Member Info for sageoflondon

Just no way that calculation holds. There will be no earnings for the majority of our holdings. GP is easy that's what the GP margin relates to. Growing companies normally have outsized admin expenses and very little in the way of earnings. 8 is what a mature profit making company with no growth would be valued at. Our P/E would be more like 80 plus - i.e. PE of constituents - as I said most won't actually have any earnings as they will be loss making.

P/E for Grow is irrelevant to a big extent. It's effectively an Investment Trust / PE company. We don't consolidate earnings to produce P&L like a major group or anything like that. You mention high PE tech firms we are associated with - I'm not sure what you mean here. Amazon has a P/S of just under 4, P/E of around 57 (yes that's high), Google P/S of 8, P/E of just under 30. A lot of the companies within our portfolio have no earnings whatsoever and are currently loss making. Revolut based on the last valuation is valued at 92 times sales. Now that is a high P/S - P/E isn't worth mentioning as they effectively have no earnings. Very sensitive to interest rate rises, unlike an Amazon that is profitable and reinvesting a lot of the cashflow it is generating, albeit not returning to investors via dividend. I am interested to understand which components of our portfolio are low p/E? Most don't have earnings and are effectively valued as a multiple of sales - very sensitive to interest rate rises. Apple is on around an average PE of 25 - compared to around 10 times sales (P/E). That's very low compared to an awful lot of our portfolio. I just want to understand the basis for the assertion that quoted tech is broadly on higher P/E than our portfolio? P/S is not P/E. Very different and that is why the market is punishing us at present in my view.

We will always get hit harder - we have a relatively illiquid portfolio. If inflation is expected to be 6% as well, interest rates will be expected to rise. Could be a multitude of reasons. It went up fast, so we probably shouldn't be surprised on the way down either.

The Nasdaq is up 107% roughly from it's 2020 Covid low. It is up 46% on it's pre-covid high. I see no reason for a 46% increase in the value of the companies making up that index since the pre-Covid peak period. I think it's overrun quite significantly. No reason at all why it won't see a 20 to 30% fall at some point as people think more rationally. What goes up at that sort of pace can come down as quickly. Starting valuations are likely a much better predictor of stock performance (or market performance) than inflation levels. In my view in the technology sector both are working against us at present, and are likely to for sometime. Grow valuations will broadly follow US tech valuations - but the illiquidity of the portfolio in the event of a sell-off could see a discount to NAV as it did in the Covid dip. I think the best result is a couple of years or treading water, but it never normally happens that way.

I'm confident long term. We haven't had a profit warning yet (based on supply chain issues) so that's a positive. I think the supply chain problems might slow our progress a little. This is why the shares have fallen I am assuming. However this isn't a perishable goods supplier and stock levels are normally kept as a buffer. I am confident the management team here will do their best - which is normally good. If it falls further I will be adding to my holding. Excellent opportunity to add below the placing price.

Normally - regardless of tech or no tech content in a portfolio, in a market pull-back of any description, PE Trusts and the like normally suffer significant discounts to NAV. Whilst tech is booming there may well be a premium. I think the tech market is likely to come off a bit which could result in a discount to NAV. Not long ago, this was worth around 800p a share - that's what the placing went at. I don't see this (or anything else at present) being a one way street - well maybe gas or oil for a bit.......who knows.

The problem is the whole market is very frothy. I can imagine Draper haven't seen opportunities to invest in. Money from all angles bidding up valuations beyond what they think are sensible potentially, hence they continue to hold liquidity whilst hoping for some uptick in the listed holdings. I get Ui Path but not at that valuation. Maybe if it lost 50% plus. If google, Microsoft or Amazon go that way they will have serious competition. Blue Prism is a competitor and they haven't managed to get more than 1 bid at around the £1bn mark. I still see this treading (volatile water) water over the next 3 to 15 months. I don't see the NAV increases adding much. I think we will trade in a range of £9 to £11. Not sure we will get back to near £12 for a good while. Premiums don't normally last long and most PE trusts (not all) trade on a discount due to liquidity of holdings amongst other reasons. Those investments can't normally be accessed publically either.

Agree re the quicker we are out of Cazoo the better.

I think it's unrealistic not to expect volatility on something like this. The NAVs themselves will be volatile so it stands to reason our share price will be. At present we are in the real PE / VC up cycle, particularly for tech - hence the volatility has been primarily positive. VC is cyclical and there is a lot of 'hot' money out there at present that is driving valuations up and significant uplifts in the next phase valuations. Personally I think we might have peaked on the tech valuations in this cycle and could see anything that looks frothy come off, or even anything that isn't going to make money for years out come off. I could be wrong, either way I'm here for the price in 7/8 years not next 2 so I'm sticking around. I don't like doing it, but my new 2024 (3 year) share price prediction is £14.

That Investment update today was a bit lacking in information. It didn't really tell us anything much we didn't already know. It's key to me to know when (and if) we will be disposing of Cazoo, Trustpilot and Ui Path. It almost looked like information for the sake of it with no real incremental substance. Maybe I am being overly harsh but the update wasn't driven by regulation as such - Cazoo was known about etc. Am I missing the point?

Good luck. I bought some in my 3 and 5 year olds ISAs......not bothered about next 5 years with those. As long as they are in the money when 18/21 that's fine.

It might be UK / EU tech from point of origin / set-up but in reality a lot of our portfolio will have an international stable of investors and hence a corresponding 'international' or 'US' valuation. There is no way Revolut would be valued as it was purely on UK market metrics. That looks very much like a US multiple valuation with the corresponding risk. Fine if it delivers and delivers relatively quickly, any mis-step, fall back in either the companies own growth trajectory or indeed the US market would hammer a valuation like that. I haven't analysed the portfolio at that level - I don't see the need as such. I am investing for uplift over a period. I don't trust Draper to get it 'more' right than others, but trust the sector will broadly grow over that period and we will follow. So a good relatively passive home (from my perspective) for some capital.

It's at least as likely that the share price has gone down due to actual, or in some cases perceived, decreases in the value of constituent components of the NAV. Trustpilot if down around 6% (or was) today alone, Ui Path considerably off peak.

This makes up approximately 8% of my portfolio. So it's my biggest holding as most are between 3 to 6%. I think it is getting up to date with valuations. Ui Path peaked at $90, now it is $56 - below it's issue price. Markets and people are starting to get concerned. The first part of making a 'bubble' - very strong economics extrapolated into the indefinite future. The second part is the easy money. The US market is probably the highest priced in history. SPACs are also a clear sign of money just looking for somewhere to go as is the valuation of Tesla in my opinion - absurd valuation. Whilst I'm not going to be selling up and going to cash, I am going to make sure I have sufficient funds to buy things a bit more cheaply if that happens. Natural portfolio yield provides some replenishment of cash, as does annual SIPP and ISA contributions. I think value is also going to make more of a comeback as well, so some of my portfolio is dull - think Unilever (bought at recent lows), Aviva, Beazley, CTY, PEYS etc, and a fair bit of SAGA. I like technology but I also like companies that are recovery plays (Saga is a well run insurer, recapitalised, with an excellent cruise business in normal times), and those that can pay a dividend from their profits on an ongoing basis. UPGS is another holding, but I have sold down a fair amount of that - it went from 38p to £2 over a 3 year period so I was outsized in that for a bit. Still think it's a well run company that has significant potential long term. It might not be exciting, but it's profitable with a great management team.

Whilst I'm not particularly inclined to estimate share prices on a weekly basis, for me, I wouldn't be at all surprised to see this come back to mid/late £9s. I think we got ahead of ourselves. Again big danger is US market falls. Then all bets are off. This is a very volatile share. Market pullback could easily see 20%-40% wiped off overnight. This isn't Unilever or Berkshire Hathaway etc. Ultimately anything trading at a big premium in a market pullback is likely to lose all of that premium plus a significant amount of NAV. Happy to remain invested for the long term, but this isn't a blue chip investment trust as such and volatility is to be expected.

I don't disagree with what you say overall. I think the one thing you don't mention is the likely volatility along that journey - this could be substantial. This isn't to be underestimated. We have, over the last 12 years, had one of the longest economic upswings we have ever seen. Take out the Covid 'blip' obviously. Many investors often assume that the high profit margins / gains made over that period will continue forever. Easy money has also been a key ingredient from 2008 onwards. I think most equity markets are at high prices, whilst the US is probably the highest-priced market in its history. This is what really concerns me.

My concern is that we will hold on to things for too long. I don't mind holding something with enduring quality - e.g. Trustpilot, but I also think it won't go up too much more short term. Ten years yes.

If you look at Blue Prism's projected increase in ARR is similar in percentage terms, it is similar to what UiPath just expressed for 2022 in their earnings call. Maybe they aren't too dissimilar? Prior to their IPO, UiPath increased their sales expenses to fill the pipeline which enhanced their growth run rate well above the industry average. The overhead tied to it was then cut. That gave the false impression that they were growing much faster and more cheaply than the competition on paper. Wall Street bought it resulting in their $30B+ USD valuation vs Blue Prism's 1.6B USD valuation. Eventually investors will wake up to the fact that these are both valuable competitors in a space that will grow at 30% CAGR this decade. However, one is over-valued (UiPath) and one is wildly under-valued (Blue Prism).

Most of our quoted valuations are way beyond what would be considered a rational P/E - let's remember they aren't actually P/E ratios - they are actually P to Sales ratios in many instances, these aren't P/E ratios. A lot of these companies don't actually have any meaningful earnings. I believe Trustpilot is on a prospective P/E of 39 for 2022. Ui Path is on 32 times this years sales I believe - it's share price took a big hit yesterday and is down significantly on it's peak. There is no justification for it being worth 25 times Blue Prism (maybe the latter is cheap). Then another example being Cazoo - similar multiples of revenues, worth more than the whole quoted car retail sector in the UK.....personally (just my view) I think we will be very sensitive indeed to any small move in interest rates or QE. I know there is a lot more to the portfolio than these companies but think it's important not to get carried away. We have had a good run, but this won't continue forever. I think the possibility of a 20-30% retrace is very probable in the event of a 10% pullback in markets. There is a lot of 'hot' money chasing valuations up at present - Revolut is a prime example of this - $33bn really - that's similar to Natwest which has revenues of over £10bn versus Revolut circa £200m.

UPGS is a great example of an appointment of a NED with an excellent reputation as an Executive and one who does not suffer fools - Jill Easterbrook. An excellent track record and someone who will have no hesitation in telling it how it is - fortunately UPGS (my view) is very well run, but this will provide challenge nonetheless. It's also a clear signal to investors that Management aren't frightened of a strong personality as a NED.

Having reported to a number of Board Committees throughout my career it's not the number of non Execs, but rather the quality and 'real' independence of those that are in place. Ultimately, as an investor, you want the highest quality possible, someone that will really add value, challenge and stand up and be counted when it really matters - this is much better than a relatively weak non-exec who is 'grateful' for the opportunity to earn some extra pounds as they near or during retirement. It is also a huge positive when the individual doesn't even remotely need the money and does it for the love!! Strong challenge is key, as is true independence. You will often see smaller organisations fill the Board with 'friends', resulting in NEDs who often act as an extension and verification process for Executive decisions, rather than a body that provides really effective challenge, governance and insight. I am not referring to GROW here, just a general observation. This appointment looks to be positive for GROW.