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Steph..Strictly and I never intend to give investment advice but PSN are very expensive relative to their peers and the ridiculous bonus scheme agreed for the previous CEO was scandalous.
PSN, which I was partly influenced by you both to sell, is doing quite nicely. Missed a few percent there. Market is not always logical.
Anyhow I bought with it GROW and PCT -which have not gone up but I'm happy with. I think GROW can jump when a fund goes in to build a stake. Fundamentals support a plus 600 price. Expecting a broker reiteration and maybe upgrade to 700+ which will help.
https://www.lse.co.uk/rns/GROW/interim-results-ph76bsl5w78ufx9.html
I'm getting more comfortable with this as a UK builders alternative. 20% discount to NAV/share is really good for the tech sector. PCN and SMT are over NAV. A 40% +discount to broker consensus even better. Brokers consistently saying this should trade at a premium to NAV/share which is unusual but given the fast growing nature of the assets owned maybe quite sustainable.
The more I look at it the more I am convinced the NAV is conservatively calculated and there is hidden treasure as we had for TEF. Valuation of NAV of underlying assets is mostly what shares the last funding round got which is a very conservative way to do it. Due diligence takes months and often the start up has no oven ready alternative to the funder and wants to grow fast to take advantage of huge opportunities and may have already partly spent the incoming funds (best friend has been there). So the final strike price is usually a reflection of conditions of a few months back and a substantial rip off compared to what the company could have gotten in the commercial market if they were publically traded -or if they had more time to chase multiple funds. They generally don't, they are focused on their core business not fund raising, so an arbitrage opportunity.
majority of around 40 on those numbers
https://www.lse.co.uk/rns/GROW/interim-results-ph76bsl5w78ufx9.html
A new poll gave the Tories only a 7% lead which means a 6 seat majority. Of course tactical voting could push that down further. Easier to organize tactical vote against an incumbent government than the reverse. You tend to **** off more people being in government than being in opposition -although Corbyn testing that thesis a bit.
A tory majority of between 1 and 40 is the worst of all worlds. Boris dependent on the swivel eyed loons the ERG not just for Brexit but on a wide range of social and economic policies. If I must endure a Boris government for 5 years I'd rather he have an 80 seat majority or more. It was painful watching TM in hock to DUP and ERG to keep her job she incompetently wanted so badly. Wrong leader with wrong coalition pulling her in the wrong directions. Pre 2017 election she had 2 really bad "know it all even though they knew nothing about trade" advisors as well.
PSN seems to have some momentum behind it....very close to 52 week high.
Steph...if Boris has a 40% share of the votes as indicated by latest polls against 30% for labour,roughly how does that translate into seats?.
unstoppable by now I think. Just the size is up for grabs. Probably good for our shares if large.
Weirdly I am hoping for a big Tory majority rather than a small one. I hope Boris has enough to ignore the ERG and pivot back to the center ground where I think he is personally more comfortable. There are SP pleasing actions in this middle ground as well like support for home purchase and enabling infrastructure. Expect Boris to deflate the Labour balloon a bit with funds for housing association build and more help to buy. .
Boris certainly not shy to splash the cash abound like a drunken sailor. Austerity will be over even as we are slightly poorer overall due to Brexit. We will become more like Italy and Japan on national debt and less like Germany. Midlands screwed in the long run but over the next 5 years will probably still have house price inflation above London as the ripple effects of earlier rises in London continue to influence. So happy to hold UK builders who have majority outside London for now.
I'd love to see a non Tory coalition government (maybe good for our shares as Labour tamed and hard Brexit avoided) but too long odds.
Can't see remotely how Labour could win a majority on it's own now this time round. The "radical" manifesto will live on for anouther fight on anouther day and as such will be a slight drag on UK shares for the forseeable future but not major. Nothing like the Brexit uncertainty we have been exposed to. Shares might dip in 4 years time if a more charismatic Labour leader is ahead in the polls but that is a long way out.
Thanks
Trouble is all these funds run by know it all 20 somethings too young to have been through the last crash. Some think they are wolves of Wall Street. I rather liked the less flash less hipster feel of TEF.
Still I want exposure to the high tech start up sector . I did look today at material science start ups. A few in us but not on lse . None attractive.
For now it is Grow and pct plus Uk builders led by bellway
" I dont think it did that well"....
WPCT has lost launch investors 71% of their money.
Steph, it would certainly be worth looking at whether any of the Woodford vehicles are invested in any of the underlying investments. Woodford of course sacked as manager of the income fund and then resigned as manager of the other funds.
If they are looking to sell holdings then this could put downward pressure on the companies in questions as well as these type of companies in general.
The Woodford fund that invested in these type of companies was his "Patient Capital" fund. I don't think it did that well from memory. Worth doing a bit of research on them in my opinion as I think they've been around a while now.
https://www.hl.co.uk/news/articles/archive/woodford-patient-capital-full-portfolio-released
Something more recent https://www.investorschronicle.co.uk/funds-etfs/2019/11/07/woodford-patient-nav-reduced-again/
One other point. There are only a finite number of investment opportunities in these high tech companies available but this doesn't stop managers taking on more cash. A company that boast a 20% return on their portfolio may well struggle to do this as they raise more cash or take on more money (depending on what type of fund it is) as opportunities of the same standard may not be available. If somebody starts a fund based on a past performance of 20% when doing the same thing privately, this might have been on a much smaller scale. Worth asking some questions I think.
Good luck with that.I am sticking with home builders, I am ex FRICS and dont feel safe outside that small circle.[
terr
thanks, terrifying for me to go outside TEF. It was involuntary but now that I have to I've looked about the world for an equivalent. 2 growing sectors come to mind. high tech young stocks and high end materials science and in particular engineered plastics. DO you remember the line form The Graduate with Dustman Hoffman 40 years ago "young man go into plastics". It was good advise then and still is.
The co-investors in GROW in order of size from 23% to 3% are:
Invesco, National Treasury Management Agency, Merian Global, British Business Bank, Canaccord Wealth, T Rowe, Brunai Inv Agency, Baille Gifford, Blackrock.
very interesting the Irish sovereign wealth fund in there for 12%
The British Business bank who themselves lend to start ups is in there for 6%.
Brunei sovereign wealth fund too.
These are very strategic funds looking for a managed tech start up portfolio.
Also GROW is deliberate Brexit proof with a duel listing on the LSE and Irish exchanges.
I definitely want in for the sector but am open to alternatives that do the same as GROW.
The only other sector I know that can have organic growth of 20% plus for the foreseeable future is engineered plastics. Not commodity plastic like what goes into bags and bottles (polyethylene terephthalate or PET that geos into plastic containers and HDPE and LDPE that go into bags). We will reach peak virgin plastic soon as environmental concerns and recycling weigh down on that sector.
What I'm talking about is specialty plastic and the IP, patents and additives that create real metal substitutes. Even the radiator of a car can now be engineered plastic. This niche is growing like hell. Maybe carbon fiber as well. This is a materials play to go with my virtual services play in tech stock with a start up strong weighting.
If I could find an investment trust that specialized in this -especially far eastern firms, I'd put up t 1/3rd of my portfolio there. Afraid to stock pick but might in the end do a few individual firms -especially South Korea, Japan and China.
Woodford disasterous foray into startup/early stage companies in new fields has put a lot of investors off that genre for good.
thanks, yes no reason why supermarkets as a whole will grow. Almost like utilities. A certain amount we spend per week divided up into those who vie for our business. Pick a growing chain and they can gain market share but for how long?
yes high tech is a new investment area although not that new. I have been promoting high tech in my day job for some time now but have not tried nor seen a way to motorize any resulting knowledge. Of course the sector as a whole will grow fast in a general economic transfer from the value add of making physical things to making virtual services.
It is, however, by it's nature a very unpredictable and changing landscape. I don't have any confidence I can stock pick within the sector. My odd small punt up to now has been disastrous. Willing to delegate to a stock picker within the sector though and thus have an aggregated bet on the sector. Thus GROW and PCT both with track records of pacing well. Probably in high tech stock picking even more difficult than for UK builders. New way of making and losing money.
I really had specialist knowledge of Uk housing markets in general and east London in particular. I wrote reports on housing for government. It was great when my investment strategy aligned with my specialist knowledge. Except for BKY to a small extent that alignment is over. Builders will re-price upwards nicely in the next 2 years but I can't see the growth in the midland based builders beyond that. Brexit will accelerate the de-industrialization and they can't compete as London does for the knowledge economy. Well paid jobs will flat line and thus the builders market.
Steph,
Maybe think of any share sector as an onion for a moment, as that's one way I look at this...
Having spent more the last fifteen years exclusively focused on house builder shares - that is, apart from a brief partial foray into supermarkets from which I fortunately quickly retreated again - I have pondered as I've progressed, about what layers of the metaphorical onion I hadn't yet got to...?
Obviously one can never be sure one has dug all the way down to the centre, but I'm certainly now several layers further in than I was say eight or ten years ago - and for part of that I have to thank Persimmon due to the mind games they played (IMO) with investors and my then looking into trying to understand why they did what they did.
And I would say that my last four or five years' investment performance, as compared to that of ten to fifteen years ago, comfortably reflects this.
Now, obviously I don't know how well you understand how all the different number components go together, the best way of laying them out in a spreadsheet to be able to spot any maggots and all that (funnily enough, this is a conversation I've been having with James188 separately by email at the moment), but if you get that then obviously some of that applies to other sectors too.
But if I was an expert carpenter - which I'm not, it's only a metaphor - then that would surely imply that I was a practical bloke who could no doubt turn his hand much more easily than the real me to plumbing, plastering, etc.
But, even so, why start a different trade if I was already earning a good living at carpentry...?
And, barring Corbyn (and let's not get into that), house builder shares are still looking like a very good living to me.
Anyway, that's the point I wanted to make.... if you felt your knowledge is pretty much restricted to TEF I could understand that you might now feel you've lost your living investment-wise.... if so, and if you haven't been on the blog yet, have a look there - between us, that is, I and various contributors (some who are on this chat), have dug pretty deeply into the onion and we've written all about it there...
Someone recently and impressively read the whole thing in one long stint, from start to finish including all the comments, over about a three week period in preparation for coming on an investor workshop and starting from the position of knowing jack about investing.... quite a task - it's probably at least two Harry Potter books' worth now...
It might be worth considering whether a bit of time spent reading might make the difference to discouraging you from leaping too deeply into the dark....
A shorter, pithier version of this comes at the start of the film, "The Big Short"....
It's a Mark Twain quote:
"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so"
Strictly
nav per share 2019=524, 2018=416, 2017=343
shares in issue 2019=118m, 2018= 71m, 2017= 40m
so NAV per share increasing at a 24% per annum clip. Booked earnings per share slightly slower but I suppose Bods choosing not to book as much profit as they could by not selling core off. So growing and hidden value TEF like.
Total Equity April 2019 =618.57, 2018= 300.51, 2017 =150.69
Net Asset Value per Share April 2019 =515.95p, 2018=246.16p, 2017=109.84p
Maybe LSE is making a error. Why would a company growing it's asset base so quickly have a P/E of only 4.0 ? Why is earnings per share growing more slowly? I'm guessing but as no firm in the asset base pays dividends and profits are only booked on sales the two seemingly contradictory results make sense. Thus like TEF there is hidden value. GROW has simply chosen not to book profit by not selling off some of the growing value of firms in it's core holding.
I've penciled in July 24th to go to the GROW AGM. Hopefully some of you will have bought a share by then and will see you there.
I know I'm out of my comfort zone beyond the UK builders and outside of TEF in particular. I was quite settled in holding 100% TEF for 10 years or more and then diversifying later when I had more time to research.
I still don't feel I have the time to do your obviously beneficial hoping about within the builders. It still takes research time to do that. I'm more forming a position of a mix of builders I am likely to stick to for a few years. Bellway is a big part of that.
I'm not surprised GROW is growing slower on earnings per share and NAV per share than a quick look at the figures indicated. If something is too good to be true it generally is not true. Still GROW has good figures and they are steadily improving in their 3 year short traded lifetime. If they can just keep going on the performance so far they will reprice upwards. A P/E of 4.0 can't be forever. There is obviously enormous value in tech start ups as a sector. EU/UK underinvested compared to USA and China in the start up sector and lots of EU and UK top international Universities giving away free help. If not GROW it would be for me some other vehicle to get that exposure. It is the only sector I can imagine that can grow in earnings per share faster than 20% over a 10 year period.
I don't really understand under what conditions GROW can create new shares and I do need to find out to maintain the large position I have. If I really can't get a handle on it I'll need to trim even though the earnings per share growth is not shabby. It is just not compelling comparing it to the much larger and safer PCT.
Seems to me dilution (via chasing new money raised in large chunks at preferential buy in prices) rather than underlying performance is the biggest risk for investors in GROW. The bods running it, like TEF before them, have a vested interest in GROW growing even if at the expense of dilution that may never fully compensates existing share holders with more profit per share within a reasonable time frame. We got hit by that by TEF. TEF dilution hurt our SP's until the buy out occurred so we never got the promised benefit of the capital raised. GROW bods have more shares personally so maybe interests better aligned.
That said the combination of PCT and GROW is a good one. Between the two it perfectly exposes me to the global tech growth partially digital, AE, robotics, e commerce, etc. PCT the big global firms and GROW the little EU start ups. Top to bottom, Prague to LA.
GROW and PCT are the best I've found so far that meet my criteria to hold fast growing tech stock for 10 years or more. I'm not loyal to those two firms they are simply for the moment the best I can find in the sector to get that east-west top-bottom coverage. For now global high tech will form 50% of my portfolio and UK builders the other 50 (led by Bellway). The split between GROW and PCT is under constant review as I research further.
Steph,
Perhaps a possible concern here for you is to be learning about the company having already bought in rather than to be buying in having already learned about it..?
Rapper, have any of your grandkids pitched up yet to sort you on your computer for the blog....? (PEG is explained there...)
Strictly
My excitement of the growth rate of GROW is a bit premature. Yes the company is growing very fast but they are also issuing more shares per year. Earnings and NAV growth per share is more moderate. Still above 20% but not as spectacular as it looked to my untrained eye.
https://www.investopedia.com/terms/p/pegratio.asp
1 is normal. Below 1 is good. above 1 be cautious.
0.2 almost unheard of. Means that market is pricing recent GROW profit growth as absolutely unsustainable going forward.
Of course GROW's profit growth can't keep up the pace of the last 2 years (nothing that good can last forever) but every indication they can meet their target with room to spare of 20% over a multi year period going forward. I've looked at previous guidance and management was always understated saying they will meet their 20% target when in fact it was 100% by year end. It is possible in the sector they are in.
As a TEF refugee (doubling EPS every 4 to 6 years I said) it has been hard to find something that might meet my same high expectations. Yes our builders will re-price upwards when political certainty returns but after that it will be 10% per annum combined divi and SP increases growth for the foreseeable future. Better than the FTSE but not life changing.
I really think GROW and PCT do better than that.
GROW has a P/E of 4.0 and a PEG of 0.2. They have doubled earnings and asset base per share each year for the last 2 years which is why the silly 0.2 PEG. I think the results have genuinely overrun past the SP. All broker recommendations at least 40% above current SP which helps. Our builder's broker recommended prices are more or less aligned.
Midterms this November 26th. If midterms confirm that this growth rate is continuing there must be a SP correction upwards.
I think GROW is just a forgotten performer in a risky sector that can grow very very fast. It is now my largest holding -even ahead of Bellway. Still young enough where I can put a significant % on capital growth hopes over immediate dividend income. Running out of time before retirement though so in a hurry.