LIC & LIT Why the love for Mirrabooka Investments?

Discussion in 'Shares & Funds' started by Zenith Chaos, 17th Nov, 2018.

Join Australia's most dynamic and respected property investment community
  1. Zenith Chaos

    Zenith Chaos Well-Known Member

    Joined:
    10th Jul, 2015
    Posts:
    1,142
    Location:
    Sydney
    Interesting list @Nodrog. My only question is why the love for MIR. I find their MER relatively high, EPS doesn't match DPS and always at a premium to NTA. I guess they must have outperformed over the years and they have a good management team.
     
  2. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    MER at around 0.60% is low for an active mid / small cap Mgr, minimal key person risk, longer term focus, reasonable performance and good income. Yes there are other funds that may outperform but they rely on hot shot stock pickers who can disappear at anytime, have huge fees and you can’t be sure they’ll be around longer term. My expectation is pretty low in that as long as they can do a damn side better job than me at picking stocks in this area of the market then I’m happy. So for us seeking ASX EX-50 exposure it does the job.

    But as mentioned the pain in the arse is the NTA premium which means buying opportunities have been rare. Occasionally a SPP offers an opportunity. But such is life, I’m happy to be patient. It’s not the main core of the portfolio.
     
    pippen and Zenith Chaos like this.
  3. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    2,822
    Location:
    It's all about ME!
    Regarding MIR and EPS/DPS difference, I haven't checked but does the EPS exclude such things as LIC CGT Discount, etc? I seem to recall it's not supposed to include such items but I could be wrong.
     
    Zenith Chaos and Nodrog like this.
  4. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    I must admit to being too stupid to look at such things but simply look at NTA growth. Below one can see low fee MIR against the crowd favourite and huge fee gouging WAM. Wilson is about to lose one of his key stock pickers. With MIR there’s no such risk but simply sensible long term focus, emphasis on cash flow, lower turnover and a modest fee:

    57B61033-ED50-430F-B2E4-3363AC463A87.jpeg

    https://cuffelinks.com.au/wp-content/uploads/LIC-Weekly-Report-Indicative-NTA-9-November-2018.pdf
     
    Last edited: 17th Nov, 2018
    Ynot and Zenith Chaos like this.
  5. Snowball

    Snowball Well-Known Member

    Joined:
    28th Dec, 2016
    Posts:
    685
    Location:
    Perth
    The reason for the EPS being different from dividends is that the dividends are mostly paid from capital gains realised in the portfolio, because it’s a relatively lower yield/higher growth portfolio, like other small cap managers such as WAM.

    But the difference is MIR is a long term investor so realised capital gains are not declared in yearly accounting profits (same as the old LICs) but as long term capital gains which is where they can pass thru the cap gains discount being a qualified long term investor. (That’s my understanding, could be wrong)

    On your other point regarding simplicity...

    For me it’s more of a mental thing. While it may not take much longer to do your tax with more holdings, it definitely takes up more mental space, gives you more to think about, manage/weigh up in your head.

    It’s something I didn’t appreciate before, and while I found it super enjoyable at first, I now don’t see much benefit in having a huge number of holdings consuming my mental energy for (probably) the same result.
     
    Ynot, Parkzilla, Zenith Chaos and 4 others like this.
  6. MarkW

    MarkW Active Member

    Joined:
    9th Aug, 2018
    Posts:
    31
    Location:
    Sydney
    I've often wondered why the love (in these forums) for QVE, with its MER being higher than MIR's. (I currently own neither of them.)
     
    willair and Froxy like this.
  7. willair

    willair Well-Known Member Premium Member

    Joined:
    19th Jun, 2015
    Posts:
    4,046
    Location:
    Troppo.
    Me too I own neither then Add a bit of name dropping - then if you read inbetween some of the merry-go-round posts those that understand mathematically ethically that being rich and becoming rich are not the same thing..
     
    DoggaPP likes this.
  8. Snowball

    Snowball Well-Known Member

    Joined:
    28th Dec, 2016
    Posts:
    685
    Location:
    Perth
    For me, it fits better with our goals than MIR, they have more of a focus on providing a growing dividend stream. And that dividend stream is from the cashflow of the underlying portfolio. Both not the case with MIR, despite being a well managed, well diversified and lower cost long term LIC.

    Maybe irrational, but I feel more comfortable with QVE's dividend for these reasons. MIR could run out of gains to keep paying out which could result in a cut to income.

    QVE's manager IML has proven itself (enough for me anyway) over 20 years with their managed funds and they stick to their chosen strategy, whether it's in favour or not (currently not). And it matches the way I like to invest. Income is a key focus in their stock selection which is important to me.

    Whether it beats the market or not who knows, but I'm happy with the manager, their style and the LIC overall.

    As a side note, I hold in a separate portfolio, some high growth low yield stocks and I just find it less enjoyable to own them. I'd rather have a good part of my return coming from cashflow, and be less reliant on strong growth and favourable business developments.

    Others will see it differently of course, but that's my feelings on it as I've learned more about myself as an investor.
     
    Ynot, Zenith Chaos, Parkzilla and 5 others like this.
  9. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    I haven’t been following QVE for awhile but I’m not sure that it’s any more dividend focused than MIR?

    QVE commenced as a “LIC” (not a trading company) for tax purposes so that it could pass on discounted capital gains to its investors just like the older style LICs such as AFI / ARG / MLT / MIR. Part of the requirement to retain this status is low turnover. From memory after a year or so QVE revoked this status choosing to become a “trading” company.

    It was all done fairly quietly merely as a sentence buried in one of their monthly commentaries. I recall QVE saying something along the lines of that they found it too restrictive being a true “LIC” and counter to the more “active” trading approach used by IML! So in summary it’s unlikely over the long term that “the dividend stream will be mostly from the cashflow of the underlying portfolio”.

    As for the turnover comparison between QVE vs MIR I haven’t checked but given the above it would suggest that overtime QVE’s turnover is likely to be higher than MIR.
     
    Last edited: 18th Nov, 2018
    Ynot, Zenith Chaos, Parkzilla and 4 others like this.
  10. MarkW

    MarkW Active Member

    Joined:
    9th Aug, 2018
    Posts:
    31
    Location:
    Sydney
    Thanks for your comments Snowball and Nodrog.
     
  11. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    Mark the main reason we hold MIR is that it’s focused on the mid / small cap sector of the market and does this for a low fee relative to similar funds. ASX is a very concentrated market with the top 10 making up a huge part of the market. The large cap older style LICs are also generally concentrated similar to the index. But they do also provide reasonable exposure to the top 50. QVE is Ex-20 vs MIR being Ex-50. Hence as a “diversifier” MIR perhaps has the edge?

    This research report on MIR would be well worth reading to provide some background:

    https://www.nracapital.com/sgxmas/listedmanagedinvestment11-12-2017 12-00-00 am.pdf
     
    Ynot, KayTea, Anne11 and 1 other person like this.
  12. MarkW

    MarkW Active Member

    Joined:
    9th Aug, 2018
    Posts:
    31
    Location:
    Sydney
    Thanks Nodrog.
     
  13. Snowball

    Snowball Well-Known Member

    Joined:
    28th Dec, 2016
    Posts:
    685
    Location:
    Perth
    Yeah IML likes to trim things regularly which I just accept as part of what works for them (in the same vein that high turnover works for WAM).

    Well I do feel that QVE focus more on income from the stocks they pick and commentary from both LICs. MIR holdings and portfolio is low yield which is shown by their top holdings and EPS. They recently bought Afterpay for example.

    MIR are still a good income provider but that income is mostly from capital gains, which is fine, but I think these things show that income doesn’t weigh heavily in the stocks they pick (which is what I meant).

    Yes turnover will be higher for QVE no doubt but it doesn’t appear they’re going to start paying large dividends from cap gains or they would’ve started doing it by now. They’ve stated before they aim to steadily increase the dividend sourced predominantly from income from the portfolio and it appears that’s whats happening so far.

    It could be argued MIR is a more proven, lower risk LIC with more positive attributes but just outlining the reasons why I prefer QVE for those that are curious.
     
    Last edited: 18th Nov, 2018
    Ynot, Anne11, lamecrocs and 2 others like this.
  14. Hodor

    Hodor Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,791
    Location:
    Homeless
    They would need some large cap gains to pay large dividends from capital gains so it definitely doesn't appear like they'll be doing that :p
     
    Snowball and Nodrog like this.
  15. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    Thanks @Snowball.

    Anton T often states their typical holding period is 3 - 5 years. Peter T owned IML small coy fund at one stage for which he emailed me it’s distribution data for the years he held it. It would be steady as she goes for awhile then large periodic lumpy capital gains distributions would appear in addition to regular dividends. QVE is still a relatively newer LIC. PT of course hates these trading oriented funds as you know so QVE and MIR would be rubbish is his view:). But that’s his personal view.

    Both LICs are some of the better ones in my view but in theory Anton T and his team are likely higher skilled than the team at MIR. Trouble is like all funds with bigger names is the usual key person risk. IML had to shelve their options income LIC as their key options trader left during the promotional period. Anton himself is likely to be gone from IML in the not too distant future. From memory Anton recently sold half his share of IML to an overseas fund Mgr. So that leaves Simon Conn as the remaining long term IML portfolio Mgr.

    I suppose one could look to one of IML’s longer running funds similar to QVE for some idea of turnover. Future Leaders fund albeit Ex-50 might provide some clue? Some familiar holdings there I’m assuming.

    CACAC174-DC31-432C-982D-4C44DCCB4F64.jpeg

    I consider both QVE / MIR excellent. I suppose when it came to recent simplification of our portfolio I had to choose between QVE and MIR. There were a number of reasons for choosing MIR a few which have been mentioned previously. There’s no shortage of cash flow being pumped out of the older style LICs which also hold a reasonable amount of Ex-20 stocks. MIR being Ex-50 by mandate gets diversification further away from the market leaders. But also the capital gains for our MIR holding was much higher than QVE.

    Value wise though a glance at QVE the other day suggested at around $1.05 from memory some might consider that an attractive opportunity. MIR unfortunately continues to trade at a sizable premium. So for someone wanting exposure outside the concentrated top end of ASX it might be considered silly to pay an excessive premium for MIR when QVE is offering much better value!

    Admitadly a sizable amount of our MIR holding was purchased during the GFC. So it’s very different for us with already a decent stake in MIR (purchased at a heavy discount to NTA) vs a newer investor trying to decide between MIR vs QVE. So that needs to be bourne in mind when reading my personal view.

    Finally I’m progressively taking a more and more hands off approach even with our small number of remaining ETFs / LICs. Simple, Set and forget really is the aim going forward. So that means my knowledge of specific LICs may be potentially incorrect / out of date so please feel free to correct me or remind me that senility has taken greater hold of me:).
     
    Last edited: 18th Nov, 2018
    Ynot, Snowball, Anne11 and 2 others like this.
  16. lamecrocs

    lamecrocs Well-Known Member

    Joined:
    8th Jan, 2017
    Posts:
    156
    Location:
    Sydney
    Great seeing expert posts from @Nodrog and @Snowball telling stories from all angles for QVE and MIR. I hope these kinda posts would tremendously help newbies to learn and also decide on which funds to invest in. Albeit they're very similar but different!
     
    ChrisP73 and Ynot like this.
  17. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    No expert, just an old fart’s ramblings. In fact going forward when it comes to investing my aim is to know less, live more.
     
    Ynot likes this.
  18. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    2,822
    Location:
    It's all about ME!
    Yep, this was the one.
     
  19. SatayKing

    SatayKing Well-Known Member

    Joined:
    20th Sep, 2017
    Posts:
    2,822
    Location:
    It's all about ME!
    Not being entirely physically active at present, boredom won and I scanned the ASX announcements. So MIR is to pay a dividend of 13.5c ff (including a 10c special.)

    Me being me it'll be one of the few times I'll use the DRP to absorb the special which I've just done. A simple calc of number of shares held x special div over total div.

    Must remember to cancel it though after the election date.

    I suspect it is possible other LICs could do these specials to try and empty the franking account just in case there is a change in the legislation.
     
    Snowball likes this.
  20. Nodrog

    Nodrog Well-Known Member

    Joined:
    28th Jun, 2015
    Posts:
    8,019
    Location:
    Me Me Me
    Pulled a muscle / ligament between my ribs so out of action also. Decided to scan more stuff to paperless that I deemed too much work previously. Not even looking at the market at the moment as not enough bad news.