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Fundsmith Emerging Equity Trust
laang lee
Posted: 02 December 2017 15:25:16(UTC)
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I have just been reading General Zod from 5 months ago, with great interest in the replies. I also read "Transactions" with interest about twice a week. This Forum is a wealth of information.
Still have more to do, before making a lump sum investment, but I doubt whether I would have considered Vanguard until reading so much here -thanks to King Lodos. Plus a lot of other regular contributors, & will click thanks when I have another read through.
What to do with a lump sum has been covered, so I have a couple of other questions to put.
I've headlined FEET, so will come back to that.
The second question is about Black Rock Gold and General. Having held it years ago, I have watched it on and off, and have seen no other fund just keep on going down for years.
But because, so often advisors recommend holding a portion in gold, when I noticed it climbing up last year I bought, and bought again. Round figures, bought at £8 and sold a short while later for £12. Having watched the price fall again, I thought, "If it falls below £10, I'll buy again." and hold. However, it does not seem to be one to hold, Royal mint has small gold bars they will store, but the spread is quite high. I wonder if Bitcoin has taken the sparkle out of gold.
I've not read anything about gold on here.
Back to FEET, Fundsmith was mentioned in General Zod, (I have read the articles on Citywire, and elsewhere, about FEET.) But it is the UK Fundsmith that has all the plaudits.
OK -so it is China that has boosted emerging market returns this year.
I would compare FEET with others with a larger holding in India. There was some comparison before with Pacific Horizon and PAC. on here.
I also hold India Capital Growth. Samesame but different. Kotak did well, then floundered.
Any readers interested in FEET, who believe Fundsmiths' style will produce the sort of performance followers hope for.? Also, with the emphasis on quality long term holdings do you think it is more safe than other funds in the same area.?
2 users thanked laang lee for this post.
Mickey on 02/12/2017(UTC), Tim D on 02/12/2017(UTC)
chubby bunny
Posted: 02 December 2017 16:10:11(UTC)
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FEET's not for me. If it ever goes to a decent discount it might be a bit more appealing, but it's under performed the sector 3 years in a row and has some of the highest charges too. PAC also has a third of its portfolio in India but is 28% ahead of FEET over 3 years. For frontier markets I'd much rather go with BRFI, which has the performance to justify its high charges, but not on a premium of 11%.
3 users thanked chubby bunny for this post.
Vince. on 02/12/2017(UTC), laang lee on 02/12/2017(UTC), Harry Trout on 03/12/2017(UTC)
Captain Slugwash
Posted: 02 December 2017 16:25:24(UTC)
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The idea behind FEET appeals to me, but when I look at company accounts and profits derived from Asia and developing markets I realise that I could get plenty of exposure from the likes of ULVR, PG, Nestle, MDLZ and numerous other producers of consumer staples.

Several of FEET's holdings will also be part owned by the large global players, or producing products for them under license.

I suppose the iShares Global staples ETF (KXI) or similar could do the same for 0.5% fees. The Vanguard S&P version is 0.15%

I hold PG & MDLZ and a few more not named here.
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laang lee on 02/12/2017(UTC)
Tim D
Posted: 02 December 2017 18:26:32(UTC)
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laang lee;53867 wrote:
The second question is about Black Rock Gold and General. Having held it years ago, I have watched it on and off, and have seen no other fund just keep on going down for years. But because, so often advisors recommend holding a portion in gold, when I noticed it climbing up last year I bought, and bought again. Round figures, bought at £8 and sold a short while later for £12. Having watched the price fall again, I thought, "If it falls below £10, I'll buy again." and hold. However, it does not seem to be one to hold, Royal mint has small gold bars they will store, but the spread is quite high. I wonder if Bitcoin has taken the sparkle out of gold. I've not read anything about gold on here.


Investing in gold *miners* (which is what you're doing when you invest in Black Rock Gold and General) is a different beast from investing in physical gold. In normal times a rise in gold prices will boost the value of both... however if you look into what happens when things really turn ugly (which is probably when you were most hoping these holdings will show their worth), you may well see gold miners' stock prices heading south even as physical gold soars. Play around with https://www.portfoliovis...-asset-class-allocation to see what I mean (it has "Gold" and "Precious Metals" asset classes, but that "Precious Metals" is actually gold miners' stocks rather than the commodity).

There are plenty of efficient ways of getting exposure to physical gold (e.g SGLN - iShares Physical Gold ETC but there are many other options. Of course the real goldbugs would tell you "if you can't hold it you don't own it").

Gold does occasionally get mentioned here, usually in connection with its role as part of a broadly diversified multi-asset portfolio. See threads like https://moneyforums.city...-IT-Fund-Portfolio.aspx and maybe http://moneyforums.cityw...st4470_ETF-of-ETFs.aspx . I doubt you'll find any discussion of "is it a good time to buy gold?" (or miners) here; it's more of interest for its diversifying/uncorrelated aspects.
3 users thanked Tim D for this post.
Freddy4Skin on 02/12/2017(UTC), laang lee on 02/12/2017(UTC), Mike L on 03/12/2017(UTC)
jvl
Posted: 03 December 2017 10:12:20(UTC)
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I like the idea behind FEET and have some.

The only thing that bothers me is that Terry Smith said a while ago that he'd be shocked if FEET didn't outperform Fundsmith (due to its portfolio having higher returns on capital invested). Then a few months later, when he had a couple of hundred million burning a hole in his pocket, he chucked it all in ... Fundsmith, not FEET!
5 users thanked jvl for this post.
Freddy4Skin on 03/12/2017(UTC), Guest on 03/12/2017(UTC), laang lee on 03/12/2017(UTC), Tim D on 03/12/2017(UTC), Dennis . on 04/12/2017(UTC)
King Lodos
Posted: 03 December 2017 13:15:20(UTC)
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It's nice he's made something that's really going to perform differently from the usual EM fund.

But average fwd PEs around 28 .. P/B 8.

I'd have seen EM as a chance to pick up Fundsmith-like companies on *lower* valuations .. It's a real bet on his philosophy of buying profitability .. But if the companies were that good – good enough to justify the higher trading costs and lower liquidity – wouldn't any of them feature in Fundsmith? .. I'm certainly watching with interest .. It's a difficult strategy to backtest fairly – Buffett knows profitability is the real driver of returns, but also knows you can overpay for things
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laang lee on 03/12/2017(UTC)
Micawber
Posted: 03 December 2017 13:32:17(UTC)
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I recall that one of Smith's arguments when he set up FEET was that in the course of looking for Fundsmith investments they'd come across many companies which met the profitability criteria but which were smaller and didn't meet the other criteria for the Fundsmith pf.

I like the idea of FEET, and bought and sold it after a while, just above breaking even; but for me the main problem is that a trust of that risky nature should be on a discount of say 12 - 15% rather than at par on on a small premium - particularly as the performance so far has been nothing to go wild over. It's another one where investors are paying a heavy premium for a name (and in an area, emerging markets, where the manager has yet to demonstrate premium skill).
6 users thanked Micawber for this post.
laang lee on 03/12/2017(UTC), Tim D on 03/12/2017(UTC), Vince. on 03/12/2017(UTC), King Lodos on 03/12/2017(UTC), Mickey on 04/12/2017(UTC), Fiona D. on 10/12/2017(UTC)
chubby bunny
Posted: 03 December 2017 13:54:46(UTC)
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The high portfolio turnover also seems antithetical to Terry's investing philosophy and doesn't exactly make one confident in his EM stock picking ability.

'Last year 38% of the trust's holdings were replaced, and in the first six months of 2017, nine companies were bought and five sold, representing a 12.3% rate. By contrast, Fundsmith Equity bought a single company and sold none over the same six-month period.'

http://citywire.co.uk/in...s-feet-stumbles/a1044067
3 users thanked chubby bunny for this post.
laang lee on 03/12/2017(UTC), Tim D on 03/12/2017(UTC), Mickey on 04/12/2017(UTC)
laang lee
Posted: 03 December 2017 15:44:09(UTC)
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Thanks everybody, all names I've seen before, and all with a different angle. I guess the jury is still out on the question " Can Terry Smith do with EM what he did with Fundsmith."? Wait and see.
Lots of ways to hold gold, but why, ? when whatever you want to buy can be bought with cash. Unless you use bitcoin, but why spend bitcoin now when those you hold are going up in value.?
Heard on radio of a man who paid £ks into the bank for bitcoin, and never received them.
The fallout, when it comes, will affect us all.
Guess I am going to continue looking for EM and SEA funds.
I like the ethics of Stewart Asia (from what I read). But it has middle of the road performance.
Aberdeen Smaller Asian could find some star co.s.
As with Fundsmith, Marlborough has done very well with UK smaller co.s, but less well with its Asian smaller co.s.
I will do some of my own research, because I don't want to appear to be lazy. But my next new topic could be *Last years Winners* eg Lindsell Train - 1st of 23, and again, 1st of 23,.now bottom of the class. Not 5/23 or 7/23 but 23/23. And there's more. There must be articles on this topic somewhere.
Tim D
Posted: 03 December 2017 16:04:18(UTC)
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My most direct play on EM consumer growth is "iShares MSCI EM Consumer Growth ETF" (GBP ticker IEMG; USD CEMG; not to be confused with the stateside IEMG which is vanilla MSCI EM). Tracks "an index composed of companies that derive high or growing revenues from emerging markets countries". Quite a bit cheaper than FEET with a 0.6% OCF! PE ratio 26, PB 3.17. So far so good (+40% in ~2.5 years c.f VWRL benchmark +33%; even better vs. VFEM's +20%). Inspired to buy after watching a lot of Hans Rosling presentations. Is a bit "odd" in that it's a mix of developed and developing world companies, so you have Chinese internet companies alongside Apple and Unilever and Philip Morris (so very dissimilar to FEET). The Tencent and Alibaba holdings probably explain much of the outperformance vs VWRL; may yet backfire spectacularly of course. My first choice at the time would have actually been "DBX MSCI EM Consumer Discretionary ETF" (ticker XMEC) which was more limited to EM companies marketing to EM consumers... but it had no GBP units and my platform wouldn't carry it; in any case I see it was wound up at the end 2016.

Browsing around some of the old FEET news I was a bit struck by this WhatInvestment piece:

Quote:
Smith noted that amongst his investments is Vinamilk, a milk business in Vietnam. He commented, ‘Vinamilk is a partnership with the Vietnamese government, that is a communist government. And if there is one thing communists know about it is monopolies! So the market position the company has there is quite secure.’


but then in the same article there is:

Quote:
One market in which Smith has very little exposure is China, he is wary of the investment climate there, commenting, ‘the problem is the government can simply take your property away.’


which seems more than a little contradictory to me!
5 users thanked Tim D for this post.
Vince. on 03/12/2017(UTC), Micawber on 03/12/2017(UTC), Mike L on 03/12/2017(UTC), laang lee on 03/12/2017(UTC), Sara G on 04/12/2017(UTC)
Dennis .
Posted: 04 December 2017 09:58:38(UTC)
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Having been investing for 40 years I have been through the BRICS and the MINTS and China and tech bubble fever etc. Whilst emerging and new markets should logically have the possibility of greater gains, my own experience has been negative and my best investments have been in the big boring stuff like Fundsmith Equity, Shell, BP, NG Unilever etc and this is where I will stick for now on.

On the question of an impending market crash/correction "because markets are at an all time high" I would point out that markets have gone largely sideways for the past decade or more and in real terms the FTSE should be up over 9000 so markets aren't really high at all.

My last point is about investing in emerging markets. I have two sons who have worked extensively in various South American and African countries. They would not invest in either market for reasons not just of corruption but that they just don't seem to work hard enough in those places. It's a culture thing, perhaps in 25 years it might be different.
10 users thanked Dennis . for this post.
Tim D on 04/12/2017(UTC), Mickey on 04/12/2017(UTC), Guest on 04/12/2017(UTC), Captain Slugwash on 04/12/2017(UTC), laang lee on 04/12/2017(UTC), Sara G on 04/12/2017(UTC), Lemanie on 05/12/2017(UTC), Jim Thompson on 05/12/2017(UTC), Alex Peard on 05/12/2017(UTC), antigricer on 05/12/2017(UTC)
King Lodos
Posted: 04 December 2017 11:24:41(UTC)
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Markets have gone sideways, but what they haven't done is come down from the excess highs of the 90s:

https://i.imgur.com/Ik4PYHh.jpg

You can see underlying earnings relative to price in grey .. Some big investors sat on the sidelines in the 90s because stocks were too expensive .. This was a mistake, but it did predict the cyclic bear market we've been in since .. The problem is markets still haven't corrected – and developed market growth's slowed.

With the risk-free (10yr treasury) rate below 2.5%, and the earnings yield on US Stocks 3.4%, you have to expect a 10-20 year period of lower market returns .. We could push valuations higher, but you're only ever borrowing those returns from the future.

A proper market correction would be the best thing for investors .. Ruffer and others think a return to runaway inflation is inevitable at some point – perhaps a return to the 70s, when stocks and bonds were awful investments – which is when TIPS and gold might come into their own .. On valuations, Emerging Mkts are one of the only areas that could produce the 7-8% annual real returns investors expect from stocks – having both growth and valuations in their favour .. They may also have a lot more risk, but corrections are opportunities to buy
4 users thanked King Lodos for this post.
Tim D on 04/12/2017(UTC), laang lee on 04/12/2017(UTC), North Star on 05/12/2017(UTC), Mike P on 10/12/2017(UTC)
Jim S
Posted: 04 December 2017 11:27:51(UTC)
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I hope FEET does well, but I think the jury is still out. Its not always easy for a fund manager to switch investment areas and replicate the same approach they used before to get the same results. Just look at FCSS & how it underperformed under Bolton, not to mention WPC.
I can't offhand think of a fund manager who has managed such a transition with great success.

For EM OIECs, 2 stand out for me, Hermes Global Emerging Markets & Baillie Gifford Emerging Markets.

For EM ITs, BlackRock Frontiers Investment Trust is at 7% premium which seems expensive to me.
Utilico Emerging Markets is at 13% disc has the advantage of being quite defensive. It will probably never make spectacular returns, but it should be quite resilient in a bear market.

I've read some good things about Templeton EM turning things around recently, both that and JP Morgan EM seem reasonably priced at around 12% disc.
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Tim D on 04/12/2017(UTC), laang lee on 04/12/2017(UTC)
laang lee
Posted: 04 December 2017 22:30:59(UTC)
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To King Lodos, Looking at the red line, we can see the recent rise, compared to previous booms, and from that speculate whether markets are toppy. Then look at the long flat 70's with a big dip in the grey. Just wish there was a line showing inflation as well.
Thanks to Tim D, I had read the article on Terry Smith a year ago, read it again, and scrolled down to another. He may well have said the same had they been written Aug17. What struck me was his self confidence. But he'd not be where he is today without that. (and I don't mean *in Mauritious*.)
Dennis .
Posted: 10 December 2017 10:18:27(UTC)
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As I have over half of my portfolio ie about £300k invested in Fundsmith I set up a Google daily alert to keep an eye on things. Every day I get an email with interesting snippets like - they have just bought another n,000 shares in one of their holdings. OK so far so good but there are also some divestments of a few thousand shares in some of these companies like the one below

UtahHerald.com
Fundsmith Llp decreased Idexx Labs Inc (IDXX) stake by 0.76% reported in 2017Q2 SEC filing. Fundsmith Llp sold 34,167 shares as Idexx Labs Inc (IDXX)'s stock rose 13.64%. The Fundsmith Llp holds 4.45 million shares with $717.68 million value, down from 4.48 million last quarter.


I wonder what is going on since, after all, if there is a buy and hold forever strategy, then why are they selling anything? Perhaps it's to keep the portfolio balanced to their liking or a bit of profit taking but these actvities do incur costs - so I wonder what goes on? I would have thought that the cash flow into this fund would be sufficient to cover any redemptions by investors.
2 users thanked Dennis . for this post.
Tim D on 10/12/2017(UTC), laang lee on 11/12/2017(UTC)
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