One of my favourite blog titles is A Pug Called Sherbet, written in August 2016.
It was when I decided to buy Monks investment trust. If you did the same you will be up 69% so it can be marked satisfactory. But recently it has not performed well. The share price is down 30% over the last year. I thought I should investigate and the Interim Report was timely. More than a few bad calls were made buying into individual companies that did not live up to expectations and have been sold. The worst call was to transition from Silicon Valley to China. Actually I thought at the time it was probably a good call. It wasn’t.
“The second group is Chinese companies. Positions in Brilliance China Automotive (auto retail), KE Holdings (online property), Tencent Music Entertainment (online music and entertainment) and Naspers (South African investment company, included here due to its significant stake in Chinese gaming business, Tencent) have been sold. For each company, there are fundamental reasons behind our decision to sell. For example, emerging competition in the cases of KE Holdings and TME and governance concerns at Brilliance China Automotive. However, it is important to recognise the prevailing regulatory environment for private enterprise in China. We believe that it is increasingly difficult for private enterprises in China to generate supernormal profits of the sort that we seek for Monks’ portfolio. Therefore, a more modest overall exposure to China better reflects our view of the potential upside.” (The Monks Investment Trust, Interim Report, 2022)
Usually fund managers boast of successes and sweep the dog shit under the carpet. I am encouraged the Monks team has taken a good look at the canine faeces. The shares are at an 8% discount to NAV ‘cos some short term investors have bailed out, I suppose. What next? It really depends on confidence in the Baillie Gifford fund managers. I don’t have complete conviction because of recent bad investments. On the other hand I like them cutting losses and re-positioning the portfolio. Let’s have another look in six years.