Peter Thornhill 2018

I am doing some numbers on different LICs and have been a little underwhelmed. Wanted to discuss results here for WHF in particular as this aligns with PT's style (and it is one of the more disappointing!).

I like to compare growth in capital to growth in dividends to gauge whether a share is overpriced. Have just used share price growth as a proxy for NTA since they correlate very well and historical price data is easy to get.

Numbers are given annualised over
5, 10, 15, or 23 yr period (first full year of full franking in Aus)

Price growth: 4.4, 3.8, 2.5, 5.5%
Dividend growth: 1.1, 0.8, 2.4, 5%

Essentially paints the profile of fast growth in dividends in the 90's, but hardly any since then. Looking at the earnings data on their website, it looks like the GFC hit them quite hard, they used a high payout ratio (>100%) and are keeping things stagnant while they recover.

Thoughts? Is this the wrong way to look at an LIC?

 

Sure it’s tough comparing against the GFC. Earnings and dividends across the market were hit hard.

The 5 years leading up to the GFC saw huge earnings/dividend growth, far above trend (see Thornhills chart). So when we take a longer term horizon and see the context of the stagnation it makes more sense.

Growth is likely to be more or less in line with the economy over the long term 3-4% pa.

With a starting yield of 4% or 5.7% gross I think that rate of growth would be more than sufficient.

 

No strong thoughts, looking after shareholders will likely come ahead of captive money.
MFF (and PMC) comes from when I thought an active portion for international was wise, now I'm not convinced. Are you going to commit enough capital to make a meaningful difference or do you just like the idea of tweaking? MFF was my best performing LIC/ETF last FY so I'm not upset.

I will try to take advantage of what is known when I can such as; big crashes, discounts to NTA. Otherwise just stay the course.

 

Yesterday I attended my second PT seminar in Sydney. I’d introduced a mate to the ‘shares for income’ approach and he was keen to check it out. So I tagged along.

It was excellent and similar to the first one I attended.

What was different though was:
- this audience had lots of questions though out the day and the QnA section at the end went for over 90mins
- It felt like there were a large number of property investors there, based on their questions being answered
- His son Oliver (a FP) also answered some of the questions and made some points during the day, which I found valuable. Not always congruent with Peter’s, but not antagonistic either.

A few points for those interested:
On NTA discount/premium: he really doesn’t care about this. A while ago her asked someone from ARG to give him the history of NTA and price and he looked at the 24 ARG purchases he’s made. 65% of them were at discount to NTA and 35% were at premium. That was enough for him to decide, not to give it any more thought moving forward.

On buying ETF’s: He’s not a fan for reasons’s others have posted here. However, he also said ‘but don’t let me stop you from buying them’ when asked. So while they’re not for him personally, he has no energy around others buying them. He simply focuses on what he knows and likes and doesn’t give much energy to anything else.

I asked his son Oliver, what his thoughts were on this. They are similar to Peters. Specifically, he talked about working in a call centre in 2010 when some sort of ETF was frozen and dealing with that professionally. Guessing it’s left a scare.

On international investing: Again, he seemed to have no problems with people doing it. That said, he's focus in defiantly once Australian assets. Gave the usual examples of COH and CSL being international and spoke about his UK LIC’s one of the just paid it’s 51st year of increasing dividends as a default of his 18 years working in the UK. The conversation then extended to asset allocation of which he’s not a fan. Spoke of his experience’s rebalancing and selling some COH at $80 after buying it when it floated in 1994 from memory and doing similar with some of his CSL holdings.

On the Labour tax changes: ‘It’ll be business as usual’ basically, if it was to happen. He doesn’t give things like this much energy, unless people ask, from what I can pick up. Yes, it’ll be less productive, but he suggested his plan is to borrow more so the difference in tax deductible interest is equivalent to any refund (at least that’s the way i interpreted it from memory).

Peter also had his youngest son there in the audience listening.

Less than 10% of the room understood what franking credits were, when surveyed.

Spoke favourably of MLT, ARG, WHF, CSL, COH, MFF (this one in response to a question) and one of his UK LIC’s during the day. Not advice, just the ones mentioned at different times.

When asked, he spoke a lot of the behavioural aspects of investing based on his personal experiences from the 1973 oil crisis onwards, this was particularly insightful. Not just from him, but the audiences response. When the question was asked about the drivers/influences of his behaviours over the years, some of the audience laughed and said ‘logic’. It’s interesting, how ‘equiped’ behaviourally some people seem to be after a 6hr seminar…?!

Peter, gently pulled them up as spoke in detail about the feeling/fear/etc of going in hard during the GFC and that he’ll surly have the same feelings next time it happens. He also talked about the huge benefit leaving Australia for 18 years had on him and coming back with a different perspective after seeing and learning a lot.

A female in the audience spoke about her dividends during the GFC being solid while the share prices (her capital) contracted and that was her focus, just focusing on the income and nothing else. he’s spoke positively of the dividends approach from her personal experiences.

Finally and I don’t know if he’s doing this for show or otherwise, but he literally reads the one paragraph summary of the companies he own’s reports (ie EPS up, DPS, up, or whatever) and that’s all he needs to know. He son, asked him ‘did you read the full report?’, Peter laughed and said no.

His message was clear. Become great in your career and relationships with your family/friends. Keep your investing simple and have money be your slave not the other way around.

All of this is from memory, but hopefully it’s helpful for some.

 

@mdk Great summary, thanks for sharing!

 

Anyone grill him on this? Would like a bit more perspective.

 

PT holds both MFF as well as MFG in super accounts.

 

International, high fee, low div and not a long history all spring to mind as reasons why PT would not take a second look.

 

The holdings surprised me too but have had a few personal interactions with him and he and his son hold the above mentioned products! Seems to contradict his dividend only mantra but at least he was open and honest in his holdings!

 

It was a great day and I learned bucket-loads of information; possibly the most I have learned in any one day about investing. Amazing value at $106. Lack of selling anything was refreshing, although I will admit that I went online afterward and bought his book for $30. Not sure that book sales are making him rich though. I am looking for the $5,000 follow-on course but unfortunately, he doesn't seem to offer one

 

Purchased as a result of holding MFG probably also assuming MFF would eventually be a reasonable dividend payer? PT said his worst mistakes have always been “selling” ones so once he owned it he held on to it and no doubt very happy he did.

 

Nice summary, thanks. Does anyone know when the next course is? Cheers

 

He may be putting another one in November

 

Someone on Reddit has kindly shared all the slides from the most recent presentation here

MOTIVATED MONEY CORE SLIDES 2018.pdf

 

Interesting, on Reddit it was mention that Peter's son Oliver who works for Fortitude Private Wealth, was at the talk and said Quote: "they are having talks with Betashares, trying to build a case for them to create some kind of ETF that tracks companies falling into Peter's investing style, essentially industrials. The aim would be to have a single ETF and try and minimise resources and property, which is difficult with the popular LICs which usually have a slice in their holdings. I asked Oliver if he was ok with me mentioning that this is under discussion, and he said he was happy with that being public knowledge. I believe they're hoping to add Peter himself to that conversation, so watch this space I guess."

Peter and ETF's - A possibility?

 

Classic, Thornhill Industrial ETF. The irony.

 

Yep classic! PT says he doesnt like the open ended trust structure as well as the perceived liquidity risks in etfs.......so we will just whip up an industrials etf then shall we

 

We have a SMSF and looking to invest LIC shares perter recommend. Is that a reason not worth to do it in SMSF? whats the cost involved anyone knows?

 

Have you checked out Greenfrogsuper http://greenfrogsuper.com.au/ There are zero restrictions on which bank accounts you use or which trading platform or what shares you can buy.

 

Just picked up tickets for Peter Thornhill's event next month in Sydney. Is anyone else coming? I'm really looking forward to it!