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fleccy. Now you really are worrying me when you say the price could fall to 90p, but it's meaningless to long term holders. I am a long term holder, but it certainly isn't meaningless to me. If the sp falls to 90p, there may be a good reason for the fall, divi cut perhaps? & there is no guarantee the sp will come back up again. When the sp was £2.40 & the divi was higher, the fall from there was not meaningless. Although I am a long term holder, I intend to sell at least some eventually, you can't take it with you! With respect, you do seem to have blind faith sometimes? But I hope your faith will come true?
Keeping things in in the overall global context, VOD has 'survived' quite well probably as a consequence of the dividend.
Problem is at the moment, whatever dip you buy it's likely to suffer a lower one.
Over the long term of course a few pence here and there it doesn't make much difference.
You’re right Fleccy - reinvested dividends make a huge difference to total returns. Take BATS as an example - nothing special looking at the price chart, but when you add in reinvested dividends over the last 20 years it’s one of the best performers in the FTSE for total returns and gives US markets a run for their money.
The only potential issue with dividend shares is that with rising interest rates they may suffer from yield decompression.
Take VOD as an example.
At 130p with a 9c div @120 GBP/EUR it offered a 5.77% yield.
If interest rates increase by 1%, then in order to maintain its risk premium the yield would need to increase to 6.77%.
If the dividend remains flat, then the only way the yield will increase is if the price drops, and in this case it would need to drop to 110.78, and if interest rates increase by 2% then the price would need to drop to 97.40.
I can’t see any companies increasing their dividends by enough to maintain the risk free premium. In the case of VOD that would mean a 17.3% increase in the dividend just to cover a 1% increase in interest rates.
I agree that tech is more vulnerable as those valuations use discounted cash flow models whose valuations can change even more dramatically with increases in interest rates. Those models also use expected growth rates, and if those start going down as well it could be a real bloodbath.
Powell made it absolutely clear last week that inflation is their number one priority so they are going to continue to raise rates until they get inflation under control. We aren’t going to see the same rate hikes in the UK as the economy isn’t as hot, but that in itself is another problem as we’re potentially heading to a recession much faster than the US, and recessions are always bad for share prices.
All of this has to run its course. Inflation has to come down, even if that means we have a recession.
The wild card is Russia, as peace in Ukraine could see a collapse in commodity prices which would bring down inflation without rates having to go up as much.
If that doesn’t happen in the next few months things are going to get very grim. Markets are tanking after a pretty good earnings season, but the next one in 2-3 months is going to be worse the effect of the sanctions against Russia will hit the top line of lots of companies (wait for the bloodbath in tech when Meta, Netflix etc report a massive drop in users) and high inflation will increase costs and erode the bottom line.
Add into the mix all major indexes are still way above their long term trend line and it could get very nasty this year with drops of 25-30% from current levels.
As I’ve said before, I wasn’t expecting a return to those trend lines for another 2-3 years but we may see it this year/next year unless something changes.
Here we go again - FTSE having a good day , vodafone slowly dropping down into the red . Time for changes at the top !!!!!
"i did sell off a few funds a few months ago and purchased more dividend shares, some went ex div beginning of April but didn't reach the highs of last year, so held on to them for the dividend, so think i will just hold all the dividend payments on account until i see a good price for reinvesting"
Maybe I'm in a minority of one, because I haven't seen any articles with the same opinion, but I see dividend re-investment as a form of Growth. By re-investing dividends, you're growing your shareholding in the company, and grow your reinvested dividend capital gains during price recovery.
The markets are going through a change, with a Trillion Dollars wiped off tech stock valuations over the last week. At some point investors, in utility type stocks with real assets, will reap the benefits of buying while the prices have been low.
Thanks Mole, I get my state pension from the end of July, but don't need to draw anything from my sipp for the first year, but hoping to build it up as much as i can over the next few years, not sure if you consider them the solid well managed company's or not, currently with VOD/LLOYDS/MNG/PSN/PHNX/DLG/LGEN and 7 funds, hopefully next year will be better, surely it can't be worse ?
Nobody can time the market Rob. We may well have a massive cathartic fall from here, or just bobble along for a few months around this level. It's unlikely to be up, but nobody really knows. Half way through the pandemic crash I did actually sell up. It fell further and I felt chuffed with myself. Started buying back in some favourites around the bottom (lucky guess), but by the time I had got fully invested again, my averages were not far off what I sold for in the first place. It wasn't worth the bother in the end. Just rolling out of low conviction stocks into my highest conviction at lower prices would of been a better strategy.
If you have a 5 year horizon, sit tight and maybe look at ways you can raise some cash to start putting in when the market obviously bottoms and turns.
Just make sure you are in solid well managed companies with a future.
Thanks Fleccy and compound, It is tricky i never know what to do for the best when you see the shares are constantly dropping, noticed the shares and funds have already lost value in the last few weeks, so probably left it too late for selling any off now, i did sell off a few funds a few months ago and purchased more dividend shares, some went ex div beginning of April but didn't reach the highs of last year, so held on to them for the dividend, so think i will just hold all the dividend payments on account until i see a good price for reinvesting, we are well overdue for a good year now, was hoping that would have been this year but seems not ?
cheers
Robleo - the writing was on the wall a couple of weeks ago. I closed out all long positions, taking some losses and cutting short a few profitable positions (inc VOD) that I thought had a lot more legs in them. It was painful, but there’s no point burying your head in the sand when you need to take action.
It’s a tricky one right now though as by open tomorrow VOD is going to be closer to the bottom of its trading range than the top. Even though on the balance of probabilities the direction is going to be down, long term there’s potentially more upside than down, so you might also want to consider fleccys thoughts as well.
I’ve already got my watchlist of shares and potential buy in prices and the subsequent potential profits, losses and yields and will wait for the market to come to me. If it doesn’t then so be it. Balance of probabilities and risk to reward ratios aren’t attractive enough for me at the moment to go long.
"Looks like some damaging weeks/months ahead then guys, do any of you have a good plan for dealing with it, you selling up or buying up or just sit it out and do nothing ?"
Damage? The only time an investor is damaged, is if they're a forced seller while sitting on a paper loss, turning the paper loss into a capital loss. The price could drop to 90p, but it's meaningless to long term holders. I topped up thousands of shares in BT, at 106 and 112p, while sitting on a big paper loss, I wasn't damaged by the paper loss, I used it to my advantage. A paper loss is just a state of mind, what's real is what you do when the price is depressed.
If I'm not too late, could I go for 120p please?
Looks like some damaging weeks/months ahead then guys, do any of you have a good plan for dealing with it, you selling up or buying up or just sit it out and do nothing ?
It's already begun Robina.
VOD is hovering around support at the moment, but no major selling/shorting yet because results are due next week. If it continues to hold up here whilst the markets decline, then after the results come out it will be a prime target for shorters once that risk is off the table for them.
Bad results will get instantly punished, and the price might spike up on good results, but it will almost certainly come down after that.
If results are neutral/steady as she goes and the dividend looks safe then it could be a very nice defensive play when it drops back.
I think we'll have a dramatic stock market fall very soon - not just a few percent.
The main reason is that I need to make some large withdrawals very soon.
When VOD gets to 90p it'll be worth a punt but I won't have any money for that.
Im having a well deserved break from the competition for a couple of weeks as its taken a lot out of me!!
If it's not too late, the guess is 115p.
I think it's time to generally just abandon hope on the broad market for this year. It will just continue downward while the stimulus damage is unwound and virtually all stocks will trend down with it.
Looking forwards, position yourselves in good companies that will survive (good cashflow, low/no debt, future proofed demand), accumulate as you get new cash and wait for the recovery.
I will go for 117.9 please.
The trend is against us at the mo.
The tide will turn in due course.
GLA
I'll go for 118.50p, GLA.
Just like sex, If you have to pay for it, it is not worth having. The article is probably just a load of rubbish that we have heard before for free.
Prediction Guesses for 13/05/22
Friday the 13th so anything goes
good evening all hope we are all feeling hopeful for the week ahead
and welcome back Sotonspike, hope you enjoyed your holidays
not so many participants this week, so maybe a lack of interest :-(
robleo 1.25
offmessage
daniel 1.26
FredRubble
mole_man99
sotonspike 1.30
csdi
cheapsharesboy
Scratch49 123.1
Not the Times article but something that appeared in the FT a couple of weeks back along the same lines.
https://www.ft.com/content/658e0a26-3f85-4a41-9a0a-2d0379dd974d
Sorry em me that's a subscriber only article. Can someone cut & paste the content or give us an idea of the gist? Thanks in advance.
https://www.thetimes.co.uk/article/vodafone-struggles-to-dial-up-deals-jgk27wh82
Interesting thread. I think Vodafone looks good against inflation and the general economy and it’s now just a question of timing. The old adage of ‘time in the market’ doesn’t apply right now. I am a buyer and for me it’s about timing….maybe next week or maybe sometime in the next 2/3 months.
There are a few other shares in a similar position.
If we have a few bad days on the markets this share will get hit like any but for me it’s then a buying opportunity. However, like fleccy suggests it’s then a hold term hold (with maybe the odd trading along the way)
GLA
Gary, as we all know Dan and Fleccy have explained their reasons for being in this long term, and as long as they are happy with their investment and dividends here that's all that matters, so good luck to them both, long term of course this may well come good and could work out well who knows, as for me, I will be a bit disappointed if this slips back to last years lows again but may consider topping up and lower my average if that happens, good point about the big investment needed in Germany and also Putins war is playing havoc with the shares at the moment as Dan pointed out, results out this month which will be the decider, so not sure what everyone's expectations are there? will let others give their opinion on that
best of luck