ongoing, now COVID-hastened, shift to digital. Looking at May’s performance for your fund in a bit more detail, the story is much the same.
Our strongest showings over the month were from PayPal (up 26%), Hargreaves Lansdown (up 27%), the Japan Exchange Group (up 15%) and eBay (up 14%).
Each of these are in the happy position of owning market leading digital networks and/or platforms and each benefit directly from the increased take-up of online and connected services. If (as we think the case) this shift sticks post-lockdown, then meaningful value will have been added to the net present value of their long term future cashflows. Indeed, whilst HL’s shares are still to recover ground lost in the first quarter of 2020, the other three are all now up strongly YTD.
PayPal’s shares have risen 43% this year, and with a market cap touching $180bn (already 4.5 times bigger than at its spin from eBay just five years ago) it ranks as an increasingly senior member of the global digital vanguard. Assuming the continuation of this digitisation trend is about as sophisticated as we get when it comes to making macro calls.
Anticipating tomorrow’s events with precision, sadly remains at least as impossible as ever - even if one is right about the long-term direction of travel. This challenge was neatly exemplified by a recent sell-side analyst report on Disney titled ‘The definitive complete guess to the impact of COVID-19’. It’s a good read, running through the potential doomsday scenarios for Disney’s various social-distance-blighted businesses.
But as the headline implies, any short-term conclusions are realistically based on guesswork. Disney, like PayPal, should be a major beneficiary of the technological shifts discussed above. Digital distribution helps the company get its content - the really valuable part of the company - into the homes of more consumers, more easily, and at lower cost.
Disney+ and its 54.5m subscribers just six months post-launch is early testament to this. But of course, with its exposure to parks, movie theatres and team sports (via ESPN), it has not been a winner for us in Q1 of 2020, and despite a decent recovery this month (up 8.5% in May) its shares are still down almost 19% YTD.
And yet, without wanting to sound complacent, The Magic Kingdom - home to eight of the US’s ten biggest blockbusters last year - will almost certainly endure through COVID.
Our position remains that, whilst we don’t know the exact shape of tomorrow’s challenges, the idea that some future iteration of Star Wars/Toy Story/Frozen/Avengers/etc will still be profitably pleasing audiences (via whatever channel) long after the current crisis has faded into memory seems to us one of the safer guesses we can make.
The onward march of technology stocks continues. Since the end of March (the low point for markets this year) the NASDAQ index, as a proxy for technology companies, has risen by 42% as compared to the rise of 24% in the MSCI World index. And this is understandable. Lockdowns, quarantines and the stay at home priority has accelerated the digitalisation of economies to the almost exclusive benefit of this group of companies. I am glad to say we own some of them. PayPal, Intuit and eBay are up 98%, 40%, and 70% from end March levels. Aside from the obvious utility of their services to consumers in these unusual times, all benefit from a positive network effect - more customers generate more scale and data that improves the utility and pricing of the service and so on.
PayPal with its c.20%+ share of internet payments globally (ex China) is particularly favoured as commerce moves decisively online. And whereas Intuit already has a 28% share of US tax filings, something that could double or more if it claims share from accountants and other assisted specialists, its market share in small company accounting software is only 5% of its addressable market (the major countries it’s targeting). In other words there’s an infinite runway ahead. But do we own enough? Our performance since March - the fund up “just” 16% - suggests maybe not. In particular we missed out on the stellar performance from Apple (up 89%) and Amazon (up 64%), now the world’s two biggest companies. Pure tech - and by this I mean companies whose whole foundations were built around or on modern technology platforms or devices - has never been a natural area for us to mine for new ideas.
The Achilles’ heel in our mind is tech itself. Will it be undermined by new inventions or innovations we cannot foresee or imagine? Burroughs, Hewlett Packard, NCR, Polaroid and DEC are all examples of leading tech companies whose market positions have been weakened by successive innovations. With tech investments we don’t have the reassurance of longevity and heritage to rely upon as we generally do with other investments we make. Instead we seek business characteristics that we typically associate with longevity: for instance repeat sales, and high barriers to entry and strong brand positioning. We steer clear from gadgets and hardware that more often than not turn into commodities.
So with Intuit it’s the stickiness of software embedded into the systems and processes of a client company; with eBay it was the realisation that any customer of an internet auction site would be drawn to use its dominant destinations - USA, Germany and the UK - for better choice and prices; and with PayPal it is trust and the network effect of a growing pool of users who expand the ubiquity and usefulness of the service. Interestingly, eBay’s auctions are now just 10% of the site’s traffic – we didn’t predict that ten years ago and although we own buckets of PayPal, the initial holding was not bought by us but was inherited from eBay when they split it off to investors in 2015.
The patent truth is that we’ve come up short when it comes to conceiving how certain tech businesses develop over 10-20 year periods. Probably the worst errors are those of omission. Knowing now what we do, we ask ourselves why we don’t own Alphabet, Adobe and Microsoft. Instead we’ve sought out hybrids - companies that not only give us the comfort and evidence of having built and mastered a business niche over many years but which are also now exploiting new tech to further the utility of that product or service, improve its distribution and build further barriers to competition. So for instance we would argue RELX has digitalised a 100+ year old business, raising barriers to entry and using its market positions to amass data sets to make its software ever more useful to its core customers. On the other hand Pearson, which owns some of the most valuable educational content and has built relationships with the widest range of academic institutions, has not yet been able to prove whether tech will ultimately be a disruptor or enhancer to its business model and its market position.
We still believe in the latter but it is not proven and it has been a long and expensive journey. We have other hybrid investments: Nintendo, Juventus, Disney, the London Stock Exchange (‘LSE’), Japan Exchange Group (‘JPX’), Hargreaves Lansdown and World Wrestling Entertainment (‘WWE’). Whereas in the past this amorphous group of companies has helped boost our returns at the same time as pure tech was performing well, this year it hasn’t been the case. The lack of live entertainment has understandably held back the performance of Disney, WWE and Juventus. 15% of RELX’s sales have disappeared thanks to the curtailment of exhibitions. Pearson is still struggling through the challenge of the digitalisation of education. Hargreaves Lansdown’s reputation has taken a knock in the wake of the Woodford debacle.
Only Nintendo, LSE and JPX are showing some semblance of life and, so far, that has not been enough to keep us up with the market’s performance. These are exceptional times however and we trust that on our time horizons our portfolio companies will ultimately be able to prove their worth.
#141
Re: Fondo inversion Lindsell Train Global Funds
Betaca2
Tienen una buena cartera: Diageo Heineken Disney Unilever Intuit LSE Etc.
Este es el tipo de cartera que deberían tener los inversores patrios para preservar el capital de los jubilados que a veces es su ahorro de toda una vida: Empresas buenas con múltiplos altos. Puede discutirse si las compañías en la cartera de este fondo son las mejores o no, le pondría más diversificación en más nombres, pero aspiracionalmente, es el tipo de empresas que hay que tener, en lugar de Aryzta y compañía.
Portfolio Manager’s Comments Things seem a little calmer this month. Big tech ebbed slightly (despite which Tesla’s share price is still up over 400% YTD) and there’s been plentiful macro commentary, but from a Lindsell Train perspective it’s not been overly eventful. Unusually for these torrid times there’ve been no earthquakes in either direction: our biggest movers were World Wrestling Entertainment, whose shares fell 8.2% (as a new team of executives slowly bed in), and Unilever, our biggest holding, which offered up a welcome 7.1% share price rise (perhaps as optimism builds ahead of Q3 results out later this month).
The MSCI World Index remained roughly flat (in GBP terms anyway), allowing your Fund to edge ahead by 1.4% and revive our positive YTD relative performance.
What have we been up to?
Well as usual, trading-wise, the answer is similarly little. Other than necessary sales to meet UCITS regulation or redemption requests, we haven’t actively sold anything from your fund. Ditto for August, and the month before that, and the quarter before that. We don’t trim unless we have to, and voluntary whole company disposals are extremely rare. In fact, excepting the sale of small stakes in two Japanese companies (Canon and Meiko Network) earlier this year, and the 2015 switch from Hershey into PepsiCo - all other portfolio ejections over the past nine years have been in response to corporate action (International Speedway was taken private in 2019, Dr Pepper Snapple acquired by Keurig in 2018 and Kraft Foods by Heinz in 2015). All said, since its 2011 inception, the turnover for your Fund has averaged at just 3% pa.
Are we too in love with our stocks? This is a common and understandable concern. It’s all very well when business is booming, but what about companies facing strategic challenges - as all at some point will? To us the answer to this conundrum is to be extremely selective in the stocks you purchase in the first place. Pick only those companies with the deepest moats and the brightest long-term prospects. In other words, it’s really only rewarding to love lovable companies. More technically we might be accused of succumbing to the endowment effect - a cognitive bias described by behavioural economist Richard Thaler that causes people to value things they already own more highly than available alternatives. The obvious risk being, that endowed investors retain their portfolios for longer than warranted to the neglect of other, worthier candidates. But what if there is no worthier candidate? Tech-driven headwinds will buffet any business and very few are sufficiently equipped to withstand them. When a company has survived and prospered through generations’ worth of such gales and emerged fitter than ever, its ability to overcome similar future challenges seems a little more certain. When a company sells products and services that are so important to their customers that retention rates exceed 90%, predictions about future cashflows become that much more relevant.
These are lovable companies, but they’re rare. These are the types of traits we look for before initiating holdings, and consider them difficult to replace once found. Of course it’s essential to remain vigilant. Even well-established business models can be changed and challenged, often through executive action, and with the benefit of hindsight, our affections haven’t always been reciprocated. Canon and Meiko were sold partly in response to management led strategic realignment, and the newly merged Kraft Heinz and Keurig Dr Pepper were both eschewed as baggier collections of less differentiated brands. Whilst the latter two divestments have so far proven profitable, we won’t always be this timely.
Canon and Meiko were arguably retained for too long, and Pearson - so far a very disappointing allocation - remains in the portfolio. Our analysis still indicates a bright future for the world’s leading digital education provider, but time is yet to judge the ultimate veracity of this view. But the important corollary is that this proclivity to inactivity also keeps us in the genuinely great stocks for longer. Unfortunately great companies also suffer wobbles and too low a pain threshold (even with the admirable intention of returning in better times) means missing the bigger opportunity.
Given the long-term value creation we believe our companies to be capable of, for us this risk of early exit is quantifiably the greater concern. Not only that, but it seems to me that other investors’ ostensibly rational fear of romantic entanglement prevents them from fully recognising a great company’s most attractive characteristic - sustainable long-term compounding. Hence we find we’re able to buy and hold such stocks at significant discounts to our estimates of their full intrinsic valuations. Even when shorter-term business outperformance or low interest rates inflate share prices to higher than historically average level
Portfolio Manager’s Comments To summarise then, here’s a quote (very much worth transcribing in full) from Benjamin Graham’s 1973 edition of the Intelligent Investor. He recognised the value that great companies can deliver when they’re loved enough and the difficulty that all but the most stubborn (or emotionally attached) of investors have in resisting the temptation to take profits. “The big fortunes from single company investments are almost always realized by persons who have a close relationship with the particular company - through employment, family connection, etc. - which justifies them in placing a large part of their resources in one medium and holding on to this commitment through all vicissitudes, despite numerous temptations to sell out at apparently high prices along the way.
An investor without such close personal contact will constantly be faced with the question of whether too large a portion of his funds are in this one medium. Each decline - however temporary it proves in the sequel - will accentuate his problem; and internal and external pressures are likely to force him to take what seems to be a goodly profit, but one far less than the ultimate bonanza.” In many ways we try to follow this advice - the only difference being that as active investors we are at greater liberty to choose our long-term partners. But it’s all the more important then, to commit to your great holdings once engaged. Choose only the best as custodians of your hard earned funds, and then hang on to them for as long as you possibly can. James Bullock, 9 October 2020
La referencia al motivo de la salida de la cartera de algunos valores y al hecho de haberlos mantenido seguramente demasiado tiempo, me ha recordado las argumentaciones diametralmente opuestas de exlaureados gestores con quienes afortunadamente no comparto productos.
Bastantes sorpresas fuera de las 10 principales posiciones
#145
Re: Cartera completa del Lindsell Train Global
Buenos días, Le agradezco la información que nos ha facilitado de la cartera. A partir de la posición décima los pesos de estas empresas en la cartera, también están actualizados a fecha del 30 de septiembre?. Nos podría indicar dónde ha podido obtener las posiciones de la cartera a partir de la décima?
Muchas gracias por la constante información que facilita sobre este fondo.
La info está disponible en Morningstar en el apartado del fondo donde se puede consultar la cartera y está referenciada toda la cartera a 30 de septiembre.
#147
Re: Cartera completa del Lindsell Train Global
Muchas gracias, ahora he visto que Morningstar incluye las 25 posiciones de más peso de las carteras.
Comentario mensual y cartera Portfolio Manager’s Comments
What can we say of 2020 and its finale? With much of Europe plunging into a fresh series of lockdowns as I type, the light at the end of the tunnel currently seems a little fainter than just a month ago. And yet, defying the gloom, global markets have proven rebelliously resilient. In GBP terms, the MSCI World index ended the year not just up, but strongly so, returning +12% in 2020. That's good for a normal year (the 50 year long-term average being c.9%) let alone one ravaged by COVID. It is no rebound either, following on from the index's robust 2019 showing of 23%. But this rosy picture masks a dramatic (and well documented) divergence.
Companies with activities directly curtailed by COVID controls have been thwacked, whilst those possessing the technology to facilitate new modes of lockeddown living have thrived. Illustrating this, the US's S&P500 ended the year returning 15% in GBP terms, and the Nasdaq an astonishing 41%. In contrast the UK's FTSE100 lost 11%. Tritely, tech companies now dominate the US market, with the S&P500's top-seven spots all taken by familiar tech giants, each of which rose by at least a third in 2020. In comparison the UK's big, listed offerings don't exactly teem with microchips - none of the FTSE100's top 10 constituents could really be considered a technology company.
And so, global markets are in turn transforming, with these seven US tech stocks now contributing 15% of the MSCI World's entire market cap. But here at Lindsell Train we are not known as tech investors. The fast pace of change and consequent paucity of heritage-rich constituents means the sector is not a natural home for us. We consciously underweight it - at least as defined by most index providers.
However, I think here it is important we are clear with what we really mean by the word. Much like 'quality', 'tech' feels like another woolly investment catchall; capturing companies with wildly differing business models - and resulting moats that range from superficial (think low barrier to entry, capitally intensive, commoditising hardware) to profound (e.g., branded, network-effected, winner-takes-all IP and software). For investors looking for long-term compounders, these two groups could not be more different. We avoid the former but are openly enthusiastic of the latter - seeing them not simply as tech providers, but as content owners, networks, marketplaces and platforms.
These are tested, intangible asset, intellectual property-driven business models, employed by companies that are also exploiting the modern tools available to them. Some of 2020's market winners will fit into the first of the above camps, some the latter. Some will fall away after the short-term shot of optimism fades; others will make good on this once-in a generation opportunity and consolidate dominant market shares into impregnable economic fortresses. Over the past decade we have initiated holdings in several 'tech' names that we are confident fit this second set.
By and large, these have driven our performance this year, though clearly we could have had more. (We might weakly protest that several others are monitored from the safety of our investment universe, but in 2020 a FANG in the portfolio would have been worth considerably more than two in the watch-list.) As such your Fund (after a helpfully strong +4% December) ended the year roughly in line with the index, suffering a narrow 57bps shortfall. A glance at our victors and losers lays bare the above dynamics. Our top five performers over the year (in local currencies) were PayPal returning 117%, Prada 59%, Nintendo 55%, Intuit 46% and eBay 41%, and all (with the arguable exception of Prada which benefited from the quick recovery in China) are clear digital winners - each leading their respective industries, offering valuable services or diversions to locked-down customers.
Our bottom three consisted of Celtic FC -38%, Juventus FC -35% and World Wrestling Entertainment -25%. i.e., our three sports franchises, all of which rely to a greater or lesser extent on live performances and interactions - most of which have been put on hold (or at the very least, socially distanced).
Walt Disney's 25% return (most of which came in December as bullish targets were announced for Disney+) and RELX's -4%, represent curious hybrids of the two. Both provide compelling, digitally delivered content, but also seek monetisation through physical events (parks and sports in Disney's case, conferences in RELX's). In the middle are our consumer stalwarts that, all things considered, held up pretty well (e.g., Mondelez returning 9%, PepsiCo 12% or Unilever 4%), taking share through difficult circumstances in pretty much every reported instance. Again though, those with physical 'on-trade' (i.e., pubs and bars) exposure suffered in the short-term (e.g., Diageo -8% or Heineken -9%) and it was these relatively large positions (vs. the small weightings to sports franchises) that held us back the most. So, as investors how should we prepare for the next unexpected event? Sadly we can’t know for sure, but chasing last year's champions without long-term foresight already feels parachronistic.
Some will have predicted the pandemic (some always do), but it is probably only now that most barn doors are being nailed shut. Instead, we look to stable companies with solid balance sheets, decades (if not centuries) of operating experience and truly desirable products. Differentiated products that should transcend technology-driven shifts in distribution or delivery. We took that view pre-COVID, took it during the crisis (during which we made almost no changes to the portfolio) and - as conscious as ever of our inability to foresee future black swans - still take it today.
#149
Re: Cartera completa del Lindsell Train Global
Buenas tardes,
Me podría indicar como obtener las 25 principales posiciones de este fondo desde morningstar?. he accedido a su cartera como ud nos indica, pero solo aparecen las 10 primeras posiciones de la cartera.
