Speaker 0:
Welcome to this next session. I'm delighted to be joined down the line from the Bailey Gifford offices in Edinburgh. James doll. Welcome to you.

Speaker 1:
Hi. Thanks. Thanks very much for inviting me. Uh,

Speaker 0:
James, the manager of the Saints Investment Trust. There are two numbers that I'm going to start with here. Two very important numbers. It's the 150th anniversary, and it's the 49th year dividend growth. Could you kick us off from there?

Speaker 1:
Yes. Yes. Sure thing. Um, and everyone who's who's watching. Yes. So you're You're right. Um 18. 73 was when saints was founded a long time ago now, but this is our 150th anniversary year. So we've been taking time to look back and reflect on how Saints has managed to keep going and thrive and never miss a dividend throughout that entire period. It's It's a pretty remarkable record.

Speaker 1:
Um, and yes, the this or or 2022 was the 49th consecutive year of dividend growth. The dividend was held flat in 73. So we're we're hoping that 2023 we're pretty optimistic will be the 50th consecutive year of dividend growth. So there's lot lots going on. There's a a book being written about the trust, which you can, um, get a hold of for free if if you if you're interested and read back over that long history, which is fascinating.

Speaker 1:
Uh, Saints was the first very first investment trust company. There are a couple of trusts legal trust set up before, but Saints was the first investment trust company which protected shareholders from being wiped out. So it's a pretty important thing in in in financial history. But yeah, a happy year, an exciting year. So we've been looking back and and celebrating for

Speaker 0:
such a historical trust. Where do you think it fits in, uh, an investors? What role do you think it plays there?

Speaker 1:
I think it It works really well for anyone who's interested in sort of high quality, steady growth in their capital. And if they want in their income, we have a We have a mix of shareholders within saints, some who use it to take out the the the quarterly dividends that we pay and use those for income. But we know there's a lot of shareholders who, just like that kind of steady uh, compounding away of capital and dividends. So

Speaker 1:
So, regardless of which you're looking for as as an income consumer with a long term time horizon or you're just looking for that that compound growth, Um, And you We often talk about sleeping well at night. If you if you want something which isn't gonna startle you, but it's just gonna compound away and you're gonna look back and be hopefully really pleased with the results he's delivered then then SA is for you. In

Speaker 0:
one of the previous sessions, one of the trust was referred to as a steady Eddie. Would that be a fair reflection of of this trust?

Speaker 1:
Yeah. I. I like to think that, um,

Speaker 1:
the the catch with steady Eddies, right, is that sometimes that means they go nowhere. And, you know, we are investors. So we are looking to grow people's savings and their income at attractive rates over, um, period of time. So, II, I wouldn't say, you know, it's just gonna sort of sit there and do nothing, and then you'll say, Well, it neither went up nor down because that wouldn't be a great result either. But, um, as something that can deliver steady growth over time, Um, without having huge drops or huge volatility.

Speaker 1:
Um, and And, you know, as witnessed by the the dividend growing every year for 49 straight years. Um, it's it's it's that kind of that kind of steadiness that we're looking for now

Speaker 0:
Increasing capital and growing income is is how the dividends grown. But looking at the portfolio, they're not typical income stocks, are they?

Speaker 1:
No, you're right. You're right. So, um, you know, the the classic way of doing income is you. You start with a yield target, and then you work your way backwards to the portfolio. You know, being being crude. Good about it. You know, you say, Well, I'm looking for a 5% yield. So what's out there? And you know, there's a certain number of stocks and you kind of cross your fingers and hope that everything's OK and and and our view is is that you know that, um,

Speaker 1:
that that has can have a place or or a role, But, um, in a much better result is delivered over the long term. If you're willing to give up on a bit of yield today and look for genuine growth companies, those kind of steady compounders that also pay out resilient dividends And what then happens? You get two things. First of all, you get, um, much better returns. His history shows over long periods of time because you're getting capital growth and not just a high yield

Speaker 1:
and and secondly, that that income tends to be a lot more resilient through crises. So when you own something with a a sort of typical income fund with a high yield,

Speaker 1:
when you get like a 2007 or eight or 2020 you're probably go. Uh, what's gonna happen to my income? Because you know that those companies are on high yields, often because they're quite troubled or they're highly levered, or or or these kind of things, and your income can drop quite a lot if dividends get cut. So the second benefit of our kind of low yield plus growth approach is that that income

Speaker 1:
should be a lot more resilient through tough times because, you know, it's lower payout ratios, stronger balance sheets, better quality businesses. So that's our approach. We think it's just be much better for shareholders

Speaker 0:
and that approach. Staying with the compounders. Would you compare yourself to a Warren Buffett? A Terry Smith in the way you approach it? You find those compounders and they give you that resilient dividend over time.

Speaker 1:
The style is is very, very similar. Very, very similar. I I have huge respect for you know those guys, they they've earned that respect for sure. They've been delivered great results to to to their clients. They're doing something very similar. They're looking for those high quality franchises, Deep notes, great returns, cash generative, and I own valuation making sure they don't overpay. Um, there's there's a long history, a long tradition of investing in that style.

Speaker 1:
Um, they they're two very well known proponents of that, um, and we're very much in that mould as well. That kind of long term, high quality growth. Um, steadiness catch up all all all all those things have come through. It's interesting if you look at the portfolios, they are a bit different. You know, there are some things that you would find. Um you know, II. I do that right? You know, we we we all study each other Well. What? What have they found What's interesting. If you look in the bucks,

Speaker 1:
you find some things that are, you know, I. I would be more sceptical of, You know, um, long term growth from utilities tends to be pretty tough, so there are definitely differences. They're not all the same for sure, But the but the general philosophy and the style, yeah, but very similar. And and I think it's a It's a great approach in, in my

Speaker 0:
view, uh, and looking at performance. What areas have been particularly strong for you in that portfolio?

Speaker 1:
Yeah. So, um, the past let let's take the past. I like to look at longer periods. I think over a short period of time, you you get in any three month period, something is going up and something's going down. But let's say let's say 1 to 5 years. So So we're not just looking at a couple of days. So, um, for saints, the the strong performance of our our our performance is always driven by stock selection. Basically, when you look over history, it's the it's the individual

Speaker 1:
names that do very well. So the so those names for us would be names like Novo Nordisk the pharmaceutical company, which is obviously doing very well, not just with its diabetes business but also the, um, obesity treatments that it's got going, Um, which has been holding for us since 2016, 2017. But the growth has really compounded through in the past few years.

Speaker 1:
Um, Arsenal and Industrial Products Company, based in the US, where they're constantly rolling out their network and serving more customers. Um, what the air, the H Vac and air conditioning company, Similar model of of steady growth over time in their network TS MC, Um has been a really great perform for us over a five year period. Um, Atlas Copco, the the These are all businesses which, um, when you look at them, they're not normally.

Speaker 1:
If I can say it terribly sexy, you know, they they don't necessarily generate huge exci. Oh, well, it's the next big thing, but what they are is fantastically strong companies in their industry, which are constantly innovating and growing and compounding away

Speaker 1:
so often, you'll sort of say, Well, who who? What is this company? Who, who What is it? But for to us, that's a loyal the attraction and and that's really what's driven since returns, um, over longer periods, uh,

Speaker 0:
switching to possibly the sexiest business of the moment. Uh, NVIDIA did the A I did the A I boom, boost your tech names. And and is NVIDIA a company that you'd consider putting in the portfolio anytime soon?

Speaker 1:
We we, we've we've looked at it in the in the past. Um, we've got some colleagues of Bailey Gifford who who own it in their funds. I'd say, First of all, the the the dividend pa is extremely low. So it's the kind of

Speaker 1:
the the dividend element that we look to, which we think is a fantastic sort of signalling and reinforcing mechanism and enhances returns. In NVIDIA's case, it's it's a It's a very, very low dividend payout, and I would also observe it. It has historically been a A very, quite, really quite a volatile business. The the earning stream as well as the share price. Um and so, um, our preference has been to, um, we We are believers in the, you know, more silicon, more digital,

Speaker 1:
that that's a that's a sort of super trend that's been going on for some time, and a I is another expression of that. But our preference has been to invest in businesses like Microsoft and TS MC, where in our view what? Well, first of all, you've got that higher dividend payout, and they're generating more cash and paying out. But also the the the, uh, the underpinnings of the earning stream and the risks you're taking are a bit perhaps a bit lower, a bit better so that they they tend to fit better for for us and what Saints is trying to do. And and so we haven't owned

Speaker 1:
video. Um, but they're all part of, you know, yet another interesting trend that's going on. You know, innovation in that space will drive real volume growth. And for companies that are doing something that's really unique and valuable, they'll capture some of that value. So whether that's NVIDIA, TS, MC or Microsoft, it's an It's an interesting place to be as a long term growth investor

Speaker 0:
and switching slightly. How have your consumer defensive stocks performed? Have they been a a sort of good one to fall back on?

Speaker 1:
They they have yes, um, again, they're in that kind of camp of very high quality franchises you know, deep moats, which can deliver steady growth year after year. Um, the the way that's played out in the past few years has has really been through, um, the pricing. So they've been able to,

Speaker 1:
um, take pricing at least in line with their input, cost inflation. And, um, because of the the way that the gross margin structure and so forth that's come through in quite solid growth. So I would say, looking at the results we've had from those names the past 12 months, they've probably been somewhere between high single digit and mid teens, year on year profit

Speaker 1:
growth. So that's been really helpful helped underpin continued good dividend growth. So So they've been doing. They've been doing well

Speaker 0:
and I want to ask you. There was an article recently on interactive investors saying that investment trusts and as, um, as useful as they are to retail investors, should perhaps rebrand to better reflect what's in the portfolio and after Securities Trust of Scotland did the same do Do you think it's a fair point? Or do you think that the longevity of the trusts goes with the name and the history? What do you think?

Speaker 1:
Well, so someone said the other day by 1 50. Well, you don't need to do that as saints, right? Because everyone calls Saints Saints. And compared with, you know, high yield funds, which are stuff full of tobacco and oil, you you kind of are saints compared with the typical income funds. So So maybe we don't need to do that, But I'm I'm kidding. Um, look, But I, I think, um, it's It's a question that's come up over the years about what the the sort of Scottish American need

Speaker 1:
be better off to something else. And I guess the the lens we look at it is, you know, is this something that's really gonna make a difference or add value for shareholders? Is it something that would really give them better returns and results over time? And I? I would say, Well, the evidence is pretty mixed on whether there's any connection between the name of the trust and whether, what? How good a job they actually do for clients. You know, we we

Speaker 1:
our colleagues here, who run Scottish mortgage, which I think is one of the strongest performing investment trusts still over, uh, sort of 10, 15 year period. We've got absolutely nothing to do with mortgages, right? And I've seen plenty of trusts that have rebranded from, you know, the old fashioned names that will. We will ditch that and call it something else. We'll call it the strategic opportunities or something. The performance is terrible. So in, in terms of the,

Speaker 1:
um, actual, does it make a difference? Will it Will it be helpful for shareholders? Um, I, I I'm I'm personally not really convinced, ultimately a shareholder and board decision. If if a shareholder was felt really strongly about that and put that forward and there was a board proposal, shareholders voted on it, then it it could happen. I I'm I'm not sure just how much of a difference it would make personally

Speaker 0:
and

Speaker 0:
that the conference is called Future Trends and Investment Trusts. And I'm aware of the irony of future trends for something that's, uh, such a historic and longevity investment vehicle. But do you do you, um, do incorporate trends into your models? And do you look at these future trends when you're looking at stocks, or is it very much look at the company rather than what's going on outside?

Speaker 1:
Oh yes, definitely. And and in fact, what I'd say is if you look back at the 150 year history of Saints, one of the prime reasons that it's continued to thrive and never missed a dividend and so on is precisely because it's It has always been a forward looking trust. It's always had a really engaged board and and managers who really care sort of been swallowed up into some kind of massive financial conglomerate where it's kind of forgotten about. It's always had a really forward thinking What what are the what what's the future look like? And how should we invest alongside that? And we do that as much today as as Saints has always done.

Speaker 1:
So, um, you know, we we are not

Speaker 1:
sort of top down. Oh, what can I buy in a I type of investors because I think the record on that kind of investing is a bit mixed as well. But what we definitely do with all of our stocks is we we want to own businesses where we feel that the markets that they're operating in are still growing pretty healthily, and they're likely to continue growing healthily for some time to come. You know, the the the trends are working in their favour that they are tailwinds rather than headwinds. So, for example, you know, we've had quite a lot of money in

Speaker 1:
a big lithium producer, and we've had nothing in oil and part of the thinking, Not not the whole thinking. But part of the thinking is, you know, on a 10 year view, surely you're going to be much better off from a volume growth perspective. If you're in lithium rather than oil, we would do the same in, say, um, anti sports the the the sportswear maker in China, which has been another big winner for us, where we've said, Look at the future trends there they're about healthiness and incomes rising and, um, people wanting to sort of express themselves and you've got

Speaker 1:
fantastic founder run business in that in a in a really strongly growing market. So yeah, II, I guess. Short version de de. Definitely. We think about the future trends, and we we try to make sure that saints is positioned in names where that's a real tailwind to their growth, and that's going to assist their compounding over long periods.

Speaker 0:
Uh, Jo, we've got time for one more question here. We're looking to relaunch a book club series on Asset TV, and we're always interested in what books fund managers are reading. So is there anything that you've read at the moment that you're you're quite keen about or that really stuck with you?

Speaker 1:
OK, yeah. Uh, well, first of all, I let me give you a round of what I fully endorse that because, um, that that's a big thing for us. And and our team, We we we actually maintain a list of books which everybody, you know, reads We're big fan of business autobiographies And what you can learn from those and and and apply those to future investments.

Speaker 1:
So, um, I I've got a list. As long as you're on and I right, let me try and pick. Pick one out. Um, if I was going to pick one, that I would encourage everybody to read, but I think it's also a good read. You know, some of them are a bit turgid, and you put them down and it defeats the purpose. Right?

Speaker 1:
So, um, I would go for um, made in America by Sam Walton. So that's the the Walmart founder who late in life sat down and put his story to paper. And not only is it a fun read, but it teaches you so much about those kind of classic compounding stories of rolling out stores gaining customers, being different, you know, really investing in the business. That that's a great one that I would recommend for, you know, long term, uh, steady growth shareholders who who who want a good read.

Speaker 0:
Excellent, James. That's a great place to leave it. Thanks for your recommendation. And thanks for joining today.

Speaker 1:
Yeah, no problem at all. Pleasure. And, uh, all the best, thanks.