Once again, thank you for sharing the depth of your analysis. Every time I think of SEIT, I come away bemused that this is a structure which investors have designed to wind-down. Bonkers! I too have increased exposure.
As for the 98%, if, by now, they haven't put their hand in their pockets, I fear that they never will. Go behind a pay-wall.
Thanks OB for this very thoughtful piece. When I invested in SEIT more than a year ago I hoped I would just hold this for years and pocket a nice dividend. It's a very different scenario now and I have to admit my confidence as an investor has been somewhat dented by the series of setbacks. I am in it at 45p taking into account received dividends, so now an emotional part of me wants to get out and reinvest elsewhere and forget this episode while the rational side says that there's still very likely a positive overall return to be had at 45p, which your sensitivity table corroborates, and that selling at 35p would be capitulation at the worst possible moment. I was encouraged by the wording in the RNS that they would try to sell assets as a whole, which could hopefully crystallize value quickly and in one big swoop. Facing years of uncertainty as assets are being sold piecemeal would be the worst outcome. Overall, it seems to me that the market has punished SEIT too harshly, but undershoot/overshoot is what the maniodepressive Mr Market likes to do and we have to live with that.
Averaged down on this so now down about 8% what with past divis. Seems to me it's like a mispriced Zero backed by functioning, inflation linked infrastructure assets.
Tempted to buy even more but have to remind myself that while I love what seems to be a bargain, my biggest gains have been in Broadcom (AVGO) which has always appeared priced to perfection, yet invariably keeps rising.
Like OB has said, averaging *up* is a key lesson he has only recently appreciated. I have never learnt it.
I for one cannot help bottom fishing or, to spin it, investing in special situations. The success rate isn't great but superficially seems cheaper than buying into something that's on a tear.
Perhaps a momentum ETF is a way of taking the pain out of buying at high prices.
I definitely have a value / quality tilt. Sometimes too cheap can stay cheap though. I wasn't keen on doubling down with SEIT partly because of the big Saba holding and you never quite know what he's up to other than making a quick buck. Will that buck be sufficient for the waiting. My avg is 45p - i can wait and see.
I would say leave the momentum in semis alone as has run so hard for so long but who knows i could be way off. I've been dripping into SSIT, FGT, SMT and PCT. Also looking at biotech / healthcare as some of the trusts have doubled in past 12 months. Commercial property also looks cheap as the Segro bid. Smaller UK caps also getting a bid. I'm at the point of getting nearly all in on above themes. Have held a lot of cash up to now.
I'm also feeling sore myself this week as Ramsden's has been taken out and was my top holding. The share price had compounded at 20% from float in 2017 to this week at 450p and now being bought at 600p. Anything that can compound at 20% cagr over long periods is going to make you a lot of money.
I should add that averaging up doesn't come easy to me but i have on SAGA on any pull backs.
Yeah, I guess buy the dips is how to average up. Lets you justify that you are getting a relative bargain.
On X someone posted YTD percentages on UK retailers. I for one could not have predicted these results. I had held a fair few of them in December but nearing retirement sold up and went into collective vehicles like global ETFs.
Government has done small company investors a favour by keeping the UK at a discount. Think they're breaking out. Look at all the takeover action. The yanks are coming buying because everything is half price compared to US. As I said I'm leaning into this right now.
Have you missed that the Trust has announced an intention to wind down? See the RNS on June 16th.
"Notwithstanding the performance of the underlying portfolio, in recent years the Company has faced a number of significant and persistent challenges which have negatively affected its future prospects. In particular, the Company's Ordinary Shares have traded at a material and sustained discount to NAV, restricting access to equity capital and constraining the Company's ability to fund portfolio commitments. The Board is of the view that there have been no signs that this discount is capable of significantly narrowing in the near term."
Then all that matters is the price that the assets will fetch and how quickly they can be sold?
In wind ups the best assets that can be sold near NAV get sold first but the rest tend to take longer to shift.
I see they are looking for a single buyer if possible but it's not a very coherent portfolio is it? If I was buying from a forced seller it I would be looking for a significant discount.
I can assure you that SEIT isn't going to be forced to sell to you or to anyone else at a significant discount, regardless of what you say you look for.
SEIT will balance returns vs achieving a timely outcome, and there's no cliff edge they have to work to. Meanwhile the assets are increasingly income generative and valuable as set out in the article. Time is SEIT's friend.
The assets all have customers and end users that you say aren't coherent. To those customers e.g. American Steel they are not only coherent - they are critical. Some sales could be to those customers. It would be a critical, strategic purchase for them.
You then say the best assets are sold first. So far that's not true either. Kyotherm wasn't anything special. Nor ONO energy. Some assets are more liquid and others less so but offer stronger returns. Others offers stronger growth. So it's not a straightforward, glib "best assets sell first" scenario in my opinion.
Private Equity buy up these kinds of assets all the time. There's trillions of dollars of undeployed funds with PE looking for income-generating real assets in safe jurisdictions.
With its extremely strong ESG credentials they are also the kind of assets that a Pension Fund or similar would snap up too. Low risk, long term, inflation-protected returns at levels far in excess of what Bonds can provide, or as a complement.
So I disagree with your assumptions, but I get how looking at this superficially you can reach your kind of conclusion.
No. Where am I going to get an equivalent long-term invest opportunity. Given the income generating potential of the underlying assets, i dont mind if the overall structure stays cheap forever
Once again, thank you for sharing the depth of your analysis. Every time I think of SEIT, I come away bemused that this is a structure which investors have designed to wind-down. Bonkers! I too have increased exposure.
As for the 98%, if, by now, they haven't put their hand in their pockets, I fear that they never will. Go behind a pay-wall.
Agreed. Start charging and donate the income to charity.
Thanks OB for this very thoughtful piece. When I invested in SEIT more than a year ago I hoped I would just hold this for years and pocket a nice dividend. It's a very different scenario now and I have to admit my confidence as an investor has been somewhat dented by the series of setbacks. I am in it at 45p taking into account received dividends, so now an emotional part of me wants to get out and reinvest elsewhere and forget this episode while the rational side says that there's still very likely a positive overall return to be had at 45p, which your sensitivity table corroborates, and that selling at 35p would be capitulation at the worst possible moment. I was encouraged by the wording in the RNS that they would try to sell assets as a whole, which could hopefully crystallize value quickly and in one big swoop. Facing years of uncertainty as assets are being sold piecemeal would be the worst outcome. Overall, it seems to me that the market has punished SEIT too harshly, but undershoot/overshoot is what the maniodepressive Mr Market likes to do and we have to live with that.
Averaged down on this so now down about 8% what with past divis. Seems to me it's like a mispriced Zero backed by functioning, inflation linked infrastructure assets.
Tempted to buy even more but have to remind myself that while I love what seems to be a bargain, my biggest gains have been in Broadcom (AVGO) which has always appeared priced to perfection, yet invariably keeps rising.
Like OB has said, averaging *up* is a key lesson he has only recently appreciated. I have never learnt it.
Semi conductor etf wave surfing has been a fantastic gainer this year. Only wish i'd taken advantage!
I for one cannot help bottom fishing or, to spin it, investing in special situations. The success rate isn't great but superficially seems cheaper than buying into something that's on a tear.
Perhaps a momentum ETF is a way of taking the pain out of buying at high prices.
I definitely have a value / quality tilt. Sometimes too cheap can stay cheap though. I wasn't keen on doubling down with SEIT partly because of the big Saba holding and you never quite know what he's up to other than making a quick buck. Will that buck be sufficient for the waiting. My avg is 45p - i can wait and see.
I would say leave the momentum in semis alone as has run so hard for so long but who knows i could be way off. I've been dripping into SSIT, FGT, SMT and PCT. Also looking at biotech / healthcare as some of the trusts have doubled in past 12 months. Commercial property also looks cheap as the Segro bid. Smaller UK caps also getting a bid. I'm at the point of getting nearly all in on above themes. Have held a lot of cash up to now.
I'm also feeling sore myself this week as Ramsden's has been taken out and was my top holding. The share price had compounded at 20% from float in 2017 to this week at 450p and now being bought at 600p. Anything that can compound at 20% cagr over long periods is going to make you a lot of money.
I should add that averaging up doesn't come easy to me but i have on SAGA on any pull backs.
Yeah, I guess buy the dips is how to average up. Lets you justify that you are getting a relative bargain.
On X someone posted YTD percentages on UK retailers. I for one could not have predicted these results. I had held a fair few of them in December but nearing retirement sold up and went into collective vehicles like global ETFs.
Government has done small company investors a favour by keeping the UK at a discount. Think they're breaking out. Look at all the takeover action. The yanks are coming buying because everything is half price compared to US. As I said I'm leaning into this right now.
OK but one fund manager just ditched UK mid caps because of new govt. Said risks were not priced in. Different opinons make a market.
Have you missed that the Trust has announced an intention to wind down? See the RNS on June 16th.
"Notwithstanding the performance of the underlying portfolio, in recent years the Company has faced a number of significant and persistent challenges which have negatively affected its future prospects. In particular, the Company's Ordinary Shares have traded at a material and sustained discount to NAV, restricting access to equity capital and constraining the Company's ability to fund portfolio commitments. The Board is of the view that there have been no signs that this discount is capable of significantly narrowing in the near term."
No.
Then all that matters is the price that the assets will fetch and how quickly they can be sold?
In wind ups the best assets that can be sold near NAV get sold first but the rest tend to take longer to shift.
I see they are looking for a single buyer if possible but it's not a very coherent portfolio is it? If I was buying from a forced seller it I would be looking for a significant discount.
John,
I can assure you that SEIT isn't going to be forced to sell to you or to anyone else at a significant discount, regardless of what you say you look for.
SEIT will balance returns vs achieving a timely outcome, and there's no cliff edge they have to work to. Meanwhile the assets are increasingly income generative and valuable as set out in the article. Time is SEIT's friend.
The assets all have customers and end users that you say aren't coherent. To those customers e.g. American Steel they are not only coherent - they are critical. Some sales could be to those customers. It would be a critical, strategic purchase for them.
You then say the best assets are sold first. So far that's not true either. Kyotherm wasn't anything special. Nor ONO energy. Some assets are more liquid and others less so but offer stronger returns. Others offers stronger growth. So it's not a straightforward, glib "best assets sell first" scenario in my opinion.
Private Equity buy up these kinds of assets all the time. There's trillions of dollars of undeployed funds with PE looking for income-generating real assets in safe jurisdictions.
With its extremely strong ESG credentials they are also the kind of assets that a Pension Fund or similar would snap up too. Low risk, long term, inflation-protected returns at levels far in excess of what Bonds can provide, or as a complement.
So I disagree with your assumptions, but I get how looking at this superficially you can reach your kind of conclusion.
OB
As a SEIT holder I hope you are right - but bear in mind they are prioritising debt reduction first before returning cash to shareholders.
No. Where am I going to get an equivalent long-term invest opportunity. Given the income generating potential of the underlying assets, i dont mind if the overall structure stays cheap forever
But there is no cash to pay a dividend and there is a wind-up vote on July 10th !