Smithson, star fund manager Terry Smith’s new global smaller companies investment trust, releases some details of its 29 investments, which include a stake in British property portal Rightmove.
Rightmove, the UK’s largest homebuyers’ website listing 1.2 million properties, is the sixth biggest holding in the £850 million trust, which broke fund-raising records at its launch in October.
It is one of just two UK stocks that have made it into the fund’s top 10, according to the company’s first fact sheet, the other being Halma (HLMA), the manufacturer of smoke detectors and other hazard detectors.
Smith, who as the trust’s chief investment officer is overseeing the work of fund managers Simon Barnard and Will Morgan, is betting that Rightmove, a £4 billion company, can maintain the rapid growth that has placed it in the FTSE 100 list of top British companies.
Rightmove, led by chief executive Peter Brooks-Johnson, reported a remarkable 77% operating margin at its half-year results in July, but faces increasing competition with three of the country’s biggest house builders yesterday announcing they were backing Rummage4Property, a new portal they hope will take on Rightmove and its main rivals Zoopla and OnTheMarket.
Smithson’s investment in Rightmove comes at a challenging time with the property market overshadowed by Brexit uncertainty. Last month the portal reported falling prices in London were spreading across the south, although signs that sellers were dropping their asking prices to gain buyer interest may hold up transaction levels and provide some shield to any downturn.
Notwithstanding the short-term uncertainty, Citywire AAA-rated Smith and his fund managers would doubtless argue the online business enjoys strong growth prospects.
That’s a view that presumably also applies to its third biggest investment in Equifax (EFX.N), the US consumer credit reporting group struggling with the bad publicity from a hacker attack last year in which details on 145.5 million Americans were stolen. The breach, which also affected over 860,000 people in the UK, earned the company a £500,000 fine from the Information Commissioner’s Office in September.
Tech stocks dominate
Similar to Fundsmith Equity, Smith’s £17 billion flagship global fund which has 28 stocks, Smithson is spreading its bets among 29 companies around the world, a number that balances the need to reduce the risk of individual stocks going wrong with a wish to have meaningful exposure to companies the fund managers are most excited by.
The average size of stocks in the portfolio is slightly smaller than expected with a market value of £6.3 billion instead of the £7 billion mentioned before the launch.
There are differences in emphasis between the two funds, however. Although nearly half (47%) of the trust’s assets are in US-listed companies, such as its biggest holding, Verisk Analytics (VRSK.O), a data provider, the bias to the States is less pronounced than Fundsmith Equity which has nearly two thirds in American stocks.
While IT is the biggest sector in both funds, Smithson starts with a higher allocation of over 45% compared to Fundsmith Equity’s 30.4%. Nasdaq-listed tech stocks dominate the new trust’s biggest holdings with seven of the top 10 positions. Second-placed Sabre (SABR.O), a US platform for airlines, nestles alongside fellow Nasdaq-listed stocks CDK Global (CDK.O), a software supplier to car dealers in seventh place; and Ansys (ANSS.O), an engineering simulation software provider from Pennsylvania in eighth.
Companies on the Nasdaq technology stock exchange don’t have to be from the US. Smithson’s fourth-biggest position is Israel’s Check Point Software Technologies (CHKP.O), an IT security specialist founded by chief executive Gil Shwed, inventor of computer firewalls, who owns nearly 20% of the shares.
Two other Nasdaq stocks complete the picture: Masimo (MASI.O), a $6 billion US medical technology company, and Cognex (CGNX.O), a US manufacturer of machine vision systems for use in the semi-conductor and other industries.
Tucking back into Domino’s
Outside the top 10, a list of the trust’s biggest risers and fallers in its first six weeks reveals a holding in Domino’s Pizza Group (DPZ.N), the US super-stock not to be confused with the London-listed Domino’s Pizza Group (DOM). The North American company - which serves franchisees of the pizza chain in the US and Canada - gave Smith the idea of launching the trust when he was regretfully forced to sell a long-standing holding from Fundsmith Equity because the giant fund was becoming too big a shareholder in the stock.
Smith is a big fan of the global pizza delivery brand, with Smithson also taking a position in its Australian offshoot Domino’s Pizza Enterprises (DMP.ASX), although, as with all the holdings listed on the trust factsheet, details of the size of the stake is not yet disclosed.
Smithson has invested nearly all the record £822.5 million it raised though it held 2.6% - or £21.4 million - in cash at the end of November. In the first six weeks the overall value of its equity investments did not rise, although the share price gained 3.3%. Today the shares, having launched at £10 on 19 October, stand at just under £10.50, a near 6% premium over net asset value per share of £10.16.