Where to now for Smithson?

bowlhead99

aroominyork said:

I say: SSON's underperformance against VWRL is not due to it being smaller companies focused; it's due to SSON being an IT and not an ETF since many ITs got heavily discounted for a couple of days". 

The factors that can cause an investment vehicle like SSON to 'suffer more on the downside' (despite doing better on the upside) include holding smallcaps, holding them in a concentrated fashion with 30 or fewer positions, and holding them in an investment trust vehicle whose price available in the market for exiting investors can be less than the sum of its parts.

As shown, the mid-cap ETF gave more downside than the large cap ETF, consistently with smallcaps often being seen to fall more than largecaps.  SSON gave as much or more downside as the mid-cap ETF because despite fortuitous stockpicking, it fell to a discount because it was using an IT structure, and because it had a concentrated set of smallcap holdings it fell to a greater discount than if it had had a diversified set of largecap holdings (i.e. dropping 14-17% for a few days rather than the 10-12% for Bankers in the same few days).

As I said in my earlier post, I'm not saying SSON didn't hold up well. It's a smaller-companies investment trust with a concentrated portfolio and so it could have easily lost over 50%, and it didn't on this occasion, only dropping 35% before recovering, and it was only at its highest discounts of 14-17% for a few days. We will have to see how it fares in future crashes, as there haven't really been any in the short period they've been running.

Sailtheworld

aroominyork said:

Sailtheworld said:

aroominyork said:

Sailtheworld said:

aroominyork said:

bowlhead99 said:I'm not saying it didn't hold up well in this particular set of circumstances.

and I pointed out that if you strip out the the discount which affected a wide range of ITs over that week, Smithson held up very well compared to VWRL.

Buying trusts because they're at a discount is all well and good but it's a bet that you think the market has got the discount value wrong and will correct.

There are only two prices. The one you can buy at and the one you can sell at. Stripping out discounts is an exercise in delusion - you can't buy or sell the NAV.

You're missing the point, Sailtheworld. Bowlhead highlighted SSON's fall compared to VWRL as an example of the volatility of midcaps. I pointed out the data was from a week when many ITs - including large caps - took a quick and dramatic deep dive into discount territory. So he was comparing apples and pears: if VWRL was an IT rather than an ETF it would likely also have 'gone discount' and SSON would not appear to have performed worse. 

Well sure if VWRL was an IT probably that would have happened and if my aunty had balls she'd be my uncle.

Of course, with hindsight, the discount dip proved to be short lived but that wasn't known at the time. The like for like comparison is the selling price. There's nothing else.

I'll try once more. 

Dunston says: "Being smaller companies focused, [Smithson] will be more volatile and would be expected to make more on the upside but suffer more on the downside."   

Bowlhead says: "Yes, as examples of recent crash for few weeks following 19 Feb:
VWRL (vanguard ftse all world) £74.07 to £ 55.56 (-25%)
IWFS (ishares MSCI world midcap equal weight) £29.71 to £19.80 (-34%)
SSON (smithson) £13.88 - £9.10 (-35%)" 

I say: SSON's underperformance against VWRL is not due to it being smaller companies focused; it's due to SSON being an IT and not an ETF since many ITs got heavily discounted for a couple of days". 

You say: "Meet me auntie, such a lovely man". I reply "But she's not a man" and you says "But if she had balls she would be."

I don't care who said what. If you want to measure the performance of a financial instrument then the price you can get is the yardstick. If the ITs were discounted heavily for a couple of days that's just another way of saying the price was lower.

Sailtheworld

Prism said:
Unless you buy or sell then the selling price is actually irrelevant too. Other than that tracking NAV is just as useful in an exercise to work out if a funds strategy has something going for it. When I am researching a trust I pay more attention to NAV than the price of the shares until I have come to a decision that I might want to buy it. In fact we could dismiss all of what has happened over the last few months except for those in drawdown maybe or those doing a bit of selling and buying to boost their return a bit 

Sailtheworld said:

Of course, with hindsight, the discount dip proved to be short lived but that wasn't known at the time. The like for like comparison is the selling price. There's nothing else.

Just because the market barks out a price doesn't mean anyone is compelled to act and, 100%, many people would've been better staying in blissful ignorance. Of course NAV's important; nobody is saying otherwise; just that when it does become relevant you can't sell the NAV. Nobody should put themselves in the position of being a forced seller but it seems like a bit of a liquidity risk if discounts can drop suddenly for a couple of days. 

aroominyork

Sailtheworld said:

aroominyork said:

Sailtheworld said:

aroominyork said:

Sailtheworld said:

aroominyork said:

bowlhead99 said:I'm not saying it didn't hold up well in this particular set of circumstances.

and I pointed out that if you strip out the the discount which affected a wide range of ITs over that week, Smithson held up very well compared to VWRL.

Buying trusts because they're at a discount is all well and good but it's a bet that you think the market has got the discount value wrong and will correct.

There are only two prices. The one you can buy at and the one you can sell at. Stripping out discounts is an exercise in delusion - you can't buy or sell the NAV.

You're missing the point, Sailtheworld. Bowlhead highlighted SSON's fall compared to VWRL as an example of the volatility of midcaps. I pointed out the data was from a week when many ITs - including large caps - took a quick and dramatic deep dive into discount territory. So he was comparing apples and pears: if VWRL was an IT rather than an ETF it would likely also have 'gone discount' and SSON would not appear to have performed worse. 

Well sure if VWRL was an IT probably that would have happened and if my aunty had balls she'd be my uncle.

Of course, with hindsight, the discount dip proved to be short lived but that wasn't known at the time. The like for like comparison is the selling price. There's nothing else.

I'll try once more. 

Dunston says: "Being smaller companies focused, [Smithson] will be more volatile and would be expected to make more on the upside but suffer more on the downside."   

Bowlhead says: "Yes, as examples of recent crash for few weeks following 19 Feb:
VWRL (vanguard ftse all world) £74.07 to £ 55.56 (-25%)
IWFS (ishares MSCI world midcap equal weight) £29.71 to £19.80 (-34%)
SSON (smithson) £13.88 - £9.10 (-35%)" 

I say: SSON's underperformance against VWRL is not due to it being smaller companies focused; it's due to SSON being an IT and not an ETF since many ITs got heavily discounted for a couple of days". 

You say: "Meet me auntie, such a lovely man". I reply "But she's not a man" and you says "But if she had balls she would be."

I don't care who said what.

Great - my wife trolling me again. Carry on like this and you can forget about that yacht.

schiff

While confessing not to fully understand the ramifications of NAV etc, I found this in chat on another forum. It may be relevant. Dated the middle of April:

"Here's a reply I received from SSON
There are two aspects to this question that need to be addressed separately. 
Firstly, the shares are only ever issued at a premium to the Net Asset Value. As such, the existing shareholders in Smithson benefit from an enhanced net asset value following any tap issue. There are also a number of softer benefits to the issue of shares. First, from the Investment Management team’s perspective, they can tweak the portfolio more efficiently. Secondly, the fixed costs involved in the running of Smithson are spread over a greater value meaning there is a slight reduction in the costs and charges.
The second aspect to your question, what would have happened to the share price, is far harder to judge. Ultimately, over the longer term, the share price should follow the net asset value and, therefore, over the longer term, the benefits outlined above also apply to the share price. In addition, the issue of shares does have the added benefit of increasing the liquidity in the shares, which is of benefit to all shareholders in the event they want to buy or sell."