Factsheet as at 31 July 2018

Investment Commentary
The GBP A class of the fund recorded a loss of 0.04% for the month of
July 2018. This brings the cumulative return of the fund in GBP from
inception in June 2015 to 40.08%.
Focus The last month has seen a number of our investee companies release
The VT Price Value Portfolio is an open-ended UCITS fund quarterly updates. The most interesting one came from Loews
incorporated in the UK. The fund’s objective is to deliver Corporation (the Tisch family vehicle), the CEO of which underlined (to
attractive long term returns. us at least) his value credentials with another solid capital allocation
decision. Boardwalk Pipelines LLP (BWP) is a master limited partnership
Investment Philosophy that transports and stores natural gas and liquids for customers. Loews
The fund seeks to invest with specialist ‘value’ equity managers established it in 2004 as a private company and listed the firm in 2006,
internationally on an unconstrained basis. The fund also seeks keeping just over 50% of the shares to ensure that it exercised control
to invest into listed businesses of exceptional quality trading at of the firm and its cash-flows. Following a ruling earlier this year by the
undemanding multiples. The fund endeavours to invest Federal Energy Regulatory Commission, Tisch has been able to exercise
according to the time-honoured principles of ‘value’ investing an option and purchase the other 49% of BWP’s shareholding at a very
developed by Benjamin Graham. attractive valuation. Boardwalk pays a 3.3% dividend that is over six times
covered by cash-flow from operations. The purchase price is cheap
versus these operations, offering an unlevered cash-on-cash return
Fund Facts (a.k.a. CFO yield) of over 12%. Indeed, the book value of Loews rose
Investment Manager Price Value Partners 5.2% following the acquisition. Loews itself is generating record cash-
flow from operations (up 67% since 2013) yet still trades at an attractive
Portfolio Managers Tim Price, Killian Connolly multiple of book value (0.85x), offering a CFO yield of 12%. At those
Fund Type UK UCITS OEIC metrics, share buybacks continue to drive up the RoE of the firm and are
Launch Date 16 June 2015 value accretive. No surprise, then, that Loews has repurchased 16.6m
Share Classes A, B shares or 5% of shares outstanding so far this year. Shares in Loews rose
Currency Classes GBP, USD, EUR 5.2% for the month but given the results announced we expect stronger
Dealing, Valuation Daily 12:00p.m. GMT share price growth over the medium term.
Management Fees A: 0.75%
B: 0.50% The best performing stock in the portfolio was Hal Trust, purchased last
Performance Fees None month. The rise of 7.7% has nothing to do with earnings releases as that
ISIN Codes A £ Acc: GB00BWZMTX09 update is due at the end of August, at which time we’ll also have received
A £ Inc: GB00BD8PLW60 an update on Seaboard Corp. Seaboard was a strong performer for us
(Variations in historic A $ Acc: GB00BWZMTY16 in 2016 (up over 50%) but has offered no real return since early 2017.
performance shown by the A € Acc: GB00BWZMTZ23 This despite an 8% rise in EBITDA over the period. It is disappointing
when share prices don’t move in lock-step with book value in the short
Oc currency share
different
term – sadly, they never do – but the one benefit when shares
classes of the fund relate B £ Acc: GB00BWZMV016
solely to foreign exchange B £ Inc: GB00BD8PLY84 underperform is that we can take advantage and add to the position.
translation effects, as the B $ Acc: GB00BWZMV123 We’ll probably do just that once we get the company’s quarterly update
underlying holdings are B € Acc: GB00BWZMV230 and ensure it’s still operating strongly. 2018 has seen relatively
identical.) underwhelming share price performance from our allocations and by
extension the fund itself. However, looking across the financial updates
Minimum Investment A £1000 / $1000 / €1000 we’ve received to date from our regional managers and the direct
Minimum Investment B £1M; $1M; €1M holding companies, we couldn’t be more comfortable in the rates of
return at which book values are compounding. We could relax our hard
30% debt-to-asset limit – some investors prefer linking debt levels to
operational metrics such as EBITDA. However, just as we want earnings
Fund Metrics to be generated from cash-flow and not changes in the value of assets
Price to earnings ratio 14.3x and liabilities, we also want the companies’ RoE (which drives share
prices) to be a function of cash-flow earnings, not levered higher by debt
Price to book ratio 1.3x
levels at multiples of equity. We want to be the tortoise, not the hare.
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Performance History
Period GBP A Share
Class

1 Month -0.04%

Year-to-date -2.27%
Since inception
40.08%
(16.06.2015)

The fund is managed independently of any

benchmarks. Chart source: Bloomberg LLP.
 Investment Commentary (continued)
Last month we met the managers of our largest two holdings in the
fund, Halley Asian Prosperity and Samarang Japan Value. Once again,
there was no mention of macro-economic turbulence from Trump’s
trade re-negotiations, the merits of Abenomics, or even Brexit. Instead,
the managers simply updated us on how the underlying companies in
their respective funds were operating. We visited Japan with Greg and
Jan – the managers respectively of the two funds – last year and visited
some of the companies operating in Tokyo and Osaka. One of these
Geographic Exposure was Tosei, which develops and sells residential properties and leases
office facilities in the capital. During July we were delighted to spend an
Country Allocation Country Allocation
evening with their founder and CEO, Mr Yamaguchi, as he updated
Japan 36% Vietnam 17% investors on the operations of his firm (he owns 26.5% of Tosei). It is
Europe 21% Canada 8% the largest holding in Halley Asian Prosperity and has been a core
US 10% Australia 3% holding since the fund was launched. Over the last five years, Mr
Yamaguchi has managed to generate strong shareholder returns.
India 2% Other 2%
EBITDA, a better measure of operations for real estate firms than
Cash 1%
CFO, has risen from JPY4.1bn to JPY10.2bn. Over the same period,
return on equity has almost doubled, from 7.1% to 14.3%, averaging
Sector Exposure 11.3% - yet the firm is actually cheaper on a price to book ratio and
Sector Allocation Sector Allocation EBITDA yield. It still offers investors a 11% cash-on-cash return at
Industrials 29% Consumer 17% current valuations. Its current dividend of 2.8% is covered almost 10
Financials 10% Commodities 20% times by EBITDA. The company holds c. JPY 25bn in cash on its balance
sheet so there is further scope for RoE growth via share buybacks and
Technology 8% Real Estate, 11% dividend growth, which seems likely given that the dividend has actually
Infrastructure increased by over 300% over the last 5 years.
Utilities 3% Other 1%
Japan is the largest single country allocation in the fund – the metrics
of Tosei and its growth in RoE via dividends and EBITDA growth might
Major holdings go some way to highlighting the underlying investment rationale behind
Samarang Japan Value 15.8% that weighting. Indeed, the overall metrics of Halley Asian Prosperity
Halley Asian Prosperity Fund 15.5% remain almost identical today, nearly 6 years after launch, to their
prevailing levels back in 2012. The return on equity was c. 16% in 2012
Vietnam Value and Income Fund 9.2%
and the fund has returned c. 17.1% per annum since launch. Halley’s
Argos Argonaut Fund 7.3% returns support our thesis that there is often a strong correlation over
Arcus Japan Fund 7.0% the medium term between underlying book value growth (RoE) and
Michinori Japan Equity Fund 4.5% share price appreciation.
Loews Corp 4.4%
We have also seen evidence of that historic relationship at the likes of
Yara International 4.2% Seaboard Corporation, Loews Corp, Fairfax Financial and Power
Wheaton Precious Metals 4.1% Corporation of Canada. So long as companies’ underlying operations
Power Corp 3.8% and revenues are sound, putting up with short term periods of
underperformance is just part and parcel of value investing. Our second
largest country allocation is to Vietnam – which happens to have been
Fund Platforms the fund’s worst performing allocation of 2018. We met the manager
The fund is available on the following platforms: of our Vietnam fund recently and were impressed with the underlying
performance of the fund’s investee companies. Vietnam Value &
AJ Bell Allfunds Income Portfolio has an average RoE of 18.9% and the manager isn’t
Alliance Trust Ascentric currently paying any kind of a premium to current earnings, with the
Aviva Brewin Dolphin fund offering an average P/E of 9.5x. We’re heading back to Vietnam
Co-Funds Hargreaves Lansdown later this year and we look forward to improving our understanding of
James Hay Novia a country that offers us a compelling macro story – whilst quietly
Nucleus Old Mutual Wealth generating cash-flow yields in excess of 15%.
Stocktrade TD Direct
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