Temple Bar Investment Trust PLC (TMPL) Earnings Call Transcript & Summary

Good morning, and welcome to the Temple Bar Investment Trust plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it received during the meeting itself. However the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to fund manager, Ian Lance.

Good morning. Thank you very much, everyone, for joining me this morning. And actually, it's a really good time to be talking about the trust because we are literally 10 days away from the 5-year anniversary of myself and Nick Purves taking over the management of the Temple Bar Investment Trust. And actually, for those of you who have not seen it, I would encourage you to go to the website because I just recently put out a letter entitled lessons learned from the first 5 years. And I do actually start off that letter by saying that the expression pride comes before a fall is probably true in asset management than any other walk of life. But nonetheless, I think we can look back on the last 5 years with sort of sense of satisfaction. So some of the highlights. The share price total return has been 211% over the last 5 years. We are #1 in the U.K. [equity] income sector over 1, 2, 3 and 5 years. We have given our shareholders progressive dividend growth, which has recently been enhanced by the Board's decision to convert some of the capital into income in reflection of the fact that more U.K. companies are now doing share buybacks and paying dividends. We have gone from a discount to a modest premium and the market cap is over GBP 1 billion. So all in all, we are very pleased with the way things have gone over the last 5 years, and I hope our shareholders are as well. What I'm going to do today is I'm going to start by sort of reviewing performance. I'm going to move on. I'm going to talk about the bank sector. The banks have been a key contributor to our performance. So I'm going to spend a few moments talking about that. And then I'm going to finish by just looking at how the market has changed from last year that the -- specifically the big credit stocks are no longer dominating and we think that our style of investing, value investing has very much come back into favor. So Kicking off with performance. As we say here, the return since we took over the trust, this is actually to the end of September, 211%, share price level, 180 at NAV level. And you can see that is significantly ahead of the FTSE All-Share of 90-odd percent over double, about 2.5x the return of FTSE All-Share. So I would just make, I suppose, a couple of conclusions from that. Number one, 5 years ago, a lot of people after a 10-year bull market in growth, were jumping up and down and telling you that value investing was dead and we disagree with that then. And I think these figures suggest that value investing was not dead. In fact, it was actually a great time to get involved in a value strategy. So that's point number one. Point number two, is that again, a lot of people will tell you that active fund management doesn't work and really you should just put all your money into a passive vehicle. If you've done that, you would have got 90% over this period of time, not 211%. So again, we would refute the idea that active management does not work. And then the final thing is that a lot of people will tell you that the U.K. is a sort of sleepy backwater in terms of the stock market and really you should just have all your money invested in exciting U.S. growth and technology companies. Well, if I told you that over this period of time, the S&P 500 has done just over 100%. So we nearly doubled the S&P 500 as well. So in actual fact, point number three is that you can make very good money out of U.K. shares. So that's the [indiscernible] sort of review of the performance. I'm going to go straight on and look at the banks because I mentioned earlier on, the banks -- our holdings in the banks have been big contributors to the performance of the trust in the last 5 years. And we've got 3 share price charts here. So Barclays on the left-hand side, NatWest and Standard Chartered. And you can see how amazing the returns have been over the last 5 years. So Barclays 300%, NatWest nearly 500% and Standard Chartered 300%. A continuing theme of the presentation today is that I'm going to try to convince you that this is not all over. And the reason we think it's not all over is because the start points were so ridiculous because in 2020, of course, if you cast your mind back, that was the start of the pandemic at the point that we took over the trust. And people had really become very, very fearful and they've driven share prices down to utterly ridiculous levels. And so what we were able to do was that, I suppose, invest in some of those shares, and we've enjoyed the gains of them. But I suppose what I'm going to try and say to you is that don't assume that it's all over because I would just ask you not to anchor off those 2020 levels. Let me give you a couple of examples. If you look at the share price charts here, let's start with Barclays on the left-hand side there. And you can see that as we ended '23 and went into '24, the share price was about GBP 1.50, and that was the point that it was about to take off. Now if I told you that in the year ended December 31, '23, Barclays reported earnings of GBP 0.40, okay? So that share price was GBP 1.50 at a point that the company was about to report historic earnings of GBP 0.40. In other words, it was trading at about 4x its historic earnings. I mean that just absolutely nonsense sort of valuations. And what's extraordinary, by the way, is that there were some very famous quality growth fund managers who were telling you at this point of time, you should never -- you shouldn't invest in the bank sector any valuation -- so even at 4x earnings, you should not invest in the bank sector. Let's go to the middle one, NatWest, same time period. So end of '23, start going into '24, they were about to report their -- obviously, their 2023 earnings, which came out at around GBP 0.50 and the share price was about GBP 2. So again, 4x earnings. So one of the key parts of the success of the banks was that the valuation -- ignore the fundamentals, the valuations at that point in time were basically sort of pricing in almost armagedon. Now the second thing that was really interesting is that not only did we not get armagedon, but we got the opposite. So the fundamentals of the sector were about to dramatically improve. If you start with the top chart, so the top charts are looking at the bank's net interest margins. Net interest margin is simply the spread between what they fund themselves at and what they're able to loan out. And obviously, as interest rates go up, the banks are able to increase that net interest margin, they were able to pass that through to their customers. And you can see here what happened between 2021, whether you look at Barclays on the left-hand side going from under 3% to 4.3%. Look at NatWest in the middle, net interest margin from 1.5% to 2.1%. So the net interest margin, which is a key driver of the profits was going in the right direction. Another significant part of our bank's P&L is it's costs. And what was going on here is that the cost-to-income ratio is coming down. So the banks were big users of technology. I think we all recognize that these days, we don't most of our banking online. We very rarely actually go into a branch. And that's been able to -- that's enabled us to enable them to get their costs down. So you've got net interest margin going up, costs going down, obviously, a big driver of increase in profits. Final part of the key driver of the bank's profit is loan losses. So the extent to which the loans that they have made are basically defaulted on. And again, this line was going in the right direction throughout the entire period. So I suppose I would just ask you to focus on the black lines here which is the nonperforming loan ratio. And you can see with all 3 banks that nonperforming loan ratio was going down. In other words, fewer people were defaulting on the loans that they were making. So so far, so good. Every part of all the banks -- every part of the income statement going in the right direction. And here, we're looking at the top charts of the earnings per share and the bottom charts are what's called the return on tangible equity, the actual return that the companies are making. And again, I suppose I'm just highlighting the way that those went in the right direction over the last few years as a result of the things that I've been talking about. So I guess if we take something like NatWest in the middle there, you can see that in 2021, the earnings were about GBP 0.30 on their way to about GBP 0.50 by 2024. So standard charter maybe even more dramatic, GBP 0.28 of earnings in 2020 on their way to GBP 1.28 in 2024. So big increase in earnings. And people will [indiscernible] will often tell you that banks are poor businesses. Just look at the returns on tangible equity that these companies are making. The standout performer would be the one in the middle. NatWest is currently making an 18% return on tangible equity. I would say that is a pretty good business, not a bad business as some people would have you believe. And then finally, we're finishing off with the, I suppose, the valuations. I already made the point that in 2023, these things were trading on sort of 4 or 5x earnings. You can see that in the top chart there where we're looking at Barclays and NatWest. So very, very low price to earnings ratio at the time that those earnings were about to explode upwards. Another method that people use to value banks is price to tangible book. And again, these things bottomed around half book. So we just looked at the fact that they're all making now very good returns. And yet they were trading for half their tangible book value. So very, very low valuations and a sign that the fundamentals were about to improve. And then final chart for me on the banks and because this has been a key component of the outperformance as well is that by the time we got around to about sort of 2023, the banks had very, very strong balance sheets. They had more capital on their balance sheets than the regulators wanted them to hold. And as we've just been discussing, they have very, very lowly valued shares. And so they did exactly the right thing, which is that they started to buy back their own shares. And that is enormously beneficial for their own shareholders. If you are buying back share trading at tangible book share trading at 4x earnings. What you're doing there is you are reducing the share count for the existing shareholders. And therefore, you're increasing the earnings per share and the dividends per share purely as a function of the fact that the share count is coming down. And again, I maybe look at the chart on the right-hand side, that's NatWest Bank, and now we're looking at the black line, and we're using the right-hand axis. So in 2022, NatWest had about 11 -- just over 11 billion shares in issue. Today, that figure is about 8 billion. So in just over 3 years, they've reduced their share count by 1/3, which is absolutely extraordinary. Of course, that has been enormously beneficial for their earnings per share and their dividends per share. So that's the story on the base. I think one thing that I would say is that we still think the fundamentals are good. We don't think they're expensive, but we have to recognize that conditions are very, very good today, probably about as good as they're ever going to be. The shares have done very well. They became a very large part of the trust. And therefore, over the last few months, we have actually been reducing our holdings in these. We still hold we still have holdings in all these banks, but they're just lower than they were a few months ago because having performed so well, it seems to be a good idea to reduce the weight. And also, it's about competition for capital. So what I mean by that is we were finding other lowly valued ideas, and we were basically taking capital out of the banks and recycling it into those new ideas. So hopefully, that gives you a sort of flavor for the bank. I'm going to skip through this, and I'm going to go on to the market environment. I'm just going to say a few words about this, and then I will pause and I will start taking questions. What I'm trying to show you here is how the market this year is very, very different from the market in the last few years. So the market in the last few years, all you needed to do is have lots of money in the U.S. stock market, make sure that most of that was exposed towards the everyone's favorite stocks, the MAG7 stocks and you did very, very well. This chart basically looks at how the markets look year-to-date, and I should point out that this is for a U.K. investor, so these are done in GBP. Over on the left-hand side there, we've got the S&P 500, less than 7% at that point in time at the end of September. And even NASDAQ had not even done 10%. The Glorious MAG7 stocks have managed to reach out 11%. The FTSE 100 has done 18%. Euro stocks have done 23%. And over on the right-hand side, the IBEX, the Spanish stock market has done 45%. So from a market's perspective, things have looked very different this year than in previous years. And we can see that also if we drill down and now look at some of the stocks within the market. And I'm going to start over on the left-hand side, some of the biggest folders year-to-date. No, sorry, over the last 1 year have been some of the former glamor stocks, some of the stocks which are beloved at the quality gray fund managers. So Novo Nordisk, which is one of the key companies producing weight loss drugs. That stock has lost you nearly 2/3 of your money in the last year. Lululemon, the sportswear manufacturer, that is down 35%. Diageo still appears to be everyone's favorite stock. Well, that's lost you nearly 1/3 of your money. LVMH, again, that's sort of glamor stock down about 25% year-to-date. Now go to the right-hand side, who would have thought that you would have made so much money out of one over on the right-hand side, international consult Airlines, that's British Airways 90-odd percent on an airline, then you've got 2 -- 3 banks, Standard, Barclays, NatWest. Currys, an electrical retailer. I mean everyone would tell you, wouldn't they that the U.K. economy is terrible. Well, nobody tell Currys about that because their shares are up 60-odd percent. And even BT, a CPL telecoms company up 35%. So within the stock market, there has been a huge rotation away from some of these growth and glamor stocks and towards, I suppose, our part of the market, which is the value part of the market. I don't think this is over. And so what I'm showing you here is the performance of the U.S. stock market relative to the rest of the world. And I suppose I would just highlight this is a very long chart. This is a 50-year chart. And we've marked on it the previous 2 bubbles. So in the 1970s, very similar setup to today, actually, there was a group of U.S. companies, which investors basically fell in love with and decided that you could just pay any valuation for them, and they would always see right like the MAG7 stock today. And they became known as the NIFTY 50. Well, 1970 marked the peak of the NIFTY 50 bubble and you lost a lot of money in those stocks if you bought them around that time. I guess most of us first of all will know or remember the TMT bubble, so similar sort of thing that people bought the dream that the Internet was going to change the world. And of course, it did. But they just overpaid for some of the companies. And again, 2 years later, the NASDAQ was down 75%. I suppose I would just draw your attention to where we are today. The [ride] in the MAG7 stocks has absolutely dwarfed the NIFTY 50 and the TMT bubble. So looking at that, I would not want an awful lot of my money concentrated into the MAG7 stocks. And of course, they have become such a large part of the index. They're about 1/3 of the U.S. stock market. But if you have exposure to the U.S. stock market in a passive way, then you probably do have a lot of exposure to them. Final point on this chart is the U.S. stock market has done so well for so long. I think some people almost can't envisage a time when it doesn't do well. And I would just highlight -- look at the line between 1970 and 1990. That is 20 years in which the U.S. stock market underperformed the rest of the world. 2000 to 2010, that's 10 years that the U.S. stock market underperformed the rest of the world. So it has happened before. And so therefore, there's no reason that it can't happen again. And again, I would just repeat that point about the fact that today's start point is significantly higher than those previous levels. This is the valuation of the U.S. stock market. And this one actually goes back to the Wall Street crash in 1929. The U.S. stock market, this is used in a market cap to GDP type ratio is more highly valued today than it's ever been. So more highly valued than it was in 2007 than it was in 2000, and it was at the height of the NIFTY 50, higher than it was in 1917 and higher than it was in 1928, just ahead of the Wall Street crash. Whereas conversely, the U.S. stock market is about as lowly valued as it's been for 50 years. So the chart on the left-hand side is the valuation of the U.K. relative to the world stock market. And again, this is a 50-year chart. The 50-year average is that the U.K. trades at about a 17% discount. To MSCI World and today, we are about a sort of 40% discount. So the U.K. stock market looks very, very cheap relative to MSCI World. Now partly that's because MSCI World these days is basically the U.S. The U.S. is 75% of MSCI World. And as we've just seen in the U.S. is very, very expensive. But we would say that even on an absolute basis, the U.K. still looks very cheap relative to MSCI World and the U.S. stock market in particular. And again, I suppose I just want to try to impress upon you the fact that although the trust has done well for the last 5 years, please don't assume that it's over. And this is possibly one of the most important charts in this entire presentation. Because what we're looking at here is the gap in valuation between value stocks or the cheapest part of the stock market and growth stocks or the most expensive part of the stock market. And when that line is going down, that is basically value stocks getting cheaper. So if we start in the middle of this chart and just look at that line between 1995 and 2000. So that's the TMT bubble. So that's basically tech stocks getting more expensive and I suppose companies like tobacco stocks getting cheaper. By 2000, the share price of British American Tobacco was about GBP 3 in trading [indiscernible] and dividend yield of GBP 8. And 10 years later, it's about GBP 50. So if you bought the cheap stocks in 2000, you did very, very well for the next 5 years. So we had a sort of 5-, 6-year bull market in value stocks. Now I would ask you to go to the right-hand side of this chart. And you can see where that line fell to at the start of the pandemic in 2020. We got to a wider point in 2020 than we were at TMT. And you can see that we bounced off that level we haven't even got back to the start point that we got to in 2000. So that dispersion between value stocks and growth stocks is still very, very wide today despite the fact that some of those stocks have done very well. If I maybe just give you one example to try to illustrate this point, in 2000 -- I'm going to use NatWest as an example here again. In 2000 -- sorry, in 2020, at the start of the pandemic, we were what took sort of 12 years past the global financial crisis. And yet the share price of NatWest fell to the same level that Royal Bank of Scotland, its predecessor got to in 2008, the day before the U.K. government had to nationalize it. So that is how fearful people were at the start of the pandemic despite the fact that NatWest Bank was a much, much better bank run by different people, much better balance sheet, much better loan book, I mean, much, much better business. They drove the share price down to the same level that it got to when it was just about to go bust. And we saw that right across the stock market that people drove the share price of Marks & Spencer down to below GBP 1. Well, Marks did about 25p of earnings last year. So you get the point. And so my key takeaway today really is, yes, things have been good for the last few years, but please don't anchor off that because the start point was so extreme. I'm just going to make 2 final points, and then I will pause and hand over for questions. People will often say to us, yes, it's great that the U.K. stock market is cheap, but what's going to be the catalyst for the realization of that value. And it is interesting in the last 2 years, there have been 2 very, very clear catalysts. The first one has been corporate takeovers. So U.S. companies have been looking at how lowly valued some of these U.K. companies are. And they basically thought great, I will have that entire company. So we've seen lots of bids for U.K. companies. And I think that is indicative of basically how cheap these companies got to. Again, if I give you one example of a company that the trust benefited from, Currys at the start of last year troughed at just over GBP 0.40 and an American hedge fund called Elliott came in and bid in the end 60-odd pence for it and we were very vocal in making sure that the company turned down that bid. And we're glad that we did because the share price today is about GBP 1.30. So -- but that was -- and then we saw other companies like IDS went out last year, [indiscernible] went out last year. So lots of corporate takeovers, and I think that is indicative of the absolute value that there is in the U.K. market, and it certainly has served as a catalyst to realize that value. And then the other one, I touched on this earlier on with reference to the banks, which is that U.K. companies themselves have really ramped up the degree to which they are buying back their own stock, which you can see that in both of these charts here, how share buybacks have increased as a percentage of total shareholder return and how the level of share buybacks has picked up very dramatically in the last year or so. And that's absolutely what they should do. If investors are going to drive the valuations of these companies down to 5x earnings or whatever level they get to, then corporate management absolutely should take advantage of that and basically buy back their own stock. So, there you go. I'm going to pause there, and I'll hand over and very happy to take any questions now.

That's great. Well, Ian, thank you very much for your presentation. [Operator Instructions] we have received a number of questions throughout today's presentation, and I want to start off the Q&A session with the first one here, which reads as follows. Aviva is a top 3 holding of the trust and has had a very good run over the last 3 years. Is there still value there and in the trust's other top 5 holdings?

Sorry, the specific question is about Aviva, yes.

Correct.

Okay. I mean not -- clearly not as much as there was a couple of years ago. But no, we still think there is good value. I think one of the things that you have to recall, of course, is that I mentioned that we were shareholders in both Aviva and Direct Line. Last year, Aviva acquired Direct Line. And we think they paid a sort of a reasonable price for it. So we were happy to sell our Direct Line shares. But Aviva are going to be able to take, we think, very significant costs out of Direct Line. We do think Aviva actually is a very well-run business. And actually, it is still trading -- just trying to go back up to the top 10. We still think it's trading at quite reasonable valuations. And as I say, we think they should be able to bring cost synergies out of the Direct Line acquisition. And to a certain extent, it makes them a more balanced business. They basically become a composite insurer. So they get a sort of, I suppose, more even spread of different types of insurance businesses. So we are still happy with the Aviva shareholding.

That's great. Thank you very much, Ian. The next question we have here, given BT Group's strong prior performance, but recent weakness, does this suggest profit-taking opportunities were missed? Or are the fundamentals still supportive in the long term?

No, we still -- I mean, again, this will be one where I suppose you almost need to run a sort of 10-year chart for BT. It's been awful for sort of 9 years and then it's recovered in the last year. So again, just to reiterate that point, don't anchor off sort of the most recent period. But secondly, actually, we think that the performance in the last year is reflective of the fact that business conditions have dramatically improved. And what we mean by that is that I'm sure a lot of you will know and probably used the Openreach division for the business, which is basically at the moment, rolling out fiber across the whole of the U.K. That was quite a competitive area. There are lots of new entrants into that market. Now quite a few of those new entrants have gone bust. And therefore, what you've seen is basically consolidation within that sector. And BT is going to -- BT is basically the giant in that sector now. it's very, very difficult for the others to compete with BT. And so we think the fundamentals there are really starting to improve. And look at the valuation, P/E of 10 dividend yield of 4. That's for a business where, as I said, we think they are just beginning to move into their kind of sweet spot.

Great. Another question we've had here. The share price recently hit an all-time high. Is the U.K. market now becoming expensive? And is Temple Bar Investment Trust now expensive?

Hopefully, we sort of answered that one. So I think we showed lots of charts that showed the U.K. stock market still looks very cheap. That one when I looked at the 50-year valuation, and we are basically just off a 50-year low. So that would be one thing. I think the other thing with reference to Temple Bar itself, I think the average PE of holdings across the company, across the trust is just under 10x, maybe around sort of 9.5, 10x today. Yes, that is higher than it was a couple of years ago when it was probably averaging out to about 8.5 or something like that. But it would still be towards the low end of the entire 30-year period in which myself and Nick have been running money. So again, similar sort of thing. Yes, things have picked up a little bit. But when I flip down that list of companies there, you're able to buy companies here on sort of 8, 9, 10x earnings. That is very low valuation, and you're getting dividend yields of 4%, 5%, 6% in some cases. again, I know I keep coming back to NatWest, but look at NatWest at the bottom there. So I started off by this presentation by telling you it's gone up 500% in the last 5 years. And yet today, it trades on price earnings ratio of less than 9% and a dividend yield of 6%. So I'm sounding like a broken record here, but try not to anchor off the start point because the start point is [indiscernible].

Another question we've had here, what's the gearing facility in the trust? And at what level can it go to?

I mean, so basically, we have some fixed debt that was taken out actually before the time that we started to run the trust. I think the highest it's been since Nick and I have been running it has been about 8%, something like that. Today, it's about 3%. And it's about 3%, of course, because the value of the trust has gone up and the debt has been unchanged and therefore, mathematically, it's just come down. I think all I would try to reassure you about is the fact that despite the fact that I'm sitting here and telling you that I think that these things are very cheap at the moment, Nick and I are naturally risk-averse investors. We've got a lot of our own money invested in this trust, by the way but we never want to put ourselves in a situation where we put on so much gearing that there's some sort of panic where the market goes down, the market basically takes some of our stocks down with it. And we are at that point of time, forced to stop selling things. actually at a point in time where really what you want to be doing is buying things. And therefore, we are always going to be very, very conservative in our use of gearing. So please be assured about that.

A question we have here from an investor. Johnson Matthey is a large part of the portfolio. Is there anything you see that might put off the sale of the Catalyst business? Do you intend to hold the company for the longer term if the sale goes through? And how do you see the remaining parts of the business and their prospects short to medium term?

Yes, that's a good question. Okay. So I'm just going to do a quick recap because possibly it possible, not everyone knows Johnson Matthey on the call as well as the person asking the question clearly does. Johnson Matthey basically is a refiner of what we call Platinum Group Metals. That's the core business. What's the primary use of platinum green metals is basically auto catalyst, so the thing in your exhaust you drive a petrol or a diesel car that basically takes the markets out of your emissions. And the company, the share price have been quite poor over the last few years because I think the stock market and by the way, the management. We're looking forward, and I think we're basically looking forward to a time when electric vehicles were going to become the dominant car within the U.K. within their business. And obviously, that would reduce the demand for these auto catalysts and what they did was they basically tried to use shareholders' money to diversify into other areas. So they were going into areas like hydrogen, for instance. And they did that very unsuccessfully. So they were committing large amounts of shareholders' money into areas that were very loss-making. And therefore -- so not only did you have the sort of problem of their core business, but you had the fact that they were then taking money from that core business and putting it into loss-making businesses. And a U.S. company called Standard Investments took an 11% stake in Johnson Matthey, and they started to engage with the company in a very activist way. If you have 10 minutes this afternoon, just going type into Google Standard Investments letter to Johnson Matthey. And essentially, what they said to the management was you have got to stop frittering away your shareholders' money on this diversification. You've got to focus back on your core businesses, but you've got to run it better. So you basically have got to take costs out of your core businesses. And they basically compare Johnson Matthey to other similar types of businesses who make much higher margins than Johnson Matthey. And with regards to the trust, I suppose we met with the company. We actually have called Standard Investments. We put on about 3% position. So we did not buy 5.5% of Johnson Matthey. We put on about 3% position. And we were, I suppose, lucky with our timing in that around about that time, the management effectively started to do things the sort of things that [indiscernible] investments were encouraging them to do. Specifically, as the questioner said, they sold a business called Catalyst Technologies. Now the important thing about this is that the market cap of Johnson Matthey at the time that we finished buying it was about GBP 2 billion. They sold this business, which, by the way, was kind of less than 20% of their profits for GBP 1.8 billion, and they are giving GBP 1.6 billion of the GBP 1.8 billion back to their shareholders. So we got nearly the market cap of the company back in cash. The transaction itself, they sold it to the U.S. Honeywell. They probably won't complete until next year. We don't see any reason why it shouldn't go through. So we do think it will go through. The share price went up about 35% on the day that was announced. But in reality, what we think the share price did was basically reflect that one transaction. We don't think it reflected anything for the potential upside in the improvement of the profitability of the core businesses and the fact that the management actually now has started to significantly reduce their investments into areas like hydrogen. Apologies, that was slightly long-winded. But so the answer to the question is, yes, we still think there's lots of upside in Johnson Matthey. And yes, we're happy to keep holding the [indiscernible].

That's great. The next question here, If the stage of a [indiscernible] is right, shouldn't you keep holding winners for years and years? You gave the example of British American tobacco going from GBP 3 to GBP 50. And maybe shouldn't that be the same for banks if you bought cheap and then hold the stock.

Yes. No, I agree. And actually, so I mentioned in my letter that I put out, and it was basically 10 lessons. And lesson #8 is don't be too quick to take a profit. And so actually, I do completely agree with the question. It's a matter of degree in risk control. When you -- when something like NatWest goes up 500% or actually, Marks is another good example. Marks I said trough below GBP 1 in 2000, it's about GBP 4 today. When you've got a 3% position at GBP 1 and the thing goes up quick, it becomes a very, very large part of the trust. And that is just irresponsible, I think, to take massive positions because as much as I like -- as much as I might like to think I know what the future holds, I don't by the way. None of us do. I mean the pandemic is an amazing example of that, who saw that coming. And therefore, it's about risk control and it's about having appropriate sizes. So we still hold all 3 of those banks that I mentioned. We just hold them in smaller positions. Yes. So very happy to keep -- I completely agree with the sentiment. I think not taking profits too quickly and running your winners is definitely a good thing to do. And by the way, that -- that is actually one of the reasons the Trust has done so well. We could have sold NatWest when it was up sort of 100%, 200%, et cetera, and we didn't. We kept running it and running it. But it's about degrees and it's about risk control.

That's great. Another question here. What is your view on ITV after Liberty Global's reduced stake to 5%? Would you add to your 4.1% position?

Probably not, again, because probably 4% is enough. That's one thing. And actually, we are quite big shareholders of ITV because we don't just hold it on Temple Bar. We hold it on our other U.K. portfolios as well. I mean I can only assume that Liberty must have been forced out of that position. There must be some reason that they are selling that because we still think ITV is incredibly cheap. We think that the studios business on its own is worth significantly more than the market cap of the entire company. So we think that the market is basically placing a negative value on the broadcast business, which includes ITVX and the kind of 50-odd years of back catalog of ITV and so on and so forth. So for years, actually, we sat here thinking, just trying to understand why Netflix haven't taken ITV out because for a fraction of what Netflix spend on programming each year, they could take out ITV, which -- by the way, ITV Studios more than 50% of its profits come from outside of the U.K. So ITV Studios is one of the biggest studios, one of the biggest sort of content producers globally, not just in the U.K. And yet at the valuation today, the market cap today is kind of a fraction of what Netflix spends on its annual programming budget. So yes, when I saw that announcement last night, I was sort of shaking my head, I can only assume that they -- I don't know, maybe they're sort of financially stretched or something and having to sell down their ITV because I think selling it at this price is absolutely.

Next question we have here, how the current U.K. economy impact the trust over the next 3 to 5 years?

Yes. I mean really hard one. It's really hard one because I guess like most of you listening today, every time I read some sort of headline from Rachel Reeves, so I don't want to cry, frankly. I think the current government are just economically literate, I think the sorts of things that they -- what they need to do is reduce government spending, deregulate, reduce the impact of net zero and move the government as a percentage of the economy down. And they're literally doing the opposite of all those things that I just said. And so that makes me, I suppose, quite impressed about the U.K. economy. Okay. So let's kind of put that to one side. So why should you think about investing in a trust which holds U.K. companies? Well, number one, the economy is not the stock market. I have seen data over time that actually tracks the performance of the stock market and the performance of that nation's economy. Not only are they not correlated to a certain -- I have seen data which actually suggests they're negatively correlated. And I guess that's because the stock market is forward-looking, isn't it? The stock market is thinking what's likely to happen in the future, not what has happened. That's point number one. Point number two, I suspect the reason that lots of these things are so lowly valued is because lots of investors are also putting their heads in their hands every time they read something that comes out of Rachel Reeves's mouth. So that's another way of saying probably a lot of the bad news is priced in. Point number three, lots of these companies are quoted in London and yet have virtually no exposure to the U.K. economy. So go through, I don't know, Johnson Matthey, Shell, BP, I mentioned the ITV earlier on actually. Smith & Nephew, NN is a Dutch insurance company. So lots of these companies are global companies. And therefore, yes, it's kind of -- it's unhelpful for the U.K. economy not to be strong. But for lots of them, the U.K. is a relatively small part of their profit. So that's kind of the third point.

We have a question here. The charts where U.S. equities underperformed and very highly valued and very pertinent. I was interested in how you think the portfolio would react in the selloff, whether from the AI bubble bursting or something similar or even less sentiment driven and more fundamental-based issues in the slowing of the global economy. If further rate cuts do come traditionally, it should eventually help growth stocks, for example, and not value or financials, for example, if you have any comments on that, that would be great.

Yes. I'm not sure I agree with that last point actually, which is that rate cuts will help growth stocks. And I absolutely know why the questioner is saying that. Christian is saying that because we went through that 10-year period, didn't we in which interest rates very low, quantitative easing, et cetera, et cetera, and that was very good rate [indiscernible]. In fact, you can see it here on this chart. When NASDAQ lost 75% of its value, the Fed were cutting rates all the way down. So the Fed cutting rates doesn't automatically guarantee that all of a sudden tech stocks start going up again. You can -- I mean, I'm reading a book at the moment. You can actually go further than that and say -- so we -- the Bank of England is cutting rates at the moment. The Fed is cutting rates at the moment at a time when inflation is significantly above the level of their mandates. So we had inflation out this morning, 3.8%. The mandate is to get it to 2% and yet the Bank of England are cutting interest rates. When did that last happen? That last happened during the 1970s. Anyone who sort of remembers the financial market history will remember about basically Nixon bullied the Chairman of the Federal Reserve that was called burns into cutting interest rates at the time that he shouldn't have been and it was basically because the U.S. government was running [indiscernible] because they were fighting a Vietnam war at that point in time. And Nixon [indiscernible] basically wanted to get reelected. So he wanted to juice the economy. Sounds familiar to today, isn't it, with Donald Trump forcing publicly [indiscernible] Powell to cut rates. I suppose the point I'm making is that if the central banks cut rates at a point when inflation is still high, what you could see is inflation going up, and that is what we saw in the 1970s. And that resulted in one of the greatest periods for value stocks ever. And so you had that -- you can see here the massive selloff in the NIFTY 50. What you can't see is that actually the sectors which went up during the 1970s were areas like energy, mining, et cetera, et cetera, because inflation took off and those were the sectors which benefited from inflation going up. You could well see something similar this time, by which I mean, if central banks cut rates too aggressively at a point when inflation has not been taken out of the system, you could see inflation start to take off. And maybe that's what they want, so they can inflate where they, I don't know. But in that environment, by the way, value will do well and growth will do that.

What do you see as the impact on the trust of the MAG7 crash in the U.S.?

Yes. Sorry, I forgot to answer that one. Look, all stock markets are correlated to a certain extent. So if MAG7 loses 50% between now and the end of the year, if I had to bet, I would bet that the price of the trust is probably going down. It's not going to sit there in splendid isolation. I guess I would just make a couple of points. In that environment, low valuation is what you should be looking for, isn't it? Because effectively, what's happening is an area of the stock market that is massively overvalued. Again, just go back to this chart here. This is exactly what happened in the NIFTY 50. You had this area of the stock market that was massively overvalued and it just derated for kind of for 20-odd years. You want to be diversifying out of that area of the market and into other areas. So yes, the share price of the trust probably goes down. But at some point in time, I think fundamentals begin to count something again and probably you move back towards the intrinsic values of the stocks. And as I said, both in the '70s and in the 2000s, again, you can't really see it there, but just my VAT example. Value stocks didn't just go down less, actually went up during those periods of time. Don't forget, there is an awful lot of money clustered into those MAG7 stocks. To give you an example, the U.S. stock market today is $70 trillion. The U.K. stock market is GBP 3 trillion. Now clearly, not all the 70 is going into the 3. But you get my point. If at the margin, people think I'm overexposed to this, and I need to take money out of the MAG7, the U.S. stock market, and I'm putting it into the U.K., Europe, Japan, emerging markets or whatever, you're going to get some quite interesting liquidity mismatches there as people can sell -- probably sell down their MAG7 stocks very easily. Getting that money into some of these other markets without moving prices is probably not so easy, actually.

Just a couple of questions left here. A question here. Temple Bar seems to use most of its committed 30% non-U.K. allocation. If the U.K. is so cheap, why do you not buy -- why do you buy non-U.K. companies?

Yes, really good question. Two reasons predominantly. One comes back to that topic of stock-specific risk I was talking about earlier on. Let me give you an example. Let's say you decided that you want to have 15% in the energy sector because you think the energy sector is very cheap. Do you have sort of 7% or 8% in BP, 7% or 8% in Shell? And then by the way, on the day of the Gulf of Mexico disaster with BP, the share price halved in a day. Probably not. Given that these are big global companies, is it not a better idea to have a lower holding in BP and Shell and then also on Total and E&I and so on and so forth. So that's reason number one is basically to diversify down stock-specific risk. [indiscernible] I suppose, is to buy businesses that are just not available on the U.K. stock market, but which we believe are cheap. So there are certain sectors. I mean, technology, for instance, not all technology companies are expensive. We own Hewlett Packard. Hewlett Packard, we think is very cheap. There just aren't very many U.K. technology companies aren't. There aren't many U.K. [indiscernible] companies and so on and so forth. So that's reason number 2 is basically to access sectors, which we think are cheap, but which are not available in the U.K. market. I suppose the final thing is it just gets you a bit of diversification, doesn't it, by basically not putting all of your assets into the U.K. by putting 70% in the U.K. and 30% into other markets. That increases your diversity.

That's great. And one final question is really around the discount and ask what you're doing about the discount and the premium to NAV.

So what we did do was when the discount went out to sort of 7% or so, there was an active program. And by the way, this is the Board's decision, not mine, to buy back stock. So we did have a -- it's not explicit, but we did have effectively a discount control mechanism. And that effectively put a floor under that discount as far as I could see. And then what has happened since then is that we've actually gone from a discount to a small premium, I believe we're a small premium today. So that's I think that -- well, that has been very positive for shareholders. If I said to you, year-to-date, all share up 18%, Temple Bar NAV up 27 Temple Bar price up 38%. And of course, that reflects the fact that we've gone from that discount to that small premium, you turn a 27% return into a 38% return.

Sorry, one more has just come through. Regarding the dividend reserves, do you know in pence what the reserves are? How are you funding the 0.75 [indiscernible] enhancement?

I don't know it off the top of my head. I mean if you went on to the website and went into the report and accounts, you could get that figure. I suppose more broadly, and again, this is a decision by the Board, but it is one that I completely agree with. they wanted to reflect the fact that more and more U.K. companies are basically returning capital to shareholders via a share buyback as well as a dividend. But what that meant was that there is an element of return coming back to us, not in the form of income. And I think what the Board wanted to do was basically say we should recognize that and basically use that to pass that on to the shareholders of the trust. And that's the mechanism that they've done. I think it's basically GBP 0.75 per quarter I think. And so what it's done is it's increased the yield of the trust by about 1%. And I have to see. I have to say I agree with it. And I think it's one of those things I know trusts are sort of slightly out of fashion at the moment. But actually, that's a good example of something that you can do on a trust that you couldn't do on an open-ended fund. So actually, I think that's one of those examples where the trust structure is beneficial to its shareholders.

Perfect. Well, thank you very much for answering those questions from investors. Of course, the company can review all the questions that have been submitted today, and we will publish those responses out on the Investor Meet Company platform. Just before redirecting investors to provide with their feedback, which is particularly important to you. Ian, could I just ask you for a few closing comments?

Yes. I think hopefully, the theme that has come out from today is that, yes, we're very, very pleased with what has happened in the last 5 years. Please believe me, we are not complacent. We're not arrogant. We're pleased with what's happened so far. But please don't think it's all over. Do not anchor off what has happened in the last 5 years. You've just got to go back and remind yourself of how ridiculous price existed in 2021. Now fortunately, we were able to take advantage of that to the benefit of the Trust shareholders. And clearly, we've harnessed a lot of the gains that resulted from that. But we are not sitting here today looking at a lot of companies and thinking, oh, those are expensive or we can't find any value. We are still looking at the holdings within the trust and actually thinking we've got some decent companies in here, which are still on quite low valuations. At a time, go back to that chart showing the spread between value and growth at a time that there is still a big divergence within the market, within the U.K. market between growth and value and across markets between the U.K. and the U.S. So we still think the trust is set pretty fair.

That's great. Well, thank you once again, Ian, for updating investors today. Can I please ask investors not to close the session as you now be automatically redirected to provide your feedback so that all the management team can better understand your views and expectations. On behalf of the management team of Temple Bar Investment Trust plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.