sage in the hills
23 Sep 2017
From iii news feed Bargain hunter: This trust is on a roll, but remains cheap as chipsKyle Caldwell (Money Observer) | Fri, 22nd September 2017 - 16:44Share thisBargain hunter: This trust is on a roll, but remains cheap as chipsThese have been a stellar couple of years for shareholders in the Fidelity China Special Situations (FCSS) investment trust, which has enjoyed a resurgence under the management of Dale Nicholls, who took over in April 2014.Nicholls had big shoes to fill as he replaced star fund manager Anthony Bolton at the helm. Bolton had steered the Fidelity Special Situations fund to annualised returns of around 19 % during his 28 years at the helm before stepping down in 2007.He moved to Hong Kong to manage the newly launched Fidelity China Special Situations trust in 2010. But he struggled to repeat his success overseas, with FCSS' net asset value return showing a loss of 31.5% in 2011, according to broker Winterflood. Indeed, it was a challenging year for all stock-pickers in the region: the MCSI China index, the trust’s benchmark, declined 17.6%.the time Bolton retired in April 2014 he had managed to steer FCSS back into the black, but in the three and a half years since Dale Nicholls took the reins, the trust’s performance has improved markedly. FCSS has produced an NAV return of 87% on a three-year view, and is showing a return of 21% over the past year.However, despite this strong showing, the trust is today sitting on a discount of 13.7% (as at the time of writing on 20 September) - an anomaly that has caught the eye of Killik, the stockbroker, which has issued a 'buy' recommendation.In a note to clients Killik notes that "for long-term investors, the development of the Chinese middle class provides a strong backdrop for growth," and that FCSS offers an attractively priced entry point for investors to gain exposure.Over the past 18 months or so Chinese stockmarkets have enjoyed a fine run of form. Killik puts this down to "clear signs of economic improvement over this period", going against predictions from various gloomy experts who had warned China would suffer from a so-called 'hard landing'.But, as the more experienced investor knows all too well, those who back China should fasten their seatbelts and prepare for a bumpy ride - the stockmarket has past form for falling sharply in a short space of time. Therefore, those who invest in such a single-country investment trust or fund should be prepared to invest for the long term, at least five years."Periods of heightened market volatility are to be expected as China undergoes a challenging rebalancing of the economy. However, for long-term investors, the development of the Chinese middle class provides a strong backdrop for growth," says Killik."The portfolio continues to offer attractive high levels of prospective earnings growth, and with the share price having lagged the NAV return year-to-date, the current 14% discount is wider than the medium-term average and looks attractive."The investment trust broker Winterflood has also recently thrown its weight behind FCSS. In a note at the end of July the broker said the discount at the time - which stood at 12% - was 'attractive', and as a result the trust had been added to the firm’s model portfolio."In our opinion, the high level of gearing, single-country mandate and small cap bias make Fidelity China Special Situations a high-risk, potentially higher-return vehicle, particularly at a time when the manager appears to be more cautious on valuations," said Winterflood."Having said this, the ability to take short positions provides an opportunity to benefit from overextended valuations and the use of gearing and small cap allocation makes good use of the closed-ended structure. In addition, while we tend to view single country funds as specialist vehicles, we note that if the manager is correct about China becoming a greater part of global indices, there could be a gr
San Jaime
22 Sep 2017
Re: Anthony Bolton You must be joking, FCSS only moved into profit once Bolton was relegated.
NCMR
23 Aug 2017
Anthony Bolton I wonder how he feels now. There were teething problems but the stock picks seem to have been inspired and the succession planning/continuity has been very smooth. I have been in since the start and have enjoyed 125% growth and more with accumulation. Thanks Anthony .. it has been a very good ride and I am sure it will continue to be.
Ripley94
31 Jul 2017
Re: Chinese devaluation... Took another slice on high 218p limit lifted 218.165p.. ( Tom H ).... 4.20pm .
hewhodares1
29 Mar 2017
TESLA Looks like we own a bit of Tesla[link]
Ripley94
20 Mar 2017
Re: Chinese devaluation... Took another slice on high . to raise funds ( SV ( 2) )Recent failed limits 198.. got live 199.108 .. can only see 3 pages ( 150 ) trades to 2.30pm.Only looked after, but got days high.
riverside red
07 Oct 2016
Hooray I have finally doubled my money, on paper at least.
Kingel
26 Jul 2016
Uber losing $1.5bn yrFidelity's Nicholls Ride-hailing app Uber may be driving for global domination but in China the company has met its match and may hit a brick wall, according to Fidelity fund manager Dale Nicholls.Uber’s big rival in China is Didi Kuaidi, which Nicholls is backing in his £864 million Fidelity China Special Situations (FCSS + Add to favourites ) investment trust, making it one of only two privately-owned, unlisted companies in the 140-strong portfolio.Uber takes 25% commission from each taxi fare and claims to be profitable in the US and other developed markets. In China, however, the business is loss-making because it has to pay drivers bonuses bigger than the fares passengers pay.Nicholls believed Uber’s pursuit of market share in China was unrealistic as it ranked number two with a market share of around 15%, according to an Analysys International study last year, compared to Didi on over 80%. Shareholder questions‘We estimate Uber is losing $1.5 billion [£1.1 billion] in a China a year. Didi is losing less as it has greater market share,’ said Nicholls. He described Didi as a ‘classic network business’ as it could reduce driver bonuses because it could send more business their way. ‘Something will have to give,’ added Nicholls. ‘Uber shareholders will start to ask tough questions over how much they’re losing and how many Western companies [none] have won in the internet space [in China].’He suggested Uber China would have to adopt a ‘niche’ strategy if it was to make its business profitable.Nicholls’ comments contrast with the stance of US investment giant Fidelity, a separate business to Nicholls' employer Fidelity International, which invests in Uber and, according to the Crunchbase website, led a $1.4 billion fund raising effort in 2014 that at the time valued the San Francisco-based company at over $18 billion.In the past year Uber has raised more than $13 billion from investors and creditors, including a $3.5 billion investment by Saudi Arabia, as it has sought to establish itself in China and India. It is now reportedly valued at $62.5 billion. Didi, the result of a merger of two rivals backed by China’s internet giants Tencent (0700.HK) and Alibaba (BABA.K), has responded by raising $4.5 billion from investors, including $1 billion from Apple in June. Fidelity was an early backer of Alibaba with Nicholls’ predecessor Anthony Bolton investing 2.5% of China Special Situations in the e-commerce site before its record $25 billion flotation in New York two years ago.That success gave Nicholls (pictured) a taste for finding more unquoted companies before they hit the market. Last Friday the trust won shareholder approval to double the maximum it can hold in unlisted stocks to 10% of gross assets.While the opportunity to invest in Alibaba came via Fidelity’s private equity team in China, Nicholls said he was looking to develop other sources for future investments.Didi currently accounts for 1.7% of the investment trust under its formal name of Xiaoju Kuaizhi, with less than 1% in the fund’s other unquoted holding, Meituan-Dianping. This is China’s largest group deals site which in January raised $3.3 billion from investors, including Tencent and fund manager Baillie Gifford.Speaking to journalists before the trust’s annual general meeting, Nicholls stressed he would not immediately deploy the new capacity in unquoted stocks, saying the 10% ceiling gave him flexibility to tap into high-growth companies. He said he recognised that the illiquidity of unlisted investments meant they had to generate higher returns.Risk and returnAnalysts say the increase in unquoted investments is justified but adds to the risk of what is already a high risk, highly geared (borrowed) fund which invests half its assets in more volatile smaller companies and can ‘short’ or sell stocks it does not own. ‘Given the high gearing, the single country mandate and the bias towards sm
Ripley94
19 Jul 2016
Re: Chinese devaluation... big position so took a slice @ 153.02
Eadwig
24 Mar 2016
Re: Growth Can't Be Trusted Anyone who has read my posts over the years, and especially in recent times on GLEN, RIO, FCSS and RR ii boards, will know how opposed I am to buybacks generally. At last, the FT has spoken out against them also:"Harvard Business Review called them “stock price manipulation.” The Economist called them “an addiction to corporate cocaine.” Reuters called them “self-cannibalization.” Now the Financial Times, in an article by John Plender, calls them “an overwhelming conflict of interest.”Yet share buybacks not only continue on a gargantuan scale—some $3.4 trillion over the last ten years. They are increasing. Last year, the FT reported that U.S. companies unleashed “a share buyback binge… Now the market stands on the cusp of seeing a record of more than $1 trillion returned to shareholders in the form of dividends and stock repurchases this year.” This is happening at a time when share prices remain close to record highs.Stupid Institutional DecisionsIf companies were buying their stock when its price was low and selling it when it was high, there might be a slender case for share buybacks. But as the FT points out, “most do not do that. They buy high and sell low.”Equally absurd is the argument that money is cheap to borrow, so why not buy shares. As the FT says, “Borrowing cheaply to buy expensively is a nonsense.”Similarly, the argument that buying shares is the best use of the company’s money because it can’t see any good investment opportunities doesn’t make any sense. “This amounts, as the FT writes, “to buying into a company that has run out of growth.”A Massive Extraction Of ValueWhat is actually going on is a massive extraction of value from firms to their shareholders. As the FT notes, firms are “boosting earnings per share by shrinking the equity.” This enables firms to meet the stock market’s expectations in terms of earning and thus tends to boost the stock price for the benefit of shareholders, including the top executives.Tim Bush, head of governance and financial analysis at Pirc, the U.K. shareholder advisory group, argues that “the link of pay to earnings per share growth may create an incentive to undertake buybacks that destroy economic value… The result is that impressions of real earnings growth are distorted… The conflict of interest here is overwhelming… Too often managers are egged on by short-termist activist investors.”“There is a marked lack of transparency and accountability in what is now a huge item of corporate spending and a serious mis-allocation of capital,” writes the FT. “The cost of acquiring the shares does not appear in the profit and loss account as a distribution. There is no requirement to disclose any decline in the value of shares in the accounts.”The Dumbest Idea In The WorldWhy are firms taking decisions that destroy economic value? Behind it all of course is what Jack Welch has called “the dumbest idea in the world,” namely, the notion that the purpose of a firm is to maximize shareholder value as reflected in the stock price.The root cause isn’t obvious because it is not a group of individuals or institutions who can be blamed. It’s an Idea. And the Idea, almost unnoticed, has come to dominate the way business works. The Idea is taught in business schools; is presumed appropriate in daily financial news reporting; is accepted as a go-to tool for any executive of a large public company; is the modus operandi of activist hedge funds; is endorsed by regulators, institutional investors, analysts and politicians; and is seen by just about everyone as simple common sense. Unfortunately, the idea doesn’t work, even on its own narrow terms.The Role Of Institutional Investors“The big question,” writes the FT, “is why institutional investors do not blow the whistle on what all too often turns out to be an exercise in value destruction. It is high time institutional investors took a firmer grip,” writes the FT. “In the U.K. that would mean vot
nk1999
07 Mar 2016
Re: NAV?? You can find the RNS showing the NAV right here under the "News" (see the link above).nk
le vin est par
07 Mar 2016
Re: NAV?? According to iii it is a discount of 16.22% currently. "Factsheet" is the header that you require to obtain this information.If you are not sure that it is a good idea then you have probably answered your own question.Depends on your objectives, timescale, existing portfolio, attitude to risk, etc etc.I sold out of this at a tidy (but lessened) profit a short while back and have been buying LLOY.
sometimes right
07 Mar 2016
NAV?? Could somebody advise the discount to NAV. I am thinking about taking a plunge. Not sure if that os a good idea. Any comments?? Thank you
Eadwig
27 Feb 2016
Re: Growth Can't Be Trusted nk1999, "Just putting forward a different view."Indeed, and what are these boards for if not for that. As I posted my response it helped me realise that my feeling about an FCSS buyback was more an instinctual thing - I haven't run any of the maths behind it that you suggested, for example, and they may well be technically correct in a buyback.Even if that is the case, I feel if a fund is doing that, especially what is essentially a higher risk growth fund, then it is an indicator that the fund isn't performing as it should, nor expected to in the shorter term and/or or the gap between the NAV and the share price is so huge that it is telling its own story.All the best with your investments and to all those invested in China either via FCSS or any other way. Its very difficult to make the return you would expect from such a success story, not least because people keep talking about a 'downturn' or a 'slowdown' and sentiment has become by far the strongest head wind. In fact Chinese growth remains phenomenal, despite being measured from a much bigger base now year on year and the consumer-led part of the economy is screaming forward still, while base infrastructure has slowed a lot, understandably. A good example is the US auto makers last results - all reporting massive increases in sales in China in 2015. No better example of a consumer-led economy booming, to be frank, you can pretty much measure that part of the economy by the auto sector alone.I just wish I could find a better way to play the Chinese growth story. Its been a lot more difficult than I ever imagined when I first started trying to get a piece of it back around 2003.
nk1999
26 Feb 2016
Re: Growth Can't Be Trusted Thanks Eadwig, and I must say I was not offended by our post. Just putting forward a different view.Your have been on my Favourites list for a long time as well, and I certainly value your inputs and analysis.Have a good weekend and wish you all the best with your investments.nk
