TMPL has been managed by Alastair Mundy since 2000. He takes a contrarian view on the timing of buy and sell decisions - buying the shares of companies when sentiment towards them is thought to be near its worst and selling them as fundamental profit improvement and/or re-evaluation of their long-term prospects takes place.
This contrarian approach centers on long-term investment in cheap, out-of-favour companies in the belief that over time, these will be affected by reversion to mean.
This approach has proved very successful over the longer term with the trust outperforming the FTSE All Share index over the past 5 & 10 years. In more recent times, the value approach has underperformed the benchmark.
Results
They have today published full year results for 2015 (link via Investegate). The past 12 months has not been good and unfortunately, the trust has not been able to quite replicate the out-performance of previous years - total return of net assets fell by -1.0% compared to a small gain of +1.0% for the FTSE All Share index - almost identical to the previous year. The contrarian approach often requires long periods before the benefits for the trust are realised.
Interestingly, the underperformance has not prevented them from hiking the management fee by 3% to £3.35m! Combined with the reduction in net assets, the effect has been to increase total expenses from 0.65% to 0.75% - not something I like to see. The trust does not pay a performance fee.
Income
The trust is committed to paying a rising dividend year on year and has met this commitment for the last 32 years.
The board are recommending a final dividend of 15.87p making 39.66p for the full year - an increase of 2% on 2014. The dividend is covered by earnings of 39.87p.
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| 2 Yr Chart TMPL -v- FTSE All Share Index |
The share price has lost around 16% over the past 12 months, partly due to a widening of the discount to NAV. At the current price of £9.85 the trust yields 4.0%.
Fortunately, at the height of the markets last May, I reduced my holding in TMPL (also Murray Income and Murray Intl.) and recycled the proceeds into the Vanguard LifeStrategy 60 index fund which has been able to ride out the market volatility much better in recent months.
I will hold the remainder of Temple Bar for the time being and await some recovery in its fortunes - hopefully!
If you hold this investment trust in your portfolio, I would be happy to hear what you think…leave a comment below.
Temple Bar have always had a good name and its value investing style does go out of favour every so often.
ReplyDeleteI have thought about buying this investment trust, but your review is making me consider if its worth buying now looking at the yield and the fall in price.
Regards
Louis
Louis,
DeleteAgreed the value approach will be variable however I believe Aberforth have a very similar style based broadly on value and they seem to have done well over the past couple of years - admittedly smaller companies.
I think maybe the timing of acquisitions such as HSBC, Tesco, Centrica etc. may have some bearing.
That said, the discount is currently around 8% so certainly better value now than 12m ago...good luck with your decision!
I looked at buying this IT but then decided to go with Diverse Income (DIVI) based on what Andrew Pitts wrote in the February Money Observer column Inside Money. He argues that sustainable equity income will be an important theme in 2016 and looking further down the capitalisation scale could help, he cites Diverse Income and Lowland. I also read this recent report by Edison http://www.edisoninvestmentresearch.com/research/company/the-diverse-income-trust
ReplyDeleteThanks for stopping by Bellabeck.
DeleteI think the two are offering different approaches so its difficult to make a comparison. There is no doubt DIVI has performed well in recent years but as it has a large weighting towards AIM-listed and smaller companies, you would expect it as the sector has done well. It would be better to compare against, say, Aberforth Smaller IT.
Good luck with it - I have not yet read the Andrew Pitts article but may look it up later - thanks for the link.