SMT recent performance

AnotherJoe

jscol said:

I've never sold any funds before. 
Always thought I was a long term investor. Always believed you can't time markets etc.  However recently SMT had done so well I thought I would sell £2000 worth and bank some profits.  The price at that stage was 980p. This was about 2 weeks ago. Tonight I see they are upto 1056p. I think I've learned something, namely how unpredictable the markets are. I really thought 980 was as high as it would go and I'd get back in at a lower price. I really enjoy reading these forums and learning but sometimes you have to see the consequences of your actions to better appreciate the markets. 

I don't understand why you think you've learned how unpredictable the markets are simply because you got the timing of selling a share wrong. That implies you were correct about what it should do and because it didn't do that, the markets are irrational. Maybe you were irrational to believe you knew what the markets will do short term? 

The only reasonable lesson would have been that you don't understand what SMT (or all shares? )  will do short term.

If you really believed that you understood that SMT would go to 980, fall, and then rise back above 980 that would have been a remarkable predictive power you held. 

IMO only good reasons to sell SMT are ; you need the money, you've got something better to put it in, it's too high a % your portfolio (above whatever  level that is for you), realise CGT.

But Not because you think you can time the markets.  

My remarkable predictive powers tell me Shell is destined to fall further long term. What it will do tomorrow, no idea. Value share? Pah !   

jscol

AnotherJoe said:

jscol said:

I've never sold any funds before. 
Always thought I was a long term investor. Always believed you can't time markets etc.  However recently SMT had done so well I thought I would sell £2000 worth and bank some profits.  The price at that stage was 980p. This was about 2 weeks ago. Tonight 

I don't understand why you think you've learned how unpredictable the markets are simply because you got the timing of selling a share wrong. That implies you were correct about what it should do and because it didn't do that, the markets are irrational. Maybe you were irrational to believe you knew what the markets will do short term? 

The only reasonable lesson would have been that you don't understand what SMT (or all shares? )  will do short term.

If you really believed that you understood that SMT would go to 980, fall, and then rise back above 980 that would have been a remarkable predictive power you held. 

I totally agree. That's my point. I thought I could predict the short term movement of shares. I was irrational. 
I think many of my investment decisions are fine. My portfolio doesn't keep me awake at night, I invest via an ISA, I have regular income and DB pension provision, I didn't panic when everything went red and my portfolio plummeted in the spring. 
However I recently decided that SMT were doing particularly well and sold about 14% of my holding as I thought that price couldn't be maintained! Not disastrous but a totally irrational decision. 

Thrugelmir

Hence the saying   "No one ever went broke by taking profits" 

While goes against the mantra of running your winners. Stocks that have high levels of volatility are the ones where ultimately you'll get your fingers burnt.  As it's money flow that's driving market performance not underlying financial performance. 

Prism

Thrugelmir said:

Hence the saying   "No one ever went broke by taking profits" 

While goes against the mantra of running your winners. Stocks that have high levels of volatility are the ones where ultimately you'll get your fingers burnt.  As it's money flow that's driving market performance not underlying financial performance. 

With a trust like SMT it is estimated future financial performance which is driving it rather than just the fact that currently stocks are more attractive due to lower interest rates. The managers of SMT sometimes refer to their valuation methods and suggest that they feel the current prices of companies like Amazon and Tesla are fair. They pretty much disregard traditional metrics like PE. 

itwasntme001

Prism said:

Thrugelmir said:

Hence the saying   "No one ever went broke by taking profits" 

While goes against the mantra of running your winners. Stocks that have high levels of volatility are the ones where ultimately you'll get your fingers burnt.  As it's money flow that's driving market performance not underlying financial performance. 

With a trust like SMT it is estimated future financial performance which is driving it rather than just the fact that currently stocks are more attractive due to lower interest rates. The managers of SMT sometimes refer to their valuation methods and suggest that they feel the current prices of companies like Amazon and Tesla are fair. They pretty much disregard traditional metrics like PE. 

Any stock is driven by current and future financial performance because the markets are a discounting mechanism of all potential future outcomes.  That translate to a trust, which itself owns some stocks, being driven by the current and future performances of the stocks it holds.

The type of stocks SMT holds are generally based more on future performance, i.e earnings, further out into the future compared to more "value" type of stocks which are more driven by earnings expected in the nearer term.  This is why stocks which SMT holds are a lot more sensitive to interest rates because they are high duration assets. It is why we got a tech sell-off at the start of 2018 because there was an inflation upside surprise (which itself caused a rise in interest rates) and it is partly why we got a sell-off at the end of 2018 as the FED was looking to move more hawkish (which was U-turned in 2019).

Markets seem to be expecting low inflation for a very long time and so it is not surprising growth/tech stocks have done so well.  Any inflation shock to the upside will be quite interesting in terms of what happens to the share prices such as SMT's.

Any sane investor would not be looking at PE in isolation because it doe snot include anything about the growth in earnings, which is really what matters for future investment performance.

itwasntme001

I own SMT and am holding it for the long term.  I expect a lot of volatility in its share price for the reasons mentioned above.  But I am confident they will still add value over time.

Thrugelmir

SMT's share price is driven by the market value of it's underlying holdings. Something totally outside of the investment managers control. The investment managers cannot trade in and out of £1 billion plus stock positions (i.e. Tesla) on a whim. Irrespective of their view on it's valuation and future financial performance. Coupled with the fact that there's then the associated problems of reinvesting the liquidated funds elsewhere.  Investors however can make their own judgement call once individual stock position(s) starts to dominate an investment fund or particular stocks have an exceptional short term gain. 

itwasntme001

Not only are growth stocks sensitive to interest rates because of the discount factor (denominator), but also, as an example, inflation rising.  Inflation rising is also correlated with a rise in interest rates.

Higher inflation will hurt companies like Amazon adversely through their earnings (the numerator).  Amazon reinvests much of their free cash flow back into its business in capex etc.  If inflation rises, the cost of capex will rise.  Earnings expectation would have to come down.

It is important to know holding any of these stocks is not without risk at all.  I hold a lot of these types of stocks in my portfolio and I do wonder from time to time at what point will it come time to sell.  Forecasting inflation and interest rates with accuracy is virtually impossible.  There will be a time to sell but no one knows when.

BuildTheWall

Prism said:

With a trust like SMT it is estimated future financial performance which is driving it rather than just the fact that currently stocks are more attractive due to lower interest rates. 

Estimated future performance will be driving the premium of the trust, not the value of underlying. The value of underlying shares are driven by their own factors. 

There’s a reason money was flowing into tech stocks. Have you looked at the record profits declared by tech companies? Sure, the PE ratios have gone up, but that’s because other industries need to spend on technology to survive in this century and these big techs pretty much run monopolies. 

Prism

BuildTheWall said:

Prism said:

With a trust like SMT it is estimated future financial performance which is driving it rather than just the fact that currently stocks are more attractive due to lower interest rates. 

Estimated future performance will be driving the premium of the trust, not the value of underlying. The value of underlying shares are driven by their own factors. 

There’s a reason money was flowing into tech stocks. Have you looked at the record profits declared by tech companies? Sure, the PE ratios have gone up, but that’s because other industries need to spend on technology to survive in this century and these big techs pretty much run monopolies. 

Yes the value of the underlying shares are driven by their expected future financial performance - where they may be in lets say 5 years or more. I am in agreement as to why all of money is going into tech.