Fisher Funds stocks

[Basil]

Have been quietly hoovering up quite a few Marlin in recent months.  Done pretty well so far.  NTA has been about $1.01 for a few weeks now and the US tech sector went gangbusters this week with Nivida's result which itself went up 16% in one day).  Other tech stocks that are in MLN's portfolio involved with A.I. in one way or another caught the tailwind, and I am expecting a reasonable NTA increase next week.  Now I have quite a few I might build up a spreadsheet model and report NAV from time to time.    A decent number on offer at 99 cents and NAV at a guess is about $1.03-$1.04 at present. I'd buy them myself if I didn't have a sizeable holding already.  I'm expecting another Marlin warrant issue in the next few months.  Opportunity knocks?  You be the judge.

Actual NAV just announced.  MLN NAV as at 27/2/24 - $1.0426.  Very nice.
https://www.nzx.com/announcements/427128

[Basil]

Another strong month for Marlin in February, up 8%.  I have built a substantial position in recent months and believe this is great buying at around a 5% discount to NAV at present and gives broad exposure to the US tech sector including A.I.  http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MLN/427726/414623.pdf

[Basil]

Latest NAV at just on $1.05 and was trading at 98 cents yesterday.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MLN/427990/414930.pdf
6.6% discount to last reported NAV at 98 cents.  Note: They can buy-back their own shares at a 6% discount to NAV, (and have been doing so recently for KFL and BRM), so the current share price, (subject to future movements in NAV), appears to be well underpinned.
Disc: Added more at 98 cents yesterday. 

[Waltzing]

Interesting share that one with exposure to tech and other industries...

https://www.nzx.com/instruments/MLN/dividends

[winner (n)]

As a matter of interest have brm KFL or MLN changed their benchmarks over the years

[Basil]

Not that I'm aware of mate.  Marlin gives quite a good exposure to the US tech sector including several stocks that are benefiting from the A.I. revolution.
Keen to increase my holding over a period of time to circa 25-30%, (currently about 16% portfolio allocation).

[Fiordland Moose]

Posted the below today in the HGH thread which got me thinking about Marlin / other FF LICs

Never invested in the LICs as prefer to go directly in ASX stocks and access US etfs directly via IBKR. Wrong thread but one thing I always wondered about was the discount to NTA seemingly representing value. I would have thought given the LICs come with high forever mgmt fees a discount should apply to them to represent the present value of perpetual mgmt fees. If doing this you'd need to addback any provision for mgmt & performance fees as you'd double count one years worth of fees. Sorry off topic I know

This will probably go down like a bag of sick with the vested interests but I hope an interesting muse none the less.

I've long been curious about the notion that a LIC's listed share price discount to reported NAV represents fantastic value - something of a steal or an arbitrage. LIC's hold a number of shares multiplied by prevailing spot price - together with some deminimus other balance sheet bits and bobs - give a readily available NAV. But I reckon LICs ought to trade at a sizeable discount to their reported NAV, but in reality trade at a premium to their true economic NAV.

You cannot view this attachment.

Over the last 5 years total corporate costs (overwhelming comprised of Fisher Fund mgmt. and performance fees) have averaged $3.86m. If one rolled them forward into perpetuity, and generously did not grow those fees at inflation, gave them an after tax benefit of 28%, and discounted those cashflows (@ tried and trusty true 10%) back to a net present value of the external manager, that would be $29.1m reduction in NAV or 13cps. Given Marlin has now accrued for a performance fee I have put my finger in the air of $1.5m and deducted that from the $29m as it would double count the current years expense.

When an institution of research analyst analyses the sum of the parts of a business like Infratil or other conglomerate, they will come up with a value for each operating subsidiary, and then capitalise the value of corporate costs or non ascribable costs. That's totally analogous to this situation. My BOE NPV of corporate costs - expressed as a PE multiple - is about 10.5x. Probably too low as I'd imagine they do grow slowly over time (say half a percent pa).

The last NZX release (13/3/24) showed NAV of $1.0574 - and the SP on close was 98cps - a notional discount of 7.3%. The punters love it - what value!

However if you take the reported NAV - and deduct the 13cps value of corporate costs - the share price on the 13th of March was actually at a 5.6% premium to the adjusted economic NAV.

Punters will argue how great the returns are above their benchmark - the reality is the appropriate benchmark is the S&P500 and my VOO returns (a S&P500 ETF) smash Marlins. Its sort of strange that they have a listed benchmark but charge the performance fee on the change in the (90 bank bill rate plus 5%) + GST. PLUS Mgmt fees of 1.25% -  yikes!

So marlin holders are paying a premium to in my opinion its true NAV. What for? Steady quarterly dividends (which in reality are just reshuffling capital as dividends - one could easily just sell x% number of shares quarterly to achieve a cash inflow), ability to receive warrants (but for those who talking about their 'back in the day' killing on warrants you can't really include the warrants purchased on mkt as that is a discrete and separate transaction - probably should only include those received as part of your direct holding), and PIE structure. People will talk about diversification and active mgmt - but you can get diversification for a fraction of the price - and the reality is a generic S&P500 beats marlin total shareholder returns.

Sorry I am probably being too forthright in my views off a wee bit of work. I do sort of regard LIC's as a dinosaur in terms of a product - rightly or wrongly I sort of regard it as a product for people heavily focused on dividend income (and not total shareholder returns), wedded to clunky old NZ DIY platforms that can't trade AU or ROW equities, and are tentative to try all the new and easy to use platforms to access ETFs or other active managers, let alone using platforms like Interactive Brokers to cut out all the middle men and access products at the absolute lowest costs. And there is nothing wrong with that...the motivations are good, an investor has a set of priorities (regular cashflow, diversification, overseas investments etc) and Marlin is their comfort level rather than doing a whole bunch of other stuff - there is nothing wrong with that. There is a lot to be said for investing into financial products that you know and trust even if they may not be efficient. I may have missed some other stuff but looking at sharesight at my VOO returns vs what could have been had I invested into marlin I'm not sure it'd change my perspective.

re the para above - I've heard it on the other channel - LICs and Smartshares ETFs are PIEs so you don't have any FIF tax. That's a complete mistruth. True, in the hands of the individual holder their isn't a FIF tax requirement, but both the LIC and Smartshare fund ARE paying FIF tax at the entity level and then comes to you - so a wash. But even worse, NZ domiciled funds (including Marlin) ALWAYS use the fair dividend rate to calculate their FIF liability. They have no option to apply the de minimus for comparative value method which hurts if there is a down year (CV you can get away with no liability).

anyway. food for thought. not an expert, not advice, but hopefully contributing something worthwhile for healthy, honest discussion.

[snapiti]

that's a fair and reasonable view, however you don't cover the three reasons I am invested in Fisher funds, BRM to be more precise, broad exposure to a market place (ASX) outside the very limited NZX, the broad number of investments rather than just a single or handful of companies, which means one should not experience significant losses if a good investment turns sour, and most importantly for me I don't have to put in the many hours researching individual stocks, to determine risk versus reward and true value of shares, don't get me wrong I have looked into BRM's holdings but not to the detail I would have on a single share investment.
Happy to pay fee's and performance bonuses and sit back collect the DRP for 10 years with a simple goal of 8% compounding net returns as this is a great way to build wealth.
Also have managed funds with Milford in their Active growth fund and Australian growth fund, also a sizable investment in Regal RF1 fund (ASX), for same reasons as BRM, that's achieved 18% per year for the time it has been going (5 years). I encourage others to look into their alternative investing strategies which includes shorting and mineral royalties.     

[Fiordland Moose]

that's a fair and reasonable view, however you don't cover the three reasons I am invested in Fisher funds, BRM to be more precise, broad exposure to a market place (ASX) outside the very limited NZX, the broad number of investments rather than just a single or handful of companies, which means one should not experience significant losses if a good investment turns sour, and most importantly for me I don't have to put in the many hours researching individual stocks, to determine risk versus reward and true value of shares, don't get me wrong I have looked into BRM's holdings but not to the detail I would have on a single share investment.
Happy to pay fee's and performance bonuses and sit back collect the DRP for 10 years with a simple goal of 8% compounding net returns as this is a great way to build wealth.
Also have managed funds with Milford in their Active growth fund and Australian growth fund, also a sizable investment in Regal RF1 fund (ASX), for same reasons as BRM, that's achieved 18% per year for the time it has been going (5 years). I encourage others to look into their alternative investing strategies which includes shorting and mineral royalties.     

Totally. I've increasingly been lifting my exposure to passive / managed funds for the same reasons as you. Many moons tried picking US shares and dont think I was particularly good at it and I didnt want to spend anymore time of them. Plus I find it takes out the emotion - if the market goes up or down - thats just what a market does. If one of the shares I invested time researching does poorly it can be a sour experience. So kinda takes out the emotion of it, for me anyway. 

It also was a good sense check on my pride. Like if I spent a bunch of time picking a few shares that went up say 20% (or 10% adjusted including my invariable turd investment) and was thinking I was clever with my picks, but then I look over and saw some millennial who had double my return simply because they invested in SPY, well turns out I wasnt so clever after all.

[snapiti]

yep agree it does take out some of the emotion side of investing, especially the up's and downs of individual stocks

[Basil]

But I reckon LICs ought to trade at a sizeable discount to their reported NAV, but in reality trade at a premium to their true economic NAV.

My view is that it all depends upon whether they are beating the benchmark index or not.  Marlin's performance is here https://marlin.co.nz/investor-centre/portfolio-performance/  If they're beating it after fees and tax I would argue no discount is warranted, in fact you could even make the case a premium is warranted for consistent strong outperformance...more on that later in relation to Barramundi.

Punters will argue how great the returns are above their benchmark - the reality is the appropriate benchmark is the S&P500 and my VOO returns (a S&P500 ETF) smash Marlins.

Where your thinking is a bit astray here is that Marlin is an international fund and has investments outside of North America.  I have little doubt that based on your experience and from a certain point in time when you invested in that ETF, you feel your performance exceeds Marlin but nevertheless they have stated their performance on their website relative to the index and I have no reason to doubt their claim.  Their fund is tech heavy and its worthwhile noting the Nasdaq has actually done a round trip to nowhere in the last 2 years.  Also they have experienced tough times with their China investments in recent years, like everyone else.  Whether you look at the last 5 years or the 5 years before that they have outperformed their benchmark index after fees and tax.

However if you take the reported NAV - and deduct the 13cps value of corporate costs - the share price on the 13th of March was actually at a 5.6% premium to the adjusted economic NAV.

Your viewpoint is not new by any means has been well espoused, mainly by a lot of brokers anxious to direct client funds into their own funds management system with their expensive fees lol.  Many LIC's do trade at a material discount to NAV and it's warranted because all they're doing is matching or in some cases underperforming an ETF with their fees on top of that. 

Comparing Marlin to an S&P500 ETF is comparing apples with Nashi pears because a lot of their investments are NASDAQ type or outside America.  Better to compare Barramundi with the ASX200 to get a clearer view of their outperformance.  https://barramundi.co.nz/investor-centre/portfolio-performance/
I note in the last 5 years since Robbie Urquart took over as manager they have generated 14.6% average annualized NAV performance after fees, including performance fees and tax, compared to the ASX200 which has gone up an average of 9.2% hedged 70% to the $N.Z dollar.

I fact checked this off Jarden's website and note the ASX200 was just on 6100 five years ago and is now just on 7800, a 28% increase over five years for those investing in an Australian ETF. 

.the motivations are good, an investor has a set of priorities (regular cashflow, diversification, overseas investments etc) and Marlin is their comfort level rather than doing a whole bunch of other stuff - there is nothing wrong with that. There is a lot to be said for investing into financial products that you know and trust even if they may not be efficient.

Going to a Kingfish group annual meeting you see a sea of grey and white hair, I really fit in very well these days lol.  Most people are not sophisticated professional investors like you and I and are happy to go with an investment vehicle that gives them a one stop shop for part of their funds that provides significant international diversification to their portfolio.  For most its about supplementing their superannuation with additional income so they lead a "choices" lifestyle in their retirement years.  Most people I know want to go with a well-respected and trusted financial institution and Fishers are one of N.Z.'s largest.

Sadly I have seen a lot of instances in my career with people approaching retirement who have very little or nothing saved.  The 8% tax free dividends in shareholders hands can make a real difference to people's enjoyment level and life in their retirement years and that's what I especially enjoy seeing.  Even as little as $100K gives $8,000 per year and to a couple existing on National superannuation alone is the difference between merely existing and having some money to enjoy going out with their friends and family for cheap treats.  Simple tactics for people with noting saved for retirement like trading down to a smaller or a regional house can free up hundreds of thousands which if invested into a fund that pays 8% tax free can make a real difference to people's lifestyle in their retirement years.
Obviously for people fortunate enough to have say $1m invested $80,000 per annum tax free on top of their super gives them a very comfortable retirement lifestyle with a lot of money to enjoy travel, expensive hobbies and money for whatever other choices around discretionary spending they want to make.

re the para above - I've heard it on the other channel - LICs and Smartshares ETFs are PIEs so you don't have any FIF tax.

Yes they do all the work for you with FIF and pay it on shareholders behalf.  Some people who make direct investments overseas have to pay their accountants thousands of dollars per annum to make all these calculations for them...ask me how I know lol

I have a long history with Barramundi and the warrants are an integral part of the attraction to me.  I am fortunate to have the skills to value them and take advantage of any mispriced opportunities which adds to the attraction from my point of view.  That advantage combined with their 5.4% per annum average ASX200 index outperformance over the last 5 years, honestly its simply not worth my time to try and beat that sort of outperformance myself with direct Australian investment.  Time is valuable and frankly I'd rather take my boat out more or walk the dog more often than thrash around endlessly with investment analysis on the ASX trying to beat that level of market outperformance.

Horses for courses...it's not for everyone, but it really suits me, especially now as I am rapidly approaching full retirement and replacing practice income with dividend income and want to do a lot less investment analysis work in the years ahead.

[Fiordland Moose]

Good stuff Basil. Makes sense to me.
Still reckon the true NAV is ~13cps lower than the reported NAV and it trades at a premium, but likewise acknowledge a lot of holders would be / are comfortable with that due to the convenience factor and other bits you raise. anyway, that's all from me.

an aside, sharesight makes it super easy to calculate the optimal FIF strategy taking into account all the overs and unders in ones FIF exposed portfolio. my tax accountant hates it because I do the work and send it to them which they obviously double check to see if its right but can't charge me the fat fees on (that part) of my return. still somehow wind up paying a fortune.

[Left Field]

Happy birthday Kingfish ..... 20 yrs

https://www.nzx.com/announcements/428684

Kingfish Limited proudly announces its 20th anniversary of being a listed company this month. Since 2004, the company has been committed to providing competitive investment returns for its shareholders.

Over this period, Kingfish has navigated through numerous share market conditions and has generated the following annualised returns since inception:
• Total shareholder return* of 9.4% per year;
• Adjusted NAV return** of 9.9% per year; and
• Gross performance return*** of 13.1% per year.

These compare to the annualised S&P/NZX 50 index return**** of 7.9% per year over the same period.

[Basil]

Well done to the team at Kingfish.  Worth noting that even low-cost ETF's are not free, so KFL have covered their management and performance fees well and truly and provided decent outperformance over and above the index and even better outperformance relative to a low cost ETF.  This is why I respectfully disagree with Fiordland Moose's contention that the NPV of future corporate costs should come off their NAV.  Further, 20 years is a really decent period of time to substantiate my viewpoint.  You can currently buy this level of outperformance for about a 7% discount to NAV.

[Basil]

Marlin NAV as at 26 March 2024 $1.0674.  98 cents is an 8.2% discount and on top of that we've had a very strong day on 27th on the US markets.  Close to a 9% discount to NAV at this point at 98 cents by my reckoning. Too good an opportunity to pass up, just topped up with more @ 98 cents.
http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MLN/428789/415848.pdf

Very good chance of another free warrant issue in the next few months in my opinion.