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Shares - Terry Smith's Smithson outperforms in first year since listing

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In its first set of annual results since listing, Terry Smith’s fledgling investment trust Smithson (SSON) has significantly outperformed its benchmark.

The FTSE 250 trust, which became the largest ever investment trust launch in October 2018 when it raised £822m, delivered a net asset value (NAV) total return of 33.2% in the year to 31 December. This compares to a 21.9% total return in 2019 from its MSCI World SMID benchmark index.

At 31 December, the share price stood at £12.98, reflecting a 3.4% premium to NAV.

The trust said it won’t pay a dividend, as it said its ‘primary objective is to provide shareholder returns through long-term capital appreciation rather than income.’

Manager Simon Barnard said performance was driven partly by a strong rally in global stock markets in early 2019 as a result of a pause in interest rate rises, followed by a pickup in sentiment in the last three months of the year as economic data stabilised and suggested a possible improvement in economic growth in 2020.


The trust has 29 holdings, and in July initiated a position in premium drinks maker Fevertree (FEVR:AIM).

The company’s shares ticked moderately lower in the rest of 2019, contributing a -0.3% drag on performance, though that drag could increase this year with the firm heavily sold off by investors in January after missing 2019 earnings expectations.

Barnard said Fevertree is a company he has ‘admired for some time’, and following its earnings miss, with further weakness expected in its core UK market until mid-2020, he added, ‘both of these issues appeared to be of a short-term nature to us, and we used the price decline as an opportunity to buy more shares. Only time will tell if this assumption is correct.’

Two of the top five contributors to performance were UK listed Halma (HLMA) and Rightmove (RMV).

Barnard called Halma, a safety equipment and sensor manufacturer, a ‘very rare breed in the corporate world’ due to its strong M&A track record, and values the firm ‘for its ability to continually invest incremental capital at very attractive rates of return by adding more small companies to its group each year.’

While on Rightmove, he said shareholder concerns over UK political and housing market uncertainty come from a ‘degree of misunderstanding’ about its business model.

He highlighted its revenue model – where it charges UK estate agents a fixed monthly subscription fee irrespective of the number or value of the houses advertised – and ‘dominance of its market niche’ as factors which make it resilient in the face of political uncertainty and a slowing economy.