The Motley Fool

Why I’d sell Lindsell Train Investment Trust and Woodford Patient Capital today

Investment trusts publish regular updates on the values of their assets. That comes in the form of a net asset value per share (NAV) figure, which states the underlying value of one share’s worth of assets. And that’s a great help in understanding the value of our investments.

In reality, the shares actually tend to be priced typically at a modest discount to NAV. There’s no conclusive agreement why that is, but a lot of factors undoubtedly contribute to it.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!


Occasionally, an investment trust’s shares will sell at a higher price than NAV, at a premium. It often happens when a trust is newly launched amid early optimism, but there’s rarely a big premium.

But take a look at the Lindsell Train Investment Trust (LSE: LTI). In its latest update, the trust put its NAV at £1,057 per share. A quick look at the share price shows it at £1,595 as I write, and that’s a massive 51% premium to NAV.

But that’s nothing. Lindsell Train shares reached an exuberant bubble valuation of £2,030 in June, putting the premium up at 92% at its peak. Who says the market always reacts rationally to all available information, eh?

Some sense has since entered the market and the price has partially deflated. But a 51% premium still seems inexplicable to me. When you buy a share, you acquire the ownership of assets valued at £1,057. So why do people pay £1,595 for that? And why on earth were they paying £2,030 a month ago?

It’s largely down to fund manager Nick Train, who seems to have taken on the mantle of favourite UK investing guru since Neil Woodford’s recent fall from grace. He is, undoubtedly, a talented investment manager — but I’m not paying a 51% markup for him to buy assets on my behalf.

I reckon Lindsell Train shares are still on an irrational fad rating, and I wouldn’t touch them until the price comes down a lot more.


Turning to Neil Woodford, his Woodford Patient Capital Trust (LSE: WPCT) has suffered badly of late. His misfortunes stem from the suspension of his Woodford Equity Income Fund, after a run of cash withdrawals used up much of its liquidity and made it pretty much impossible to satisfy expected new demands.

Now, that fund shouldn’t really affect the Woodford Patient Capital trust directly, though it does invest in some of the same unquoted and speculative assets. The big difference is there’s no such thing as cash withdrawals from an investment trust. All people can do is buy and sell the shares, which won’t affect the underlying asset value one jot.

And sell they have been, with a resulting fall in the share price and a boom in its discount to NAV. At its latest update, the trust’s shares were on a 33% discount, which is huge. That’s a very tempting discount, and I do think the trust is oversold now.

But I won’t buy it for two reasons. One is that it invests in “jam tomorrow” assets I wouldn’t buy directly. The other is it’s geared, with debt amounting to a gearing of 17% of NAV. That gearing is being reduced, but I don’t want anyone, not even Woodford, borrowing money to invest for me.

You Really Could Make A Million

Of course, picking the right shares and the strategy to be successful in the stock market isn't easy. But you can get ahead of the herd by reading the Motley Fool's FREE guide, "10 Steps To Making A Million In The Market".

The Motley Fool's experts show how a seven-figure-sum stock portfolio is within the reach of many ordinary investors in this straightforward step-by-step guide. Simply click here for your free copy.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.