Tag: Mello

Mello Trust and Funds Event and ShareSoc AGM

I managed to attend part of the Mello Trust and Funds Event in West London yesterday and although I had other commitments today, I may manage to attend the second day of the main Mello 2019 event tomorrow. If you have not attended one of these events before, it is definitely worth doing so. The only slight criticism I would have is that getting to Chiswick from South East London where I live via the slow District Line is not great. The wonders of the London transport network meant it almost took me two hours to get there. I’ll give a brief report on the sessions I attended, and what particularly interested me:

There was a good presentation by the young and enthusiastic George Cooke on the Montanaro European Smaller Companies Trust (MTE). This is a company I had not come across before and it looks to have a good performance record. It’s a stock pickers fund in essence but Mr Cooke’s approach to small cap company research seems similar to mine. However he covers the whole of Europe whereas my focus on direct investments is the UK. I will take a more in-depth look at this company.

I attended a panel session on investing in small cap funds and one member of the audience questioned why one would do so when you can invest in the companies directly. Here are two possible reasons: It can give you exposure to geographic or sector areas that you cannot adequately research oneself (as in MTE), and for UK funds it is always interesting to see what the high-performing fund managers are buying and selling even if you only get a limited view. That’s why I invest both directly in companies and in funds.

I also attended a presentation by Carl Harald Janson on International Biotechnology Trust (IBT) a company I already hold so I did not learn a great deal new. This is a sector specialist with a good track record and it is now paying dividends out of capital which has help to close the discount to NAV when it used to be quite high. The discount is now negligible.

Several stand staffers in the exhibit area tried to sell me “income” funds but that proved difficult as I had to tell them I never buy income funds. For long-term returns, growth funds usually provide better performance and you can always sell a few shares to produce cash income – and you may be better off tax-wise also as a result. But many people buy funds for retirement income so they are attracted by the “income” name. This is where more financial education might be beneficial.

The last presentation I saw was by Nick Britton of the AIC (Association of Investment Companies who represent investment companies). Their web site is always useful for researching investment trusts and their past performance, which I tend to prefer as against open-ended funds although I do own a few of the latter.

Nick covered the differences between the two types of funds (open versus closed). His presentation suggested that closed-end funds consistently performed better for several reasons and he compared some funds of both types run by the same manager as evidence. There are a number of reasons why closed-end funds perform better in the long term and I was convinced by the statistics on this a long time ago. But Nick gave some more data on the subject.

So why do open-ended funds dominate the fund industry (£1.2 trillion versus £189 billion funds under management)? I rather expected that after the Retail Distribution Review (RDR) that platforms would no longer have a strong financial incentive to promote open-ended funds but it seems there are other reasons remaining which are not exactly clear. But it’s the investors who are suckered into buying open-ended funds who should know better. Like in most markets, folks buy what they are sold rather than do their own research and buy the best option. That’s particularly problematic on property funds which Nick was particularly scathing about.

I hope ShareSoc members are better informed. Which brings me on to the subject of their AGM which was held at the Mello meeting. This was a relatively straightforward event as there were no controversies of significance, although I did suggest that with more funds in the bank they might want to hire more staff and spend more on marketing. As one of the two newly appointed directors pointed out, few investors have heard of ShareSoc although they do enormously good work in promoting the interest of private investors and in educating them. In my experience, sales of anything often relate simply to how much money is spent on marketing even if some attention has to be paid to the most cost-effective channels. But if you don’t know what works best, you just have to experiment until you find the most productive approaches.

However ShareSoc membership is growing and it’s now twice the size of UKSA with whom merger discussions are now taking place – which I wholeheartedly support incidentally. There are also discussions taking place about supporting Signet activities, who run investor discussion groups, following the recent death of John Lander who led Signet for many years.

ShareSoc is spending money though on improving their back-end membership system which will help to improve the services provided to members.

In summary this was a useful event, and like all such meetings, as useful for networking and picking up gossip as much as from learning from the formal sessions.

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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Tungsten, RedstoneConnect, Proactis, LoopUp, Mello and productivity

Yesterday there was an announcement by Tungsten Corporation (TUNG) that there was press speculation about a possible requisition of a general meeting to remove some of the directors, including the Chairman and CEO, and appoint others. This is likely to come from Odey Asset Management supported by other large investors the company understands. Their combined holdings could give them a good chance of winning any vote, or at least it would be a hard-fought proxy battle.

It would seem that the former CEO Edi Truell is involved in this initiative. It would be most unfortunate in my view if he returns to this business (and I did purchase a very few shares in the company after he departed which I still hold). Richard Hurwitz has done a good job in my view of turning this company from a financial basket case with very substantial annual losses into a sounder one. Revenue has been rising and costs have been cut although profits have been longer to appear than hoped. However the company does report that EBITDA was at breakeven for the first four months of the calendar year. It’s at least heading in the right direction now so I am unlikely to be voting for any such requisition.

I attended the Mello event at Hever yesterday and was hoping to get an update from Mark Braund on RedstoneConnect (REDS) where he was due to present. But his presentation was cancelled. Now we know why because an announcement this morning from the company said he was leaving. Perhaps he wants a new challenge. This was another basket case of a company where Mark turned it around in the two years he has been there. So some investors may not be pleased with his departure and the share price predictably dropped on the news. The new CEO will be Frank Beechinor who is currently the Chairman. He is also Chairman of DotDigital and clearly has experience of running IT companies so it’s probably a good choice. A new non-executive Chairman has been appointed (Guy van Zwanenberg).

The Mello event, organised by David Stredder of course, was held near Hever Castle in deepest Kent. I know some of the roads in the area as I live nearby but even so managed to get lost. Not the ideal location. But it was a useful event otherwise. I did an interview for Peter of Conkers Corner and sat on the panel covering the Beaufort case. Videos of both are likely to be available soon, and I will tweet links to them when they appear.

A company that did present at Mello was Proactis (PHD) with CEO Hamp Wall doing the talking. I was unsure of the potential future growth for the company as I thought the market for procurement software might be quite mature (i.e. most likely users had such a product/service). But not so it seems, particularly in the USA and their target vertical segments. Hamp spoke clearly and answered questions well. He is clearly an experienced IT sales/marketing manager. He said he was surprised though that the share price fell over 40% recently when they announced the loss of two of their largest customers. He thought it might fall 15%. I agreed with him that it seemed excessive. But the market does not like surprises.

Today I attended the AGM of LoopUp Group (LOOP) who sell conferencing software. They recently merged with a competitor named MeetingZone and it looks likely to double revenue and more than double profits if things go according to plan. The joint CEOs made positive noises about progress. The company is chaired by heavyweight Chairperson Lady Barbara Judge CBE which is somewhat unusual for this kind of company – at least heavyweight in terms of past appointments if not lightweight in person.

Tim Grattan was the only other ordinary shareholder present and may do a fuller report for ShareSoc. A disappointing turnout for a very informative meeting as both I and Tim asked lots of questions.

Tim advised me after I mentioned the Foresight 4 VCT fund raising that it was odd that no mention was made in the prospectus of the alleged illegal payment of a dividend. Is this not a “risk factor” that should have been declared he asked? That company and its manager seem to be turning a blind eye to that problem.

There was an interesting letter from Peter Ferguson in the Financial Times today. It covered the issue of a declining productivity growth in the UK and other countries aired in a previous article by Martin Wolf. This is certainly of concern to the Government and should be to all investors because only by increasing productivity can we get richer. Mr Ferguson suggested one cause was the negative impact of increasing regulation. He suggested it has three impacts: 1) more unproductive people appointed to monitor and enforce the regulations, 2) more compliance officers, and 3) less productivity as a result in companies due to sub-optimal practices. Perhaps fortuitously I am invested in a company that sells risk and compliance solutions. It’s certainly a growth area and there may be some truth in this argument. Has MIFID II reduced productivity in the financial sector with few benefits to show for it? I think it has.

But Rolls-Royce are going to improve the productivity in their business at a stroke. They just announced they are going to fire 4,600 staff. But are any of them risk and compliance staff?

Roger Lawson (Twitter: https://twitter.com/RogerWLawson )

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