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Monty, you might find the numbers I put in this Telegraph article in a comment today useful...?
I don't want to write them all out again here...
https://www.telegraph.co.uk/investing/shares/questor-forget-gamestop-hype-stick-knitting-likes-crest-nicholson/
The thing about Bogle is to understand about being hammered by fees.... that was his core selling point, his raison d'etre.... (it's reckoned his legacy is saving investors $100 billion a year.... Wall Street must have loved him...!).
Most people are stunned by the reality that if they make 7% a year, then, by paying 2% a year in fees, after 50 years you've effectively lost two thirds of what you would have otherwise had if you'd not paid any fees...
Doesn't seem possible, does it..?
But that's nothing...
If you run that forward for 300 years, instead of just a measly 50 years, on a spreadsheet (as I did, out of curiosity and being a bit of an anorak for stuff like this), you'd have lost 99.8% of your money, so just by paying a fund manager 2% of the 7% gain, you'd have got to keep just £2 out of every £1,000.
Sounds incredible, doesn't it...?
Something for Methuselah to watch out for, I suppose...?
But there's nothing new under the sun... I referenced Einstein in a previous comment.... this is what he was talking about....
But now we all have Excel, anyone with a couple of brain cells and a computer can work it out for themselves, you don't need Einstein's IQ to figure it out, do you...? :-)
Strictly
That’s a nice article ??
I personally think that H2B will be extended certainly until 2025 for the next election. Interest rates will be low and consumers have a 100bn savings buffer ready to spend so builders will have a tailwind for certainly the next couple of years probably allowing SP to get up to £40-50 a pop.
Hi strictlybricks/Vlad
Came across the following article this morning – it is a bit dated (Dec 2019) but wondered if you had seen it and what your thoughts on it are?
https://www.ukvalueinvestor.com/2019/12/invest-in-uk-housebuilders.html/
My take:
- Crunches the numbers and reports BWY financial results as ‘astonishingly good’
- Seems to argue that the housing cycle is largely responsible for the amazing results (9% due to BWY, 14% from cycle)
- Discusses impact of HTB on housebuilders and potential impact should (when?) this ends
- Article concludes with a suggested purchase price for BWY at 2200p or less – interestingly the last comment on the article (dated 31-Oct 2020) highlights that this happened only to then re-evaluate to 1500p (admittedly a back-of-the-fag-packet guess) !!
As I say, article is just over a year old but what are your views on this, in particular the points on housing cycle and government intervention (HTB).
Cheers
MontyPy
Strictlybricks
Thanks for the link to the Telegraph article, I had read this article but didn’t actually follow the youtube link to the Python clip . . .
I am currently reading ‘The Little Book of Common Sense Investing’ by Bogle (about 75% read). I get all the stuff on low-cost, compounding results etc and these are illustrated well with graphs/tables throughout the book. The bit I am struggling with is the concept of only needing an ‘index tracker’. I accept the analysis and the simplicity is attractive . . . so why don’t I believe?? Think at the moment it is a mix of ‘It can’t really be that simple, can it?’ and ‘logical analysis must be able to improve (by focusing on quality)’ ? May be over time and becoming even more of a lazy-git will convince me?!
I think this is where I am at now . . . but I have this idea that I can use a few IT/Funds alongside a few shares and do better? Was thinking in the range of 5-10 different holdings but obviously selecting the ‘quality’ is the key!! Is this a common investing mistake though . . .
Anyhow, next on the book shelf is ‘Beyond the Zulu Principle’ by Jim Slater and then I have ‘Investing’ by Glen Arnold (FT guide) . . . . which should keep me busy for a while.
Cheers
MontyPy
Copying this from the Crest Nicholson articles in the Telegraph...
Something for the masses...have been reviewing a few investing techniques and returns
John Baron - Investor Chronical IT specialist. Found this quite interesting when started investing but with not too much knowledge. Focuses in building a diversified, global IT portfolio.
The main summer portfolio has returned 387% since '09 to Jan '21
Richard Beddard - On Interactive Investor and his share sleuth portfolio. Focusing generally on small UK companies with a very analytical focus has turned 30K into 180K or returned 500% since '09 to Jan '21.
Bogdan - Your approach as above returned 1400% in the same time frame as 2 above.
Just shows that backing the right horses in a tight portfolio is a very good call.
My takings from it are that the IT's are good if have limited time / resources to put into investing. The John Baron portfolio is probably still twice a tracker so worth while. The Richard Beddard portfolio is interesting as i imagine once the covid recovery gets going this portfolio of UK smaller will gallop. If you look at the top rated shares in the spreadsheet the surplus is around 2,3,4% whereas the Bogdan portfolio is focusing on this 10% number and over 11/12 years it would really appear to work.
Monty,
This was the Telegraph article:
https://www.telegraph.co.uk/investing/shares/questor-watchdogs-taking-heat-vodafone-getting-grip-costs-buy/
And this was the Python clip:
https://www.youtube.com/watch?v=ZmInkxbvlCs
I was trying to bring a bit of levity to the topic.... after all, if someone's an investor in Vodafone, FFS, they need something to cheer them up...!
To be frank, IMO, all those Telegraph investing articles, and nearly all the comments, are a waste of time and effort if what you're after is useful input.
I reckon you're better off reading pretty much anything on Warren Buffett.... that's what I did in my early stages in this, the man has so much to offer.
But in the end, unless you have someone to lean on in this whom you entirely trust both in terms of integrity and ability (and it has to be both), I think you're better off making your learning & understanding truly your own so you can make your own investing decisions based on sound understanding and reasoning, take full responsibility for them and then trust your judgment and stand firm regardless of what that w.nker, Mr Market, is up to...
You've probably picked up that I have an investing blog to help my circle.... it goes by the same name as my moniker here, funnily enough...
One of the most important things I've tried to convey there is that the highest paid quality in the world is confidence... and I have three rules for investing, the third, and by far the most important of which, is: Don't be flaky.
I bang on about it all the time on the blog, to the point where, I hope, everyone has it running through them like a stick of rock...
Because, when the next big bad boy comes at them down the pike, as it surely will at some point, they're gonna need to be able to trust themselves.... or Mr Market will almost inevitably take them out at the knees... 'cos that's what he does...
And covid, thus far, hasn't been much of an investing bad boy, really... typically, half a year's profits evaporated for house builders... and, so far, that's it, though I'm not saying there isn't more to follow..?
Comparing that to the credit crunch, as the Black Knight would have said "Twas but a scratch!"
And, re 10% extra a year, and all that, I strongly recommend you invest plenty of time playing with percentages and time scales on a spreadsheet... it's likely to be "an epiphany in slow motion"
That's how it's been for my lot, many of whom don't think too much about numbers.
Perhaps ponder on the deep wisdom of Einstein.... after all, he was no slouch, was he..?
He said: "Compounding interest is the eighth wonder of the world... those who understand it earn it, and those who don't, pay it"
Sounds rather glib & trite, doesn't it...?
Trust me, really, it ain't..!
And, lastly, find yourself a Youtube video clip of Jack Bogle explaining the tyranny of long term compounding costs.... that's been a real eye opener for a few of my crew, I can tell you..!
Strictly
Strictlybricks
Many thanks for the replies – I’m a little younger than you (mid-50s) and relatively new to investing. Currently trying to educate myself a bit by reading articles online and a few books. Reason for this is two-fold: first is in relation to managing SIPPs/ISAs through retirement (although I am one of the few with a final salary pension from a private company!!) and secondly, I have started a JISA for my son and want to try and get him interested (as I think he really is going to need all the help he can get).
I read the articles in the Telegraph and whilst I don’t find them too helpful, what I find more useful are the comments (at least some of them!). What I appreciate about the comments from you and Vlad is that you state what you are invested in, describe why you have made those decisions and how it has benefited you - these posts stand out from the others. I didn’t notice the clip you posted – which article was that against?
As to making that additional 10% the immediate answer would be ‘Yes please’ . . . but thinking about it a little bit more, I guess it would depend on the time/effort required to achieve that. Although I can create spreadsheets and enjoy a bit of number-crunching I really don’t want to be sat at a desk all day, overly worrying about this. A few hours now and then, no problem . . . guess I’m a bit of a lazy git too! Scratching me bum for just 14% . . . punched into a spreadsheet isn’t too shabby . . . sure I can sell that to my son !! Explaining how to get that +10%, whilst obviously worth it, might require some improvement in my home-schooling abilities . . . . but for him, this knowledge or understanding could be immense.
Thanks again for taking the time to reply
Cheers
MontyPy
PS
Monty, obviously I have no idea how old you are (and, given the moniker you've used, did you watch that clip I posted on the Telegraph..?) and therefore what time scale you're looking at...?
But a number to conjure with is this:
If you could make an extra 10% a year ~ through trading between shares based entirely on perceived best value and NOT by trying to call the market ~ on top of whatever you anticipated making through buy & hold, and if your time scale was 30 years, you'd end up about 17 times better off than you otherwise would have done....
And if you're drawing down a steady amount from that regardless, then that only increases the multiplier further still.
So, buy & hold in the right shares is all well & good, but it's NOTHING LIKE what you can achieve through pursuing value if you can get it right...
So I guess it depends how important it is to you and how much you enjoy your day job...?
Me, I'm in my late 60's, and I've built & owned businesses, one of which I sold, but these days, when it comes down to it, I'm a lazy git when it comes to work - so this suits me fine and I can help all my people along with it at the same time, and all without having to leave the house in this time of plague...!
Strictly
Monty,
In answer to your points:
1) I always go to the balance sheets and work it out for myself... that way, you get the "reality check" numbers, not the "mythical" ones.... for example, I'm only interested in tangible assets and ignore intangibles, and I don't pay any attention to declared earnings per share beyond comparing them to the reality check figures than come from the balance sheet.
2) I think you only have to read a bunch of typical readers' comments in the Telegraph investing section to get an idea about that.... many investors seemingly have all sorts of weird & wonderful notions running through their heads about all this... take Vlad/Bogdan, an oasis of sanity in a desert of nonsense, but he still gets stick there... someone recently called him an "eastern European sociopath" in the Telegraph online, though the comment was quickly taken down again, and it seems to me that all he's trying to do is to help people to see sense.
You may have seen a discussion I had with someone on that Vodafone article the other day....? That's what you're up against... at the end of the day, TBH, I only went into the Telegraph investing comments section to pursue a discussion with Vlad, as he's very clearly on the same song sheet as me and that has funnily enough coincided with a similar long term performance.
3) this may be a short question, but it would require more than a short answer to cover it well... in essence, yes, I trade, but only insofar as I'm a seeker of perceived value, or a value tart to put it differently, in that I'm happy to hold for how ever long is appropriate but show me a perceived value gap and I'm there...!
It's more convoluted than just PBV, or anything, as not all house builders are equal... yes, I put a fair bit of time into this, and it's been my entire living now for nearly two decades, but then most of my family & friends have followed me into this over time having seen how well it's gone, and the majority of the time & effort I put into investing now is spent helping them...
We have nicknames for some of the companies.... Bellway is Ghost Dog (you'd no doubt understand that that's a compliment if you've seen the film), Battersea Dogs Home for Bovis (clearly that ain't in praise of it) and Vicky Pollard for Galliford (neither is that!).
That should give you some hints...
Nothing wrong with buy & hold if you choose the right companies.... buying Bellway in 1983, you could have averaged about 14% a year gain ever since just by sitting there and scratching yer bum...!
Strictly
Hi Strictly,
Like a few others, I have read your comments (and those of Vlad/Bogdan) on the Telegraph and followed you here. As a relative new-starter to investing, I really do appreciate the detail in the posts and the ‘mathematics’ supporting your view to investing.
I do have a few questions though:
1. Many (most, all?) financial sites contain financial data including BVPS, EPS. P/E, ROCE . . etc
Can you rely on these numbers (eg. the ‘BWY fundamentals’ page on LSE) or is there something additional in the way that you have calculated them? Do you always go back to the company balance sheet and DYOR?
2. You certainly have me interested in your process for identifying ‘value’ but, why is it that others aren’t so convinced? If BWY have been performing like this over such a period of time, and the numbers support this, why haven’t others noticed? Investment trusts/funds must have teams of analysts/researchers so why aren’t/haven’t they seen the light??
3. In your posts you say that you are trying to beat BWY performance – to achieve this I imagine that you have to ‘trade’? What sort of rules do you use to help this decision process? Do you have a SP that you would buy/sell at or do you solely rely on calculated/estimated BVPS/ROI?
(To be honest, I am not sure that I would spend the amount of time you obviously have for this so would be happy with continuing BWY performance – simple buy and hold!)
Just to add that I now have a holding in BWY and a slightly smaller one in FORT (and LGEN although that isn’t brick stuff ?? ) – thanks to some profit taking on SMT and BG American (cough, splutter . . . sorry)
Cheers
MontyPy
Vlad,
I should first declare that I know Strictly and have met with him in person a few times, so I know that he is not a fictional poster.
I have followed with interest the debate about shareholder surplus. I focus more on total shareholder return. Stripping out intangibles has to be right, but your formula does not actually a concrete return, as the increase in NTAV may not be reflected in an increased share price. So, I can see that it is a sanity check, but I struggle to see the utility beyond that. I may be missing something.
Finally, you should consider joining the blog. I think that you would find it useful.
Vlad,
I haven't seen that, do you have a link...?
BTW, a couple of people from this share chat have recently joined the blog... you interested...?
And, as part of that, I've been playing around with your notion of shareholder value, except I work off the progress of an individual share rather than the company as a whole....
After all, I only own shares, not whole companies...
I want to put it together a few different ways on my spreadsheet, to see if it has anything to offer to further enhance my book value weighting process, I'm far more interested in that TBH than sheep & goats...
Don't know if you've done any sailing...?
I like metaphors, and, before electronic navigation and all that fine stuff, you necessarily used a hand bearing compass while sailing along the coast to get a fix to confirm where you were....
Picking out three recognisable landmarks, you take a bearing off each one and plot them on the chart... they never line up exactly and you end up with a triangle called a "****ed hat".... you should be somewhere within that and the smaller the triangle, the more accurate a fix you've taken.
And IMO, this is very applicable to our situation ~ I'm considering that your approach may be a valid different landmark I can take a fix off of and hopefully it will reduce the size of the ****ed hat on the chart (in this case, of course, the chart being the spreadsheet).
I think there's some potential for both of us in this, as we aren't necessarily using the same landmarks, and there are several others in our investing "crew" who might contribute....
If you're reading this chaps, you might want to put a comment up here to either confirm or maybe to warn Vlad off getting caught up in this...!
Strictly
Strictly - interesting to see the SMT manager, Anderson - they of the Tesla holding, going at Buffett or rather his approach with some venom.
IC interview at Christmas, talked of the anti-Buffett approach to investing. Now in Morningstar interview they say 'Buffet to blame for value tragedy'.
Interesting as this happened in 1999, then the bubble investors were queuing up to ridicule the Graham and Dodd approach to investing. Signn of the times I think.
Vlad
Cash,
I've just sent you an email so if it doesn't arrive please let me know - otherwise we can continue "off air"....
Strictly
yahoo.com
not sure why the end of my email is blanked out by the system, whereas the user below is not!!
Hi Strictly,
Interesting you have different Tangible per share values to me - I got the numbers I used from AJ Bell Youinvest, and the TANGIBLE BOOK VALUE PER SHARE numbers they had were:
2018 - 1889.73
2019 - 2187.1
2020 - 2463.72
Sometimes AJ Bell data leaves a lot to be desired - they do not have the Inland 2019 balance sheet/income statement from circa 12 months ago for example whereas HL do, which is a bad quality indicator. Do you calculate these numbers yourself or get them from elsewhere?
My email for the blog is "mercenary1980**********", look forward to reading it!
Thanks!
Cash,
PS
I overlooked to comment on your point about calculating earnings...
Couple of elements here...
Firstly, it is Vlad who uses total company equity, etc. not me, and so I'm probably closer to what you do...?
But, as my second point, I consider that, on the whole, profit and loss accounts can be works of great fiction and so, for the calculation of any important numbers, I ignore both these and declared earnings per share.
Whereas, balance sheets are truth boxes... okay, they may wobble around a bit on the values, but those wobbles don't disappear for future years for the purpose of working out how a company has actually done - unlike declared EPS which can move on with no forensic evidence left in following years if you're mug enough to take any notice of them...
Whereas, if a balance sheet has been overstated by, say, 20% of value, you can't just lose that.... you have the choice of carrying on the same degree of deception every year, losing it noticeably in a single year attached perhaps to some sorry tale of woe, or to lose it gradually and degrade reality check earnings over a number of years...
Bit like "Silent Witness", isn't it..?
If I ignore any concerns about leverage, all I need is the tangible BVPS each year end together with the div per share actually paid out in the year and then I can work everything I need out from there if I have a good number of years' track record - as is the case with Bellway, right back to 1983.
IMO, a typical company annual report of over 100 pages is a mountain of dross to be sifted to find the nugget of truth...!
Of course, far from everyone will agree with this....
Strictly
Cash,
Re Bellway, I've got 2020 start of year BVPS of 2,372p and end of year BVPS 2,427.3p, so a change of 55.3p plus div paid in year of 100p = total reality check EPS of 153.3p which is pretty close to their declared EPS of 156.6p which is usual for Bellway and is one of many reasons I like them as an investment prospect.
So perhaps check your numbers against those...?
Re the blog, as I'd mentioned to Ilikehousebuilders recently ~ though he/she hasn't come back to me thus far ~ you need to put up an email address here, probably best being just a temporary one, so as to make contact off-air (so to speak) and take it from there....
BTW, don't know if you've ventured here from the Telegraph online investing section chat...?
If not, and if you have a subscription for that so you can access the readers' comments there, if you take a butcher's at the links below and scroll down you can find a couple of extended conversations about Bellway, and all that, there between Vlad and me albeit we both have different monikers there - but they will no doubt be apparent...
https://www.telegraph.co.uk/investing/shares/number-stocks-falling-investors-protect-savings/
https://www.telegraph.co.uk/investing/shares/top-five-value-stocks-buy-2021/
Strictly
Hi Strictly Bricks/Vlad,
Have read your recent comments in this BWY section with a great deal of interest.
I have recently operated a very similiar methodology as what each of you have described as to how you value companies, but with a small difference as I understand it. I look at the change in "Net Tangible Asset Val Per share" each year, and add this to the dividend paid out each year, for a total tangible return to the shareholder each year, and then compare different companies over a 4-5 year period on this basis.
Benefits - I like this as I can compare my returns to the stated EPS for each company over the period, and I can thus find large irregularities. But it does leave me exposed to errors in stated EPS/Tangible asset value per year, or where the number of issued shares is moving round. I understand you more calculate on the company profit/dividend figures and market cap rather than the per share figures?
Like you, on my calculations BWY and RDW appear the standout candidates in this sector.
But my calculation has thrown up one strange outcome I have not looked further into yet - In the 2020 year BWY reported an EPS figure of 156.1, a large reduction due to the pandemic (fair enough)!
But in addition to a dividend paid out of 100, Tangible Asset value per share increased by a whopping 276p per share, meaning circa 220p of value was created from somewhere, yet taxation did not increase.
Any idea where this figure came from, have you looked at this previously?
If part of the landbank was re-valued (I am assuming the most likely reason), would not some tax have been payable?
Intersted in your thoughts, and I might also ask for a blog invire one day!
Cheers!
Hi strictly,
Can you send me the address of your blog?
....................................
Ilikehb,
It's a private blog, that I set up about five years ago mainly for my circle of family and friends who have followed me into this investing-in-house-builder-shares malarkey over the years (though there are a few contributors who have joined from the LSE share chats, mainly the TEF share chat going back to before that company was taken over if you check that out), and you'll need an invite sent directly from the blog to you in order to be able to access, so you'll need to put up an email address here first - even if it's just a temporary one just to make contact to start with...
Strictly
Hi strictly,
Can you send me the address of your blog?
Keith,
I've just sent you an blog invite so, if it doesn't arrive along with a separate email directly from me, please let me know...
Strictly
Strictly.
That wold be great re the blog. I'll give you an old email address which I don't really use (I can't see how to delete/edit posts from here to remove). If you email me on that, I'll email back with my correct email address.
Use keith.hinde@btinternet.com .
Many thanks.
Seagull.
"You are definitely right about focusing on the underlying process and letting the market prices take care of themselves, which, over time, they do of course."
..............................
Vlad, going by the overwhelming percentage of comments across the different house builder share chats here on LSE, that's not how most investors see it....
Of course, by speculating upon, and worrying about, short term future price movements, they've necessarily put themselves in the ring to spar with Mr Market.
And, as we well know, he's a mad bar steward... :-)
So, my view is, keep clear..!
Strictly
Strictly
You are definitely right about focusing on the underlying process and letting the market prices take care of themselves, which, over time, they do of course.
Vlad