| Group description: |
This group nominally covers the whole of Scotland – although we are also open to members from wider afield. The focus of the group will be on ‘Technical Trading’ rather than Investing. Importantly, we understand that many people do both longer term investing and shorter term ‘technical trading’. Of that mix of styles this group will focus on ‘technical trading’ – so you might expect us to have conversations such as:
Swing Trading, Stop Losses and Position Sizing, Chart Patterns – Cup and Handle, Breakouts, Springs, Flags etc, Support & Resistance, Indicators, Price Targets, Positive Expectancy, Trade Management, Trading Systems, Trade Ideas and Evaluation, Trade Planning, Leading and Lagging Sectors, Leading and Lagging Participants within Sectors, Trade Journals, and the ‘Tools of the Trade’.
The majority of the group have both longer term investments and carry out shorter term trades, too. They would term themselves both ‘investors’ with a longer term outlook and ‘traders’ with a shorter term outlook. The group members have broad experience in the markets – including across all asset classes and vehicles (shares – companies, trusts, ETFs, funds; spread-bets, CFDs, Options, Crypto). However, most of the group are predominantly interested in equities within the context of a portfolio.
Although some members are highly experienced traders that is not true of all and experience level should not be seen as an impediment to joining. So, if you don’t know who Richard Wyckoff was, or why Fibonacci is even more relevant today than in the 11th Century – don’t worry! Every day is a ‘school day’ for us all – Mr Market makes sure of that! |
I have invested in a few Investment Trusts, and now that I get ‘news’ from the LSE on anything my companies have to report on, I am surprised that these Trusts buy in shares for cancellation or Treasury almost every day. On enquiry I understand that the percentage they can buy in is approved at each AGM for the following year and that figure cannot exceed 15%. This is done to help reduce any discount between the share price and NAS. One Trust admits that if they continue to buy in 10% of the issued share capital for ten years or less it would have odd consequences. They failed to answer “Surely you could do what you are meant to do and invest in companies who grow and prosper.” One said that “they are not like a trading company who should use spare cash to invest in assets to grow the company or pay the cash out as dividends”.
Any thoughts anyone?
You are quite right, Mark. There is a balance to be struck when a trust makes buybacks. On the one hand, they increase NAV per share, when a trust is trading at an excessive discount to NAV and may help close the discount gap. On the other hand, they shrink the trust. For a small trust that may be an issue, because the manager’s costs are then spread across a smaller number of shares, which may make the ongoing charges % higher (for any fixed cost element). Less likely to be problematic for a large trust, where buybacks don’t have a big impact.
For example, Blackrock World Mining tends to have a volatile discount, which sometimes widens to an an unreasonably large level (> 15%). As that trust has a £700m market cap. and the trust buys back shares judiciously, I am happy to support the board in doing this. Where shareholders know that such a policy is in place, they can be confident that if they need to sell shares at some future point, they won’t have to do so at an excessive discount to NAV. For trusts without such a policy in place, there is much less certainty about what price can be realised should the shareholder need or wish to sell.
Nevertheless, a consistently good trust performance (and good investor relations to make sure the qualities of the investment company are understood by the market) is a better protection against excessive discounts than buybacks!
In summary, you need to decide on a case by case basis whether you support a buyback policy – and make the board aware of your views.
Best,
Mark