Investments

Recent Buy: Barrack St. Investments (BST.AX)

Barrack St Investments

Barrack St Investments

Barrack St Investments Ltd (BST.AX) is an listed investment company that runs a concentrated small to mid cap growth portfolio managed by ECP Asset Management Pty Ltd. The company listed in August 2015 after being established the year prior. Some of the investment team have a history to 2012 at Hyperion Asset Management. Hyperion is a better known Australian funds manager with a good track record.

ECP Asset Management claim to use a bottom up, fundamental view of stock picking with a  focus on historical sales growth, return on equity and interest cover. In my mind this is a sound approach to selecting investments, and a quick review of their underlying holdings confirms I’m broadly content to own this LIC.

Past Performance

Being newly listed, there isn’t a huge track record for BST. This is possibly why it is trading at a discount to NTA. The LIC returned a 3% grossed up dividend yield and a slight negative return for NTA in 2017. Performance since inception has been 10.4% p.a. Compared to the All Ords 0.8% p.a. over the same period, this is excellent.

NTA as of 31st Oct was $1.0937. I picked up my holding at $0.885 per share. That was a generous 19.1% discount to NTA! Considering the management expense ratio of 1.2%, this discount was appealing to me. The standard management fee is 1% and there is a performance fee of 20% on out performance above 8.0% p.a. You can read my post on how I analyse an LIC, here if you like.

Key Risks

The key risk is that the investment team don’t out perform the market. The attractive buffer to NTA will help reduce that risk as I’ve essentially bought 16 years of management for free. As with all LIC’s, the share price can become wildly detached from underlying NTA so there is no guarantee the price and NTA will converge. Finally, the most experienced of the team, Dr Manny Pohl retired from the board this year and his absence presents a further risk. Manny’s son seems to be taking up the challenge of filling his director’s shoes.

Full disclosure: Long Barrack St Investments. Do your own research prior to making any investment decision and seek personal and professional investment advice. This post is not a solicitation to buy or sell any stock. Read my full disclaimer.

Do you own BST or another LIC?
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