Both have adopted a straight-talking approach, both have demonstrated the knack of seeing beyond numbers to pick damn good companies, and both could easily have had a career in PR or marketing, having an innate sense of what people want to hear. They are Showmen with Substance.
They have both hit my Inbox this week. Woodford with the 6 month results of his Patient Capital Trust. And Smith with his new Smithson Investment Trust.
Woodford’s Patient Capital Trust is effectively a holding company which owns shares in 94 businesses which hope to be tomorrow’s big ideas and names. If the huge global names are the elephants, these stocks are the baby cheetahs - Purple Bricks. Tech. Drug trials. Artificial intelligence in healthcare. Crowdfunding platforms.
Some of these firms may die. A few will grow to outrun most things. The idea and belief is that owning 94 of them smooths out the risks and is a smarter way to invest in this space, rather then trying to pick one or two names.
The clue however is in the name. Patient Capital Trust. Over 3 years, it’s down by 28%.
Given this, I took umbrage at what Mr Woodford wrote to me yesterday:
'When we launched just over three years ago, my mission was to deliver shareholder value by investing in great ideas and help to turn those ideas into great businesses – great in terms of quality and in terms of scale. I am pleased to report on a period during which the success of this mission is becoming increasingly clear.'
Perhaps I am getting grumpier in my old age, but this language irritated the hell out of me. My savings are not here to fund your intellectual and professional curiosity. The 'success of your mission' in real terms has been to turn my £1,000 into £818, during a time when the FTSE has shot up in this ongoing bull run.
I am sympathetic to this. As someone who runs a start-up, I understand the cycle. And I quite see the long-term nature of this, and I want to diversify away from all the big household names and tech giants which have dominated headlines. You’ll fossick out and scrutinise firms I’ve never heard of. I feel fairly confident that you will do well in the long-term. I’m cool with all of this.
But please don’t get so up yourself that you forget that despite all my logical training, my irrational and emotional chimp side of the brain is screaming at me because my £1,000 has become £818. And my Chimp does not appreciate nor want to hear self-congratulatory messages about your mission. Clumsy.
Over to Terry Smith who is having a better time of things this year. His Fundsmith Equity fund has been the best-seller this month on various platforms. He’s returned 95% over 3 years. And next month he’s launching the Smithson Investment Trust which will invest in 25-40 global companies at the smaller end of the company size spectrum, following his same no-nonsense principles. (Let’s be clear, with an average size of £7 billion these are not minnows either). His 'Owner’s Manuals' are great and worth a read. In an industry full of waffle and dull 120 page documents, they tell a very good story about what he does and why. Nice.
It's interesting that these 2 managers, both highly tuned into global trends and consumer demands, have branched off down the ‘small cap’ route. We can’t rely on Amazon, Google, Apple, Microsoft and Facebook to fuel returns forever. I’ve no doubt we’ll see more activity in the global ‘small cap’ market as investors look to fund managers to help them hedge their bets against the huge dominant global brands.
Remember this. Elephants don’t gallop. Well. Not for long anyway.