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To generate attractive, risk-adjusted returns, principally through income distributions, mainly invests in US and European CLOs or other vehicles.
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Gavster -NBC; hope you are well.
I don't think the declination rate is the source of the SP drop, and isn't DEC specifics that are the crux here but that such o&g stocks are out of favour....without really looking, HBR, i3e, WDS are at or near year lows., and whilst some might argue they all have their company specific concerns, they too are all highly profitable. I do think your previous suggestion, at a previous sharp drop, that it might be related to the EPA (and concomitant API submission) desire. I read both in their entirety, and beyond the obvious (green tax/levy charge), there was a requirement from the EPA that wells were physically inspected at very frequent and considerably.more than current, and crucially, at fixed periods, and that such included ALL wells active or dormant (until plugged). The API's submission, beyond stating this was unworkable/unviable, stated that remote fly by drone type inspections (of which DEC is pre eminent in using) should be accepted
The buyback regularity here is also now "Refreshingly boring".
@Agricore
Another great write up regarding DEC. I'm interested as to why you didn't mention the annual 10% production declination rate being the source of the share price decline. Recently I shared some rough analysis on DEC I did regarding that production and so revenue decline at today's gas prices and their hedges for the next 10 years, with respect to whether they can keep up their debt paying commitments. This above all else, relaxed the anxiety I had concerning the constant new lows in SP going into its US listing.
Wot no buyback today? -; My st he running out of cash.....not.
A slight u pliftin the. VTAS dividend. for January, which must indicate that it is in good. shape. Thankyou all for. advising there is no withholding tax
Agricore; thanks for providing the definitive answer.
I'm an unstinting fan of FAIR, but I've long liked VTA in it's own right, and to ensure diversity. Not sure Demay's departure will be material and still like the access to AXA, and the resource/origination that offers (mindful of the flip that such giants can stifle performance).
I still feel their is a special divvy coming here, and any uplift SP wise to reflect that, or returns of capital from the winding down of BGLF may allow me to diversify, without adding to my overweight position, within this sphere.
I signed up for a trial of Stockopedia. Interesting to see FAIR listed as a 94/100 super stock. Volta is 97/100 too. I was interested in what made it 94/100 but it seems to be partly FAIR's price to book being 0.12. Not sure how accurate that is.
Hi Kentio,
I have held VTA for 2 years and I would say there's no witholding tax that I've discerned on VTA. VTAS, which is quoted on Amsterdam might be different. The only "loss" from my point of view is the divdend is paid in Euros so in my case I have had to convert the dividend at II's (interactive investor) rate into GBP.
In the interest of keeping this in context to FAIR, I've not found VTA to outperform FAIR. I was taken with the quiet/effective capability of Serge Demay of VTA but who has since recently retired. I still hold VTA but pending other news/updates and particularly given the dollar weakening I'm pro FAIR right now and may well liquidate my VTA holding and buy FAIR.
Hi Kentio; I hope you are well.
I don't hold VTA so don't know definitively but I'd of thought if it's the UK listing you hold, no.
I am a fan of VTA it's just I have a chunk in this sphere already; I would buy VTA today, but I have a finite pot, and I would have to reduce my holdings in BGLF,/TORO/FAIR to do so, and whilst they have been good to me, and I could (should?) diversify but I still think they are delivering, and will continue to do so, to my expectations.
Agricore who holds here, also holds VTA and I'm sure will answer your question more definitively.
Damofari, forgive. contacting yo on the. FAIR page but would like to know if. you know if there is a withholding tax on the. Volta Finance. dividends as it s also quoted in the. Amsterdam. exchange.
2 of 2:
Where I do see China being influential to world markets, is their governmental focus on securing long term supply agreements for oil/lithium/rare earths etc, and using that control to leverage the wider economy.
This month's nav show a slight drop, but in the context of the Divi outflow in the period actually an increase.
Agricore; i think the few of us here all do the number crunching, spend some time, sometimes a long time, and then go. And we go for those, having done such, that others inexplicably don't want to know. Are willing to ride the tide of doom/irrationality that we sometimes seen thrown up. Patiently. So like you, I have had some unloved stocks gain favour/appreciation, albeit I have a couple of convictions that are looking pear shaped at the moment, that I'm revisiting my stance on. Times are hard, and day to day UK societally much is struggling/ sustaining , but not broke or bankrupt, and as such all year I think the despondency in stocks (and society) has both been irrational and overdone. I think the UK will plateau/consilidate for 6 months, and then I think it will really kick on, irrespective of colour of Govt. This year, I have managed to add stocks that I have liked for a number of years, but didn't meet my focus for 10% sustained yield income, but through investors irrationality/dumping have now become such.
My only problem in the last three months, having a fixed pot, is which is the greatest amongst a strong slate to add, and my long term conviction/ hold style, to recycle/sell/top slice. An example is both BGEO and CGEO that I hold. They have both EXCEEDDED my desires, yet I feel both still have considerablly more to come, being, along with SEPL the best choices I've made since personally investing.
China - wow you ask a big question there, and I'm going to have a proper think about that, but my instinctive thought is that China is struggling, and they are struggling because they adopted western capatilist growth/profit ideologies to play, but crucially without the controls generally concomitant with such. Hence Evergreen. A capitalist vision of profit is good whilst demonstrating communist views of being honest for all. I've long felt that China's importance to the world economy is overstated, and not withstanding that just on a volume of populace they could produce 5 times as much as anyone else and corner/flood markets, this has ignored that their are over populist countries (India), that can also produce volumeously and cheaply. Vietnam, Brazil are growing and contributing for example, and they are all competing more with China than western countries, and nibbling away at China's powerhouse.
I see today Fair are in the top 10 for 1 Month and 3 month performance for ITs. Number 9th I think
Dgi9 and SOHO of triple point in there too. And amedeo
Thank you Gavster, much appreciated.
@Gavster @Damofarl
I ran my eye over TORO the other day and will certainly return for another look. Quite a number of my holdings have turned corners over the past fortnight so the difficult decision to average down into oversold positions (at deep value to their NAV) is bearing fruit. And even where it isn't yet, at DEC for example, I remain convinced that it is a matter of time. As someone posted at OakBloke what happens when Henry Hub hits $8 a MMBTU.
Today Volta shared their annual report and the news that Serge Demay has retired as of 31/10/23 was a negative (in that I have no idea to the quality of his replacement called The Duy), but the performance of VTA within the CLO space gives encouragement more widely to FAIR and TORO. Worth a read.
Here's a shortcut:
https://www.voltafinance.com/media/36601/20230731-vfl-v6-final-clean-.pdf
I would be interested in your views to China's extended and exacerbated weakness? And what, if any, knock on effect you believe this will have to CLOs? CLOs, at least FAIR's, are US and Europe only, but is there a contagion. I have watched videos from a Peter Zeihan about China's imminent demise over the past year - and it appears he is spot on. The 1 child policy coming home to roost and China is like Japan 1989 heading towards severe deflation. Perhaps for 20 years like Japan. The continued evidence appears to support this thesis. What do you think? Will China's exported deflation lead to a goldilocks soft landing and a bumper 2024? It's not a narrative I've read this anywhere (yet) but it appears we are emerging from a doom narrative, at least in the UK, where the soft landing appears positively feathered and memory foamed. Or am I being too optimistic? Of course assuming the Middle East settles - which it might not.
A good weekend to all.
Hi Agricore.
I was going to ask about that trade, I saw a moment where you could have been up by over 5% and bought back to increase your holding here. I was about to say well done... There's still a lot of time I think with that trade.
TORO's discount to NAV is still high and there's just been the hint of movement upwards there.
As far as FAIR, definitely not selling yet. I have my eyes on the US$/GBP rate to break support and go lower than 1.20 before I would consider taking profit here. FAIR is now my second largest holding, then TORO and DEC are about the same. The chart of DEC tracks the treasury but on a small but increasing distance away from it, which is a good sign but an SP rise there IMO will be a long road.
I see your Oakbloke blog finally got noticed ! A good read. I finally got pen and pad and worked through your example a weak ago. A turning point for DEC could well be upcoming reports where there should be a change to profit with the hedges due to the accounting rules.
FAIR and TORO (and SMIF) are my "risky" plays but right now some of the most refreshingly boring but high yielding investments.
Agricore; indeed, and that NAV rise is even more impressive considering it encompasses the dividend payment in September.
Hi Damofarl, FAIR is still going strong. In fact I would point you towards the September update of 2 days past. 1.4% NAV increase month on month. My partial exit and averaging down on DEC hasn't yet proven a wise move, to do the opposite that you did has been a better move. For example in their last update the increase in resilience at FAIR is striking "US loan default rate decreased from 1.55% to 1.27%". The discount to NAV, too, has narrowed from around 15% to 10%. All bodes well for the months ahead.
https://www.fairoaksincome.com/~/media/Files/F/Fair-Oaks-IF/Fair%20Oaks%20Income%20Fund%20-%20Sep-23.pdf
FAIR have now bought back just under 5% of their 15% authority, so looks like a continuance vote at AGM to extend for another 2 years to completion!
That said the buy back daily volume has risen considerablly more recently Yesterday's was 87,904 @ 54, whereas the first was 18,082 @ 47.5
The £234,000 spent in the last week suggests they aren't short of free cash - but possibly short of new investments. Either way, you can't dispute these buybacks have been a good bit of business
Agricore; love the blog.
Just as you was topping up DEC, I was exiting. I think you do DEC holder's a great service in your blog, specifically with the breaking down of hedging 'liabilities' by your explaining that accounting wise 5 years of future hedges have to be stated in the one year, which distorts the picture when only 1 not 5 years income is similarly stated. I think this will help many to understand better that aspect of their business. Despite my long term often contrarian view, and high risk appetite, I felt there was safer plays to play.
Followed the blog, hope you will continue contributing here.
Good luck to all Fairies.
Hi all, I was faced with a dilemma yesterday. I felt compelled to average down with DEC's drop in price, and poor FAIR took the brunt of my reallocation. I still hold here but at an 80% reduced amount. I know there are some DEC holders here too, Damofarl, I think you are, so I thought I would share my new blog with you:
https://theoakbloke.substack.com/p/dec-the-halls
I mention FAIR in this other post, although, I'm contemplating doing a full-on analysis on FAIR in the future.
https://theoakbloke.substack.com/p/do-you-love-dividends
Hi damofarl.
"boringly predictable"
You said it.. And right now this is awesome.
15% Yield and a daily relentless buyback scheme in the back ground.
Our worth in GBP increases recently too as the GBP/USD rate decreases on a trend.
Cheers and GL.
Observations form today's interim report:
$33m in cash receipts (against $45m last year) which alone is 15% of mkt cap.
Defaults at 0.30% and CCC rated debt exposure at 5.03%, both below industry averages of 1.8% and 7.11% respectively.
Whilst confirming that the current elevated rate environment was very beneficial margin wise against previously secured lower loan origination costs, FAIR 'does not foresee a near term catalyst for the CLO primary market to pick up', stating it is hard to generate attractive returns for new issues
Was hoping it might be a little more ebullient, but boringly predictable is good too!
Good luck all Fairies.
BGLF have just released their half year report. It's a lengthy read, but their is some interesting, by which I mean positive, read across to here and others in this sphere. Amongst other things that caught my eye were uninterrupted cash inflows, and higher defaults albeit still lower than historical levels, and managed levels. I think BGLF are the daddy in this arena, but not withstanding such, the detail in their report reads positively for FAIR etc.
I'm no fan of buybacks, and frankly can't think of one that has benefited small shareholders.
Until now maybe! Since the buyback has commenced, it is quite clear that the SP has firmed, the NAV narrowed, and the spread massively reduced. Maybe it's a coincidence, and just (excellent) performance of the Company? I honestly don't know (when BGLF did buybacks it had zero material impact).
Maybe the fixed dividend gives certainty/comfort?
Really looking forward to the next FAIR update, their commentary, to try and understand the improvement. Naturally delighted at the SP rise/NAV discount and spread reducing.
A big confidence driver here, for me, is the buyback condition that they can only continue whilst income received is free/above obligated/committed obligations. Whilst they are slow and small, they are constant, all at NAV discount and most at some discount to current SP.
A FAIR wind to all you Fairies.
Kentio; just revisiting your previous post where you mention your big losses on BGLF/P.
I'm not sure what percentage your loss represents, but I think taking into account wind down, and balancing overhead costs/maximising value over time, that probably 25% of that NAV is real. Hence my previous quandary. I'm fortunate that whilst I still have a headline SP loss on BGLF, in reality, with dividends, it's been a free high yielding ride for a while. I have no concrete data to evidence that NAV discount is true, but I think the vintage of their origination means that the primary risk has subsided, and hence the factored in contigency and continues to do so, whilst income continues. I'm pretty much extrapolating that thesis from what you can see here with FAIRs realisation shares, which are benefiting from the wind down/eradication of obligation/risk. With regards TORO I've posted there so maybe have a look at some of my posts there.
In a nutshell, depending on your level of big losses (dividends received aside), I believe if they are in/below the 25% range they will be recovered.
Kentio; correct. Liquidity is a problem for both, hence I always factor in a 5% spread (upfront hit). I do find if you try to best avoid the spread, that a limit order will get hit but you need to let it sit a couple of weeks before it gets filled.