Manchester & London Investment Trust PLC · LSE:MNL
Manchester & London Investment Trust — FY2022 Earnings Presentation
31 slides from Manchester & London Investment Trust's earnings presentation, October 2022
Slide 1: Final Results – Manchester & London Investment Trust
Final Results. Manchester & London Investment Trust (“MNL”) October 2022 Visit our website: https://mlcapman.com/about/ Follow our Tweets at: https://twitter.com/MLCapMan Read our previous articles at https://www.linkedin.com/company/m-&-l-capital-management-ltd/?viewAsMember=true M&L Capital Manage
Slide 2: Headline results
Headline results. 1. Tough FY to July 22 split into two key segments: a) -12.3% (GBP) contribution from our Chinese positions (~23% of portfolio and Hang Seng Tech Index dropped 45.8% in GBP); BUT b) -10.7% (GBP) contribution from non-Chinese positions v N American Expanded Technology Software index
Slide 3: Update & Actions undertaken since our last meeting
Update & Actions undertaken since our last meeting... 5. Digitalisation by Large Corporates continues even during Tougher Periods: The Economist: "Such new ml capabilities, delivered by the cloud at lower prices and combined with more data, greatly expand the upper bound of the cloud-computing marke
Slide 4: Update & Actions: Software valuations back to long term averages
Update & Actions undertaken since our last meeting… 6. Software valuations are back to Long Term averages. 4 Source: Bloomberg, MLCM
Slide 5: Long Term Investment Performance of MNL LN
Long Term Investment Performance of MNL LN since MLCM initiated the Management. Performance over ~7 years – ARR of ~10%. 5 Source: Bloomberg, MLCM
Slide 6: What happens now?
What happens now? • The cold war between China & the West will continue. Supply Chain redirecting => Stagflation. • Climate Change is also affecting Supply Chains => Stagflation. • Panicked Energy shift from hydrocarbons => Stagflation. • Long Covid, Productivity & Labour Participation - https://www
Slide 7: Pro Forma – 52 Week High analysis
Pro Forma – 52 Week High analysis, Patience required to return to ATH 7 Source: MLCM.
Slide 8: Be very careful where you hide! Build Margins of Safety
Be very careful where you hide! Build Margins of Safety…=> Quality & Scale. 8 Source: MLCM.
Slide 9: Be very careful where you hide! No precedent for Growth elsewhere
Be very careful where you hide! There is no precedent for Growth elsewhere…. Earnings Growth: EPS rebased for each index over 15 years. 9 Source: MLCM.
Slide 10: The discount…
The discount… 10
Slide 11: The Discount: Punching above our weight
The Discount: Punching above our weight… 1. Remains in line with the Sector considering the Liquidity afforded by the Larger Funds. HRI is ~7x larger than us yet their discount is HIGHER! 2. Discount likely to move relative to the Sector. 3. Fighting discounts is like “Canute commanding the Tide”. 4
Slide 12: The Data Framework & Portfolio construction
The Data Framework & Portfolio construction. 12
Slide 13: The Data Framework
The Data Framework (note this is not ALL the filters): 1. Universe of 90,000 stocks from Bloomberg. 2. Remove poor corporate governance markets (example OECD Corporate Governance Factbook etc); 3. Quality: 1) ROIC > 8%; 2) R&D > 5% of Sales; 3) EBITDA margin >15%; 4) Gross Margin > 35%; and 5) Net D
Slide 14: Data Framework performance – current version ex momentum
Data Framework performance – current version ex momentum. Note this v SMT, ATT etc. Note: By design, we seek to position lower down the Risk Return frontier than others. 14 Source: MLCM
Slide 15: Data Framework performance – GFC
Data Framework performance – GFC. 15 Source: MLCM
Slide 16: The Data Framework – Optimising Stock Weights
The Data Framework – Optimising Stock Weights By backtesting a variety of stock attributes, we determined the most significant drivers of performance and use these to weight the optimised portfolio. Key Stock Attributes for Weighting: Market Capitalisation R&D to Net Revenue Volatility of Sale
Slide 17: Human Framework – Most Interesting Investment thematics of the Era
Human Framework – What we see as the most Interesting Investment thematics of the Era. • Cloud Computing – MSFT, AMZN, GOOG; • Artificial Intelligence – GOOG, NVDA, AMD, MSFT, AMZN; • Growth of Sensors & Chips – ASML, SNPS, CDNS; • Automation & Robotics to increase Productivity - SNPS, CDNS, ANSS, M
Slide 18: GOOG and MSFT are conglomerates not single play names
GOOG and MSFT are conglomerates not single play names. The median Market Capitalisation of a member of the S&P 500 index is $30bn yet each of GOOG’s 6 divisions is LARGER than that: The largest division is actually 42x larger than $30bn median SPX member. The same point stands for MSFT: Cloud, Softw
Slide 19: Portfolio conclusion – elite, liquid, growth at close to Market Valuations
Portfolio conclusion – elite, liquid, growth at close to Market Valuations. 19
Slide 20: Key Risks
Key Risks M&L Capital Management Limited 12a Princes Gate Mews, London, SW7 2PS Tel +44 (0) 20 7584 5733 20
Slide 21: Key Risks: Regulation of Tech has Expanded from EU to USA to China
Key Risks: Regulation of Tech. has Expanded from EU to USA to China. 21
Slide 22: Key Risks: The New Cold War – USA v China Tech War
Key Risks: The New Cold War - the USA v China Tech War for Supremacy. When does China invade Taiwan and which Funds will suffer the worst? 22 Source: The Economist
Slide 23: Key Risks – Inflation, Debt => Higher Yields
Key Risks – Inflation, Debt => Higher Yields (Discount rate). 23 Source: Bloomberg L.P
Slide 24: Appendix – Additional Fund Information
Appendix 1 Additional Fund Information M&L Capital Management Limited 12a Princes Gate Mews, London, SW7 2PS Tel +44 (0) 20 7584 5733 24
Slide 25: Data Framework - Investment process
Data Framework - Investment process. Step 1: Data Framework – Known as IGOR – Data Filter of stock universe based on Fundamental Analysis. Step 7: Pragmatic momentum Step 2: Human Framework – based investment. i. Filter on preferred Thematics; and ii. Further analysis on business model attributes su
Slide 26: The advantages of investing with Manchester & London
The advantages of investing with Manchester & London Performance • A filtered universe based on objective data hurdles founded on Liquidity, Quality, Growth, Valuation and Momentum. • Note due to the Data Framework focused on Risk, Profitability and Size we will NOT follow SMT or ATT. • Investment f
Slide 27: Example of the investment process: Spotify
Example of the investment process: Purchase, Hedge, Hedge again & Disposal of Spotify STEP 1 We identified Spotify as a possible long based on: 1. Platform Economics Equity Movement 2. Large potential TAM 3. Strong growth profile We purchase a position in Spotify for the Fund. We monitor each stock’
Slide 28: Daily risk monitor sheet
Daily risk monitor sheet Example of Risk Management used to control the fund VaR Liquidity Portfolio Stats Attribution Performance Scenarios Volatility * This is being provided to illustrate certain of the risk management tools MLCM may utilise. This model is one of many other tools that may be used
Slide 29: The Investment Team
The Investment Team Mark Sheppard Richard Morgan Alex Armstrong • CIO. • Investment & Chief Operations Officer. • Qualified Chartered Accountant. • Qualified chartered accountant • CFA ® charterholder. (Deloitte) and leads the Portfolio • Taking final 2 modules of Computer Management function. Studi
Slide 30: MLIT - fund terms
MLIT - fund terms* Launch Date January 1972 Structure Fees Name Manchester & London Investment Trust Plc Investment Management A management fee is payable quarterly in Fee arrears and is equal to 0.5% p.a. of the NAV of Domicile United Kingdom the Company. An uplift of 0.25% of the NAV applies to th
Slide 31: Important information
Important information This document has been prepared by M&L Capital Management Limited, (“MLCM”) 12a Princes Gate Mews, London, SW7 1JS, which is authorised and regulated by the Financial Conduct Authority (“FCA”). This document is provided to you for information purposes only and should not be use
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