Sherbourne Investors

10th Feb '19 by redmolly

7 comments 996 reads

Hi,
I would be grateful for any views and advice on what to do with these shares.
I bought 17,703 units in SIGB and 9000 units in SIGC both in Nov 2017 and they have gone down 72% and 44 % respectively since that date. I confess I didn’t really know what I was buying, some investment that buys run down companies and builds them up, selling them and passing the profits back to shareholders I thought. I was influenced by reading that George Soros had also bought into the company.
The problem is should I wait and hope my understanding was correct and that in time there will be a pay-out or should I quit now while they still have some value.
I know I shouldn’t be asking for advice and I wouldn’t if these were ordinary shares but I have gone in above my head and would really appreciate some sensible advise.

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dmjram

10th Feb '19

You hold shares a company at the upper end of the risk spectrum which itself invests in other companies it believes are underperforming and that it can turn round. You're therefore relying on the management being able to identify good opportunities AND being able to make good on the turnaround.

Whether you should hold on or sell really comes down to your personal circumstances and views and isn't something anyone on an online blog can give specific advice on.

A few questions I always find useful to ask myself regarding holdings when deciding whether to hold/sell or add:
Can you afford to let the value go to zero, the inherent risk of any investment?
Would you buy the company now at the current price?
Do you have a better use for the cash tied up in the investment?
Can you cope mentally with the volatility in price movement of what you're invested in?

Note this isn't advice as to what to do with your holding in Sherbourne, just a few pointers on how to assess any investment held which you may or may not find useful.

Generally on following tips/other investors, Soros in this case, the problem as Jesse Livermore explained nearly a century ago is that you never get to hear in a timely manner when they've sold out/changed their mind.

Nick Ray

SIGB pays out its profits in huge dividends. When a dividend is paid the share price drops by the same amount. So check your dividend payments in your trading account. You should find that you are not out of pocket overall.

timarr

Nick is precisely correct. Sherborne, aka Edward Bramson, is an old-school activist seeking to take stakes in underperforming companies, getting themselves on the board and then shaking them up. Sherborne Investors (Guernsey) B (LON:SIGB) is a vehicle for investing in Electra Private Equity (LON:ELTA) which has hugely rewarded investors. Sherborne Investors (Guernsey) C (LON:SIGC) is attempting to get a board seat at Barclays (LON:BARC) and force them to divest.

Sherborne Investors (Guernsey) B (LON:SIGB) has paid out over £1.50 in dividends in the past two years as a result of Electra divesting. Sherborne Investors (Guernsey) C (LON:SIGC) is still in process of trying to do the same with Barclays. Whether it will be a good investment will depend on how successful they are.

But, to be honest, if you don't understand the business model you probably shouldn't be invested.

Carcosa

Taking a quick look at Total Returns i.e. combining all dividends then for SIGB:

5c602bb25036cSherborne_Investors_(Guerns

Returns have been okay but when looking at SIGC:

5c602bde1ea4cSherborne_Investors_(Guerns

SIGC returns have not been so great.

Having a quick read of the annual reports I gather that the former was successful largely due to to the success of a company called 'Electra' that had realised a significant number of its investments. When SIGC came along the managers had a go at investing in Barclays Bank which turned out to be (so far) a bit of a disaster. Had you bought shares in Barclays directly I suspect you may have had better returns.

As dmjram noted, this is a very high risk share to own. Also, as Nick Ray noted SIGB was a successful gamble for long term shareholders.

Should you sell? Well I don't see how an investment manager is going to make more money out of Barclays than if you held them yourself.

NB: Have only really 'glanced' at the data/reports so could have easily missed something of importance.

redmolly

Thanks very much, it was stupid to invest in somthing I didnt fully understand.

Hi Carcosa

They're not an investment manager, this is an activist vehicle - take a stake, get on the board, force asset sales and drive value to shareholders:

https://assets.bwbx.io/documen...

Of course, if they succeed any benefits will also accrue to Barclays shareholders too, but presumably the SIGC discount to net assets will narrow substantially as well.

Bramson has a terrific record of outing value, but Barclays (LON:BARC) is a very large fish to be going after.

P.S. redmolly - I wouldn't worry too much about it, it doesn't look like it's been the worst investment in the world.

jonesj

11th Feb '19

Also, if the stock is paying out enormous dividends, you need to think about the tax on the dividends. Hopefully this is in an ISA.

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Redmolly

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