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Vlad,
From what you've said, i.e. that you've achieved low 20's in terms of average percentage annual gains since the start of 2013, that would seem to underline that there is has been a benefit to sticking with house builders rather than venturing elsewhere into other sectors during that time that is greater than the just 2% gap between us when measured from May 2009.
The clue to that might be in your comment "2009 to 2010 was a period of particularly high gains". I had a flat 2010 so, by itself, that would account for the difference I would say.
I don't imagine I would have shifted to investing in more sectors even if you could have shown me a worthwhile difference in favour of it based on past performance, as I'm too long in the tooth, too set in my ways, and way too lazy...!
So, it's a relief, to some extent, that it isn't so - and especially as I feel that we, as a group, have managed to up our game in recent years..... not hugely, perhaps, but maybe sufficient to add another percent or two gain a year above what we would have achieved previously...
You've mentioned the game of investing being invasive to the mind.... I absolutely get that, as I would say I've lived my life like that since the age of 22 when I started a business that grew rapidly and was pretty much all consuming of my thought processes....
However, in my early 30's, my wife and I both learned to meditate and it became something we were both able to make a habit.... it was a game changer for both of us, and I'm talking in a very practical sense rather than as some sort of new age tree huggers.... if you haven't experienced what mindfulness can do for you, I recommend trying it....
You also mentioned in your Telegraph comment words to the effect of that despite doing so well, it is so volatile that it never seems to feel like you are winning steadily...
I think my response to that is that because I'm constantly nagging my lot on our blog to focus on the underlying progress rather than share prices ~ we have a parable called "The Old Git & the Dog" that was created for this purpose (I won't get into explaining that here - you can always sign up for the blog if you're curious about it...?) ~ and spending so much time repeatedly banging on about that to them seems to have largely left me able to fart in the general direction of Mr Market and I don't pay too much attention to him, to be honest.
And I don't suppose you do, either, really...?
Strictly
Strictly - I would also add that post 2016, the house building sector as a whole was quite held back and yet the sector strongest, our holdings basically, powered on year after year with large growth in tangible balance sheet equity, which is why we have the current very strange situation where tech/pharma/new economy stocks are at the kind of levels seen in 1929 and 1999/2000, whilst at the same time, our high quality house builders are selling for genuine bargain prices.
Whilst other sectors are generally not not priced like tech etc, they are not at bargain prices either. In other words, if you broadened your search beyond house builders, I think that you would currently find thin pickings out there, relatively little of interest right now.
Strictly - thought I would reply to your DT post here as the DT article is slipping deeper into the archives now.
Post beginning of 2013 gains. Low 20s% compounding roughly since then, 2009 to 2010 was a period of particularly high gains as was late 2012. 2013 onwards began with a flourish, Barratt was on the up, then Dart, then Kentz, then Inland did okay. From 2016 things have been much quieter, but generally a quiet period for UK facing stocks, even the best ones, which in part explains why we still find these very strong pockets of opportunity within the UK stock market.
My approach has evolved, back in 2009 and still in 2013, I was not really focused on the surplus which heavily overlaps with your approach to tangible equity. Back then I was looking for a low PE, decent earnings growth and a solid balance sheet that was not deteriorating. That approach is a reasonable starting point to find stocks that will out perform but obviously the tangible equity growth and the correlation with earnings was a big omission back then, although requiring both earnings growth and balance sheet strength did tend to weed out the major earnings to tangible equity offenders.
I will always look beyond house builders and I currently hold LGEN, about 30% of my total roughly, but it is telling that 70% of my holdings are BWY an RDW and I do regard house builders as my main sector. I don't have a strong view on whether your approach in terms of just house builders is right or wrong, I don't think that there is a right or wrong here. Having read Guy Thomas's Free Capital, it is clear that within the broader value growth method, individual's do develop an element of personal niche in their individual approach over time.
Specialising in one sector allows you to really get a grip on the companies involved. Also, investing is a slightly socially oddball activity. Whilst our time is our own, which is a tremendous thing, investing tends to invade the mind, being able to switch the investment mind off at the right times is an important factor in the well being of the long term investor. In other words, specifics of the individual approach often come down to the approach that leaves the investor in a comfortable place in the long term - and if the approach is clearly working, who can argue with that.
2227,
I like Redrow and for the same reasons...
However, history can repeat itself and last time Steve Morgan left the business, still as a large share holder, it all went Pete Tong which is why, as I understand it, he returned.
I really didn't like that B share wheeze the company pulled last year, though, and Redrow have lost some brownie points with me in that I don't trust them quite so much any more.
Steve Morgan might have still been there when it happened, but he was nearly out of the door by then and I'm guessing it wasn't his idea and, as an investing group, we STILL don't agree on exactly what happened there in respect of share holder value, and we're paying close attention, unlike some of their shareholders, I imagine...?
Up to that point, they were on a par with Bellway for us but now have a small weighting applied to their BVPS - the other advantage of Bellway being that they have achieved top of sector profitability over the long term (I mean, over decades) while, at the same time, consistently having the safest balance sheet.
A more leveraged balance sheet ~ and I mean taking into account all liabilities not just bank borrowings ~ is all fine & dandy.... until it isn't..!
And that's the key word with Bellway.... consistent.... they are truly in a class of their own in that respect.
Strictly
Strictly,
One reason I like Redrow more than others is that the founder Steve Morgan is still the biggest shareholder, and still holds a very large chunk of the company.
2227,
As a footnote to this, there might be some quibbling within our investing group about relative book value weightings between the four companies I've mentioned that I'm holding, such as whether Redrow should be on a par with Bellway in that respect, whether Crest should be handicapped more heavily because it got London more wrong than the others and also whether Inland should be less well rated due not only to its size but also borrowings...
But there is absolutely no quibble about the very much universally agreed notion among us that both Barratt and Taylor Wimps warrant a lower relative PBV than Bellway (as our benchmark) yet their PBV is actually currently significantly higher.
This makes no allowance for what the market may do, of course ~ as, for example, it's been getting Bovis seriously wrong for literally decades, ask anyone who has bought and held that company's share for thirty years - easy to recognise, they'll be the investors with the long faces ~ our sole concern is to single mindedly pursue perceived best value at any time.
Strictly
Article for the house builder bulls...
https://www.telegraph.co.uk/news/2020/12/30/england-needs-build-300-homes-day-cope-migrant-surge-study-finds/
Thanks Strictly
2227,
Bellway, Redrow, Crest and Inland are all very much on my radar and, in fact, currently constitute 100% of my investments in descending order or percentage holding: Bellway, then Inland, then Redow & Crest level pegging at somewhat smaller amounts.
IMO, Inland are by some margin current best value, but of course they're a relative tiddler so share trading liquidity becomes an issue.
Barratt & Taylor Wimps are fine companies of themselves ~ if you ignore that they put themselves into existential threat in the crunch and in undertaking those rights issues back them wiped out most of existing shareholder value, especially Taylor Wimps ~ but currently way too expensive for me, I mean, 40% price drops in relative terms required for both of them to get into the zone for me.
Persimmon are at a ridiculously high PBV by house builder standards so, to my mind, are potentially an unexploded bomb, value-wise, if the market wakes up one day and forms a different view of them...
And Vicky Pollard and Battersea Dogs home, aka Galliford and Bovis.... best to not even go there...!
So, just the four for me to trade between, then, but that's sufficient...
Strictly
strictlybricks,
I'm interested to know your views on Redrow.
How would you compare Redrow to Barratt, Wimpey? It seems much better on value terms and have been producing profits well above the analysts expectations in the recent past.
Seagull,
If you're interested in looking at all this further, and in more detail, you may have noticed from comments to Bogdan/Vlad both here and in an extended discussion between us in a Telegraph investing article that I have a blog dedicated to this game.
This is the relevant Telegraph article:
https://www.telegraph.co.uk/investing/shares/number-stocks-falling-investors-protect-savings/
If you put up an email address here, albeit a temporary one just to be able to make contact separately to on here, I'd be happy to get in touch directly and from there send you a blog invite - that'd be some serious lockdown reading, all in all, but also, I reckon, plenty of food for thought for you.
Strictly
Strictly.
Many thanks again - appreciate the grading ;-)
I can see that I'm not too far out on my other calculations which is encouraging. I'll analyse your figures tomorrow and see where the small difference came from.
Thanks for the new link - I'll have a look again tomorrow.
I must admit, those returns are impressive and beats what the fund managers get for you (with no commission of course either). But I must admit, I do think I'll try to avoid any ideas of you scratching your arse . Some things are best left alone :-D. I have about 10 years on you and am coming to this late, although I have built a reasonable pot due to sizeable chunks going into both ISA/SIPP for about 25 years. I dread to think of the accumulated fees I've paid for relatively passive management.
Best regards, (and 'll try to not bother you too often ).....
Seagull,
I feel like I'm marking your homework here..... :-)
But, seriously, keep working at it and make it your own - that's the way to go, IMO.
My numbers are:
Bellway 2018:
BVPS 2018 of 2,079p less BVPS 2017 of 1,786p plus divs paid of 48p & 84.5p = 425.5p reality check EPS divided by 2017 BVPS 1,786p = 21.2% ROE
Redrow 2020:
BVPS 2020 of 461.11p less BVPS 2019 of 450p plus div paid of 20.5p = 31.61p EPS divided by BVPS 2019 450p = 7.0% ROE
Redrow 2019:
BVPS 2019 of 450p less BVPS 2018 of 401.4p plus div paid 29p = 77.6p EPS divided by BVPS 2018 of 401.4p = 19.3% ROE.
Another element to this ~ using the scribblers' EPS forecasts, which you can get from yourselfhttps://www.marketscreener.com/quote/stock/BELLWAY-P-L-C-9590129/financials/
for free ~ you can easily make a calculation for an updated estimated BVPS each month by splitting the scribblers' forecast EPS into twelfths and adjusting BVPS accordingly, but don't forget to also knock off the div to be paid on ex div date 'cos the market won't forget.
Providing you do this accurately, you'll be working with a far more up to date, and therefore far more accurate, BVPS than Sid & Doris will be, and so you can also therefore obtain a more accurate PBV from that.
From there, I use a weighting for each house builder's BVPS - such that dogs like Bovis/Vistry (and, previously, Galliford, when they had a house building arm) get marked severely down so they wouldn't even come into the frame unless they were right priced in bargain basement territory - which certainly doesn't happen in the case of Bovis as they've been a builder of relatively p.ss poor performance for more than three decades yet the market has never seemed to notice.
So they never make it into the target zone and, IMO, that's a good thing for me..!
When you see such strong & enduring evidence like that, it really does help one to trust and believe in the notion that so-called market rationality really is for the birds...
Anyway, good luck with this, as it makes a huge difference in the long term.
My target is to beat Bellway by an average of 10% a year.
Until this year, for the past seven years which is the period I've been measuring it accurately for, it'd only been around 6%.....
However, thanks to largely dodging the covid iceberg, my eight year average is now over 12% a year... I anticipate that sliding again, but hope to at least keep it in double figures...
I'm now a relatively old git, in my late 60's, but a thirty year investing career of beating Bellway by an average of 10% a year would mean that, by the end of the thirty years, you'd have made around sixteen times what you would have otherwise done by simply parking your dosh in Bellway then just sitting and scratching your bum (metaphorically speaking, of course - as, otherwise, that would be one very sore arse!)
Thinking about it does make your eyes water, though, doesn't it? (the gain, I mean)
Strictly
Strictly.
(Last post :) ).
I've also done analysis on Redrow as it's another one of your selections.
Based on the 2018/19/20 final results I have calculated EPS/ROI as follows:
2020 - EPS - 32.14 : ROI - 7.14%
2019 - EPS - 80.28 : ROI - 20.03%.
Do my calculations agree with your figures?
Thanks.
Strictly.
I've also applied the same logic for 2018 (based on final accounts for 1/10/18) to calculate the ROI for Oct 2019
My figures are:
Equity - £2557m (2018)
V/Rights - 122.980 (2018)
BVPS - 2079.20 (2018)
Dividends - (145.4 ttm)
This gives me EPS of 437.76 and a ROI of 21.05%.
So does this seem right?
Also, where on this site do you get the dividends from. I've had to use https://uk.investing.com/equities/bellway-dividends to give me that data.
Thanks.
Strictly.
Thank you for taking the time to reply. Very much appreciated.
I'll print your replies, and take the time to read and understand.
Best regards.
"Do you have a different pot of money to trade with and another for buying and holding or just go the whole hog with the same lump of cash?"
........................
John, "Buy & hold" does not really exist in my lexicon, it's all in there to be traded...
Traded isn't really the right word, though, as I regard myself as a "Seeker of perceived value".
If you click around on this LSE site and look at comments under sections such as TW., you'll no doubt find there's much day trader type chat there - speculation about where the price will be this afternoon, tomorrow, next week, next month.
Personally, I don't give a monkey's about all that.... the prices overall can go up, or they can come down, I really don't care in the short term because if you're fully invested it doesn't matter - what very much does matter are the gaps which open and close between the relative perceived value of different builders' shares.
Which is a profoundly different thing, and that's what you really do need to get your head around at the outset - I find I'm often banging my head against the wall with some of my lot about this as it's alright while everything's hunky dory but, come a bit of volatility, all the rationality can evaporate in panic...
The most important rule in investing, IMO, being "Don't be flaky".
Because, if you are, the market will almost certainly find you out and punish you accordingly.
Sometimes, when it comes to it, I can be all in one share.
Within the past seven or eight years, when it's seemed appropriate, I've been 100% Telford, or 100% Bellway or 100% Redrow.
Many of my group are somewhat daunted by the prospect of committing that far, and don't venture there.... and I'm certainly not recommending it to you - we all have to take our own decisions...
Right now, I'm across Bellway, Inland, Redrow and Crest.... that's four different companies currently in my portfolio... by my standards, that's serious diversification...!
But, if you get your head properly round this game of investing purely in house builder shares ~ and I'd be the first to acknowledge it's not for the faint-hearted as it's so volatile ~ my experience, and that of others in my investing group, has been that it is like winning the lottery in slow motion, and I'm not seeing why that should change as things stand (ceteris paribus, and all that...).
Strictly
Thanks Strictly - i will go back to have a look. I have just really noticed the share price moves and have just wondered that will give you plenty of opportunities.
Do you have a different pot of money to trade with and another for buying and holding or just go the whole hog with the same lump of cash?
"......however seems like there are opportunities if were inclined."
................................
John, if you spend a bit of time over Christmas skimming right back through this (BWY) share chat and also TEF share chat, and also click on the names of any posters on those two share chats who's comments seem to have something worth while (so that's a lot of scrolling back in all, though it's not for me to recommend individual posters...!), I'm sure you'll find plenty of food for thought.
But, to answer your question directly, yes, absolutely there are opportunities for trading and if you can add around 5% a year or more to what the builders themselves make ~ and I've been at this game for around two decades now and I can confirm that that is eminently do-able ~ then the power of compounding means that, at that rate, you double your overall gains every fifteen years...
But, to do that, you do need to keep paying attention to the market and you do need to develop your own process of assessing best value between different house builders and you do need to stick to that or you are likely to be in danger of "trading yourself backwards" - if that makes sense? (that's how we refer to it in our circle at any rate).
Once you've sorted your "perceived best value" process, you'll probably find that you're down to well less than half the house builders at most at any time and that, right now, the two you've mentioned are definitely in that very select group, IMO.
But my closing caveat is that I think that you do need to be confident about your best value rating process, otherwise it's probably safer to stay with buy & hold.
Anyway, hope that helps..?
Strictly
Hi,
Just wonder if anyone has any view on trading property stocks? Both Redrow and Bellway have been very volatile over the past few months throwing up opportunities (more than i am used to at any rate). I can see the Beta is higher than 1 for both stocks indicating will move more than the market average. Eg: Redrow has gone from 400 to nearly 600 in the space of 2 months and up and down in between. Personally i don't go in for trading and just buy to hold generally however seems like there are opportunities if were inclined.
Sea,
Forgot the little matter of the worked example you requested... but I could smell dinner cooking.... that distracted me.... honest guv...
And now I've eaten, so back onto this...
Anyway, on here, go to BWY Live RNS, scroll down to 20/10/20 Preliminary Results, then scroll down to the balance sheet.
Take the £2,994m total equity figure and take off the intangibles which, in good old Bellway's case, is zilch.
Then go to the RNS 3/8/20 Total voting rights (i.e. the first after the year end) and take the 123.345m shares in issue and divide that figure into the £2,994m equity which gives you BVPS of 2,427.32p.
To find reality check earnings, take off last year's BVPS of 2,372p and adjust for the 100p div paid during the year and this gives EPS of 155.3p.
Divide that by starting BVPS of 2,372p gives reality check ROE of 6.5% (well down, but this is the year of covid don't forget).
And Robert's your Dad's brother... that's it.
If you start to get serious about this, then you could go further by making yourself an updated BVPS each month or ex div date by taking a percentage of forecast EPS and adjusting accordingly, not forgetting to knock the BVPS back for the div amount on ex div day.
If you're looking to buy and hold, that's probably an unnecessary step. If you're looking to trade between house builder shares ~ as I do ~ then, apart from this, you'll also need to take a view on assessing relative value.
I sometimes move between house builder shares on a perceived value gap of 5% or so though usually look for 10%.... I find I can normally, but not always, come up with an assessed BVPS that ends up within 2% of the actual when announced in due course, and that's realistically close enough.
Depending on your timescale, and amount invested, this may or may not be worthwhile for you to do.
My target is to beat Bellway by 10% a year but, before I dodged the covid iceberg, I was only managing about 6%, and now I've hit my target averaged over the past eight years
Even that modest 6% would double your otherwise resulting capital over 12 years, though, and quadruple it over 24 years.
Vlad may or may not give you his three halfpence worth on this, though I think his primary habitat is lurking in the shallower areas of water in the Telegraph online Investing section, like a hungry pike.... but if he does spot your lure, he may make a grab at it...?
Strictly
Sea,
If you go on to this Telegraph article below, and scroll down to my response to Maria there on 16th December, that will hopefully give you a reasonable outline of what you want to know.
And if you have the available time and are a glutton for punishment, click on my moniker here and scroll back through my comments.... many of them are rather long-winded, but that's me, I'm afraid, so I make no apology for that.
But the short answer is that, no, you don't really need to "delve deeply" as you put it.... this is more like keyhole surgery, and far from rocket science once you know where to make the appropriate small incisions... :-)
You're welcome to come back to me here though.... while I think I've given up on reading the investment section of the Telegraph as largely a waste of time, I'm a sucker for an appropriate & sensible investing question on here.
Strictly
https://www.telegraph.co.uk/investing/shares/questor-housebuilders-divi-coming-home-sweet-home/#comment
"Thank you for your informative posts but to a layman like myself the in depth analysis is quite difficult to grasp so would you say that generally investing in house builder shares and in particular BWY has been and should be a good long term investment choice to make?"
...........................
Hap,
I think I need to separate out two different couplings of your words to deal with this....
"Has been" and "should be".
If you've read back through some on my posts, you may well have grasped that I invest largely by looking carefully in the rear view mirror.
"Has been" is easy to answer.... if you'd started investing in Bellway in 1983, and, metaphorically and investment-wise, had just sat there and scratched your bum ever since, you'd probably have outperformed pretty much anything else in sight given that that would have been 37 years @ 16% a year (just whack that into a spreadsheet to find the compounded result and make your eyes water).
So, the answer to that one is an easy & emphatic "Yes!"
My group of investors have a private investing log, dedicated to house builders, of which I am the eponymous author, and I frequently go to pains to make, and to repeat, a continual core point there - which is that I'm telling them what I'm doing and why, but they then have to make their own investing decisions and take full ownership of them.
Apart from anything, because that old b.stard, Captain Hindsight, is never around when you need him.
So, my answer to your second part is "I couldn't say, but I'm steaming full ahead remaining invested in house builder shares on the basis that the future will most likely more or less emulate the past"
To add to that, though, over the past couple of weeks or so, I've skimmed various investment prospects in the Telegraph online, investing section, main written under the Questor column there... every company reviewed there, to my eyes, was a nightmare, to a lesser or a greater extent, as an investing prospect... it didn't help that the columnists were boldly and confidently advising would-be investors one way or the other, and that's without appearing to have much of a clue what they were talking about...?
I put a few comments there, under the moniker Gunga Din, mostly in conversation with Vlad, his moniker there being Bogdan, but I don't think I'll bother any more with either commenting on, or even bothering to read, the Telegraph articles in that section as, with the notable exception of Vlad's comments there, it's all a bit naff & dispiriting, IMO.
Sorry that's probably not very helpful, but many of my lot have spent years trying to get me to make such predictions, and I have developed quite a thick skin for rebuffing them on the matter.
One final point, which might assist, though.... remember that the four most dangerous words in investing are reckoned to be "It's different this time"
Strictly
Strictly.
(I followed you here after reading your posts on the Telegraph).
I like what you say about Earnings/Equity and that premise makes sense to me (if I'm right in the understanding that the important thing here is the increase in shareholder value).
So, do I need to delve deeply into the financial statements of a company to apply your method. Or, is there a fairly straight forward way to determine this information and make considered judgements on which companies to invest in?
If it's not too much work, would you be willing to provide a worked example for the last set of accounts published by Bellway so I can try to understand you logic. I've moved my SIPP/ISA from being managed to self-managed, and I want to make sure I don't make too many mistakes :).
Thanks.
Thankyou for your informative posts but to a layman like myself the in depth analysis is quite difficult to grasp so would you say that generally investing in house builder shares and in particular BWY has been and should be a good long term investment choice to make?