Member Info for fela96

Technical analysis is proven nonsense.

Beachhouse, can you point to a time during the past 30 years when SMT underperformed the S&P 500 index as much as it is now, on a 5 yearly basis?

I understand it's crashed in the past, but in the dotcom crash and GFC, the indexes also crashed. This time the indexes are just fine, it's only SMT which has crashed.

That's the question nobody seems able to answer...

So you're just going to ignore the fact that the NAV is also under-performing?

I've bought at many levels ranging from £4 to £15.

LLL, if you want to present to me a well-reasoned argument disputing anything I say, I'd love to have my mind changed. But so far none of what you've said made any sense on a purely logical level. And when I complain about that, you shoot me down by saying you'd rather not engage in "debating logical fallacies" (I think that was one gem of a quote), which really means you just can't be bothered to argue your case and wish I'd just shut up and be convinced.

Regarding investigation of the causes of under-performance, on this board at least that has been very amateurish, because all of the proposed causes are irrelevant, given the global context. The discount is completely irrelevant because the NAV itself has under-performed, and yet people keep bleating on about that. And interest rates are irrelevant, because global stock markets have recovered (pretty much) in anticipation of inflation slowing. So please, don't whine when I carry on asking a question which hasn't been answered.

Dontshootme, I'm hoping that the holdings themselves aren't iffy, just the market's perception of them are. In other words, I'm hoping the market is either plain wrong, or short-sighted enough for me to benefit. Which I know is risky, but I'm in my 20s, so can afford to take a risk. I'd be sweating if I was over 50 and holding this.

Tambo, what you should know about LLL is that he has trouble with the idea that anybody could possibly disagree with a word he says, and the moment they do, he takes it personally, presumably because he suffers from cognitive dissonance when he realises his own opinions aren't founded in reason.

We as holders should be wary of blind optimism, and if our fund is severely under-performing the market on a long-term basis, as it currently is, we should not do as the ostrich LLL does and bury our heads in the sand, we should ask the question: why?

And in this case, the question "why" is NOT explained by "bad UK investor sentiment", or "inflation", or "interest rates" or any of that stuff. The NAV (not just the price) is underperforming global markets. Understand that and ask why. It might not be a pleasant answer.

I know you were talking about the discount, but have you considered that even without the discount, SMT would be vastly underperforming US markets?

I don't think SMT's underperformance can be explained by inflation, or UK specific investor sentiment. Its NAV has underperformed, regardless of discount.

Dontshootme, isn't that a red herring though? SMT's NAV is still below where it was a year ago, while US markets have recovered. The NAV is determined by what all market participants are prepared to pay for the underlying holdings, so definitely no UK bias there at all.

I agree with LLL here, I have no clue why people keep talking about UK figures here. The trust has hardly anything in the UK, how is it relevant beyond the fact that it's traded in GBP?

What it seems to show to me is that SMT underperformance isn't explained by inflation or interest rates in general. Inflation is clearly on the right track (globally), and US markets reflect that, but SMT is lower than where it was at the height of the inflation / Ukraine war panic last year. This seems more fundamental; SMT's companies simply aren't predicted to do well by the market. Hopefully the market's wrong.

Bear in mind that SMT's discount has doubled in the past six months, from 10% to 20%. SMT price no longer reflects value of SMT portfolio, they don't move together in the short term.

LLL, why can't you handle the idea that your arguments aren't convincing somebody? My mind is very open, your arguments simply make no sense!

For example, the reason SMT's sp has increased more than CTY and it has a higher total return, is because its companies reinvest in themselves. That's exactly my point can't you see? The point of CTY is not to provide sp growth, rather to provide a stable and good income. It's much better at that than SMT could ever be, so if you want income from your portfolio why would you not use an income-focused fund to do so?

In computing there's a philosophy called the UNIX philosophy, which states that things should do one thing and one thing well. Just as you wouldn't expect CTY to start investing in private equity, so you wouldn't expect SMT to start paying a dividend - or so it would seem to me at least.

Not sure that answers my question really. CTY's yield is 5.07%, while SMT's is 0.62%. CTY's share price is about where it was 5 years ago. SMT's is, er, also about where it was 5 years ago, if you ignore all the crushing volatility in between.

If you want a retirement income, why not put enough into CTY to get the desired income you want, and then the rest in SMT to get it to grow? After all, you'd need 8x less capital to get the desired income in CTY as you would in SMT, and you'd suffer less volatility. And if you do something sensible like that, the SMT dividend is completely superfluous.

The idea that SMT is a catch-all growth and income trust meant to cater for the needs of retirees, is new to me.

LLL, let me ask you this then: given that all the stocks in SMT's portfolio are growth stocks, that is, they are intended (and expected) to grow their revenues and bottom lines over the next few years / decades, do you think any excess cash that SMT has is better utilised in your (and other shareholders') pockets, or invested in the companies it owns?

If you think it is better utilised in your pocket, why bother investing in SMT at all, since you believe you can achieve a greater return than its portfolio?

Thirdly if you are investing in SMT for the purpose of receiving a regular income, why not put that money in a stock which produces a much higher yield, and with much less volatility on the value of the shares? Such as CTY or any other old-world dividend income stock portfolio.

Yep, the SMT dividend is a detractor to its total return, especially with every reinvestment being subject to fees and taxes. Surprised nobody's pointed this out at the shareholder meetings. The idea of a private equity portfolio paying any kind of dividend seems laughable to me.

There's a case to be made that companies which pay too much of their profits as dividends are less likely to succeed and grow, because they're not reinvesting their profits into the business (as much). It's a sign that they don't know where to put their excess cash, or are too scared to plough it back into the business.

Anyway, with that in mind I do wonder whether SMT's puny dividend would be better invested in its portfolio.

I think the strategy with moderna is to trust that they're at the center of mrna tech, that mrna tech will take over medicine and that they'll win big for this reason. It's hard to quantify the likelihood of any of that happening, even experts are notoriously bad at predicting the future. If it doesn't happen, it's no disaster, just opportunity cost. I remember when people were saying they wouldn't touch SMT because of its Tesla holding though. Look how that turned out for them :-)

If you'd rather discuss something else then that's fine, if you're sick of a discussion, don't reply. Don't try to shut down a conversation with false information like "if you extrapolate backwards with any underperforming share, it'll underperform its peers". The nasdaq 100 outperformed the S&P 500 from 1995 to 2002, despite hugely underperforming it during the dotcom crash. Its outperformance in the years prior made up for it so that the nasdaq was up by 100% still, while the S&P was only up by 65% over the same period. (Not including dividends to be fair, but I shouldn't think that made much difference).

There are countless other examples of underperforming shares, like Tesla last year, which extrapolated backwards (say 10 years) still crushed most other shares or indexes.

Walp, the reason this discussion about performance is going nowhere is this:

1. I claim SMT is failing and then give a criteria by which I make that judgement

2. You and others claim SMT isn't failing because you have some other criteria by which you judge it

3. I remain unconvinced because you never made a solid argument in my mind about why I should switch the criteria by which you judge it

The fact remains that at this moment in time, whenever you invested in the past 30 years (except potentially at the peak of the dotcom bubble), you'd be down on SMT compared to a nasdaq tracker.

My mind is very open if you want to dispute the above with actual numbers, or if you want to make a convincing argument that a nasdaq tracker isn't a good comparison. The reasons I think it's a good comparison are:

- the index is overweight innovation (like SMT)

- the index has high volatility (like SMT)

Don't get too worked up Walp, all I said was that during the past 30 years up to now, SMT has been a poor investment. The reason is that it has had higher volatility than the nasdaq index, and lower returns. Sure, you might have different criteria, in which case let's not argue about semantics. And we all (as holders) surely agree that this story will turn itself around and SMT will dig itself out of this hole. Nevertheless, the only sure thing is that right now, by the above criteria, SMT has underperformed.

Anyway, regarding technological improvements: you say that prior to the Internet they were very small. I think this depends on the sector. One could make the opposite argument. For example, in the 50 years from 1910 to 1960, people went from travelling mostly by horse and cart, to jet airliners. In the 50 years from 1960 to 2010, the speed of transport barely changed (although it became a lot more accessible). We did become a lot closer to each other in the sense that communication became instantaneous and high bandwidth.