Manchester & London’s results for the year ended 31 July 2024 reflect the success of its AI-related investments. The NAV total return for the period was 55.4%. The share price rose by 56.1%, narrowing the discount a little to 15.3%. The dividend has been increased by 50% to 21p. [The trust is amongst the best-performing of all investment companies]
The manager subjectively believes that buying back shares to close discounts is akin to “Canute commanding the tide” and that the discount will only close when 10-year Treasury yields are clearly on a downward path and growth shares are back in vogue. The directors and the managers bought a net total of 389,272 shares (with a value of £2.5m) during the financial year.
The board is calling for new directors, saying: “We are committed to attracting the best talent that can lead and challenge the direction of the company. The manager & the board invite any interested parties who believe they can add to the diversity of the board and have some knowledge of technology investment or operations to indicate their interest in becoming a non-executive director of the company by emailing them at [email protected]”
Extracts from the manager’s report
The portfolio’s NAV total return per share of 55.4% represented a 41.6% outperformance against the benchmark [MSCI UK Investable Market Index – which we wouldn’t have picked] and compared to a 23.9% return for the Nasdaq Composite (in GBP) and a 21.4% return for the Nasdaq 100 Technology subindex (in GBP) [which are perhaps better comparators, and still illustrate the degree of outperformance achieved in the period].
The Information Technology sector delivered 100.4% of the NAV total return per share. Material positive performers (>1% contribution to return) included Nvidia Corp, Microsoft Corp, Arista Networks Inc, Advanced Micro Devices Inc, ASML Holding NV, Synopsys Inc and Cadence Designs Systems Inc. There were no material negative contributors.
The companies in our portfolio have a material exposure to China and Taiwan, hence we have been active at various times during the year at laying on hedges against this risk (via EWT US and MCHI US). We are constantly watching the oil price with anxiety.
We have positioned our portfolio so that a vast majority of our holdings have Ai “core and central” to their business purpose. If Ai is the era defining technology we believe it to be, the portfolio may perform very well and, vice versa.
Our top two holdings – Microsoft, and Nvidia – represented around 59% of our NAV at the period end and our top 5 holdings represent about 78% of our portfolio. Sadly, we do believe the outstanding winners from the Ai era may in time be counted on the fingers of two hands. So what are we meant to do: diversify to dilute performance? Punish our winners for proving they are elite? The logical conclusion to this risk for shareholders that are Retail Investors is that our Fund should form part of a diversified portfolio. Please do not over-concentrate on our Fund if you cannot afford to bear potential loss. However, it is worth noting that according to two of the leading ratings agencies MSFT has a better credit rating than US sovereign debt.
MNL: AI bet pays off for Manchester & London
