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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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Hi Damofari. Many thanks your lucid (as always) opinions. In fact I am so impressed I may now change my mind re. TORO and VTA.
My earlier lack of enthusiasm .for them was because they appeared to be "minnows" compared with FAIR and BGLF and appeared to have little liquidity.
The VTA. div is only 8% of NAV but because the. share price is at a 25% approx. discount. to the NAV this brings the actual yield to. about 10%. Am I correct?
Kentio; and on VTA also meant to say, the large AXA holding, and the access to AXAs tremendous resource, is a big plus for me - akin to BGLFs access to Blackstone.....
Kentio; hope you are well. Thanks your thoughts on BGLF. I don't think the level of divvy will change there for a year, just as I don't see any redemptions in that time, however there could be a short term boost to divvy as there is no new investment/origination, beyond that already factored/considered, hence there should be some income received throw off.
I know your up to speed in this area but agricores' VTA vid post is excellent - particularly interesting was their view that volatility, (maybe counter intuitively) is their, and this sphere's friend.
With regard to being lukewarm to both VTA/TORO,. I'm a fan of both
.I hold TORO (as I have for 4 years) but not VTA - the only reason l don't hold VTA is not concern just that I am already top heavy in this sphere. If I was to pick one anew today it would be VTA. Whilst their 8% of NAV yield is below TORO's 10%, as is their NAV discount, I think that VTA is both more conservatively run and likely to have increase the yield. I feel TORO has been less than its usual surefootedness in the last 6 months, albeit that I see that as a momentary blip.
Generally, in this sphere, and by all the companies we've mentioned, the commentary, reinforced in that VTA presentation,seems to be of rising defaults, but all below historical levels, and below the individual companies incorporated stress levels. European default levels are higher than US,.and as TORO is more euro dominated that might be a consideration. The current commentary is also of this sphere of stocks generating tremendous income currently,.off the back of historicall originations. Personally I feel this sphere is in a better risk/reward ration than at any time in the 7ish years since I started here, with BGLF.
Really interestied.to hear your thoughts on why you are lukewarm on both VTA and TORO, knowing your experience/understanding of this sector generally.
As ever, FAIR luck all
Kentio - try watching this video about Volta. I was very impressed with Serge Demay:
https://hardmanandco.com/hardman-talks-volta-finance-webinar-seizing-opportunities-volatile-times/
The yield on Volta is lower than Fair and the spread larger, but I did like how Serge presented, so hold a small amount of Volta but mainly hold FAIR.
TORO is very cheap at the moment... Much more of a discount to quoted NAV than here, FAIR.
Looking forward to the Dividend landing in a couple of days. After this DRIP, I'll be very much in profit.
(...Hope I'm not speaking too soon).
Cheers and GL.
Damofari, I have a large position in BGLP and. will, at least at first, await proceeds fromthe redemptions. rather than sell the shares at a big loss, but am wondering where to put the proceeds . I will definitely increase my FAIR holding slightly. I already. have a small position in MPLF which I might increase. I also have. TFIF which has CLOs, so that leaves TORO and VTA., but. I cannot somehow become. enthusiasticover the last two.
Agricore; the key piece in those CQS notes is 'resilient'. when I look at the pummeling Persimonn (which I hold) and other main stream high yielders have had this year, it rather reinforces that. These supposed sophisticated/professional investor only stocks have been extremely resilient comparatively.
The IC rating.....their top picks rules specifically exclude specialised debt instrument stocks, so will never be in their top 10. And whilst the publicity does help, we're here already and now what a beaut it is! As for the quality of that paid analysis, there is better here for free!
Still think FAIR is throwing off cash, as supported by their slow but unceasing buybacks (there was a condition that buybacks could ONLY continue where income wasn't required for committed obligations), and the CQS reports highlight this markets current income receipts. I've actually become a fan of the fixed dividend (and I see them sticking to them, albeit I still believe a special is coming).
I see BGLF has voted for wind down, which is no surprise. A dilemma for me, and I'm pondering whether to hold indefinitely, or move it on. Blackstone are the daddy's in this sphere, and I do think most of that NAV differential will be realised, albeit patience required..
Interesting to note the commentary on this sphere related to the collapse of Casino supermarkets, and the current SFR telecom parent debt concerns, which is a sector concern but seemingly managed with unnoticeable impact
A good weekend to you too.
Damofarl,
Fair is number 1 in September's IC's Alpha Investment Trust List of 25 with a Z score of 3.1 but out of their top 25 as usual they hone in on a "top 10" which begins with #2 and #3 (once again they decline to cover FAIR and its cousin TORO) instead claiming #2 Mobius MMIT to be the "best" IT pick, despite it having a laughable 0.9% yield and lower 1 year and 3 year (a higher 5 year return but not once you factor in dividends)
https://www.investorschronicle.co.uk/alpha/2023/09/14/don-t-be-the-dumb-money-for-investment-trusts/
Interestingly FAIR was also #1 in August and they did actually cover it to the extent they said:
https://www.investorschronicle.co.uk/alpha/2023/08/03/scottish-mortgage-and-the-fair-price-of-risk/
"The top 10 table includes trusts like Fair Oaks Income (FAIR), which has shares priced in dollars and is a play on the income generated by collateralised loan obligations (CLOs) made up of debt of US and European companies. These are
complex financing arrangements and the products are hard to understand. Of course, debt isn’t bad, but this is the sort of investment that requires an understanding of the credit profile of borrowers (and indeed lenders), how the
loans are originated, the structure and seniority of debt, whether loans are fixed rate or floating, the terms until they are due etc. On top of that, you’d need to understand the structure of the debt package and the seniority of the tranche of the debt product you have exposure to. In short, it’s just way too much for a retail investor to keep on top of."
That was analysis worth paying for, don't you think?
Have a good weekend.
Hi Damofarl,
These are both worth a read. A perspective which is positive for FAIR, and written 8 months ago where arguably you could say here in month 9 the outcome is broadly accurate.
https://www.cqs.com/file.axd?pointerid=63d7e5cc4b53d7117cfc9270
https://www.cqs.com/file.axd?pointerid=63c158784b53d70f8cee534a
Agricore; had a look at that Quoted Data vid....yes did chuckle....quite liked the show so we will view a few more so thanks for that extra information/view nugget....they all help.
Note the quite dispersing comments on BGLF (which I also hold), pertaining to it's planned wind down, in that it could take 7 years to get wind down proceeds. Did counter that by saying would probably be quicker, but didn't really focus in on that greater value that would ultimately be realised if it did take that long. Personally I hope, and believe - +because of the cross investment/links in parent company), that the run out is long, to avoid a firesale if what are still greatly performing assets. In BGLFs wind up proposal they are extremely detailed/proactive/professional in pre stating that they will continue paying dividends whilst income received (which will only stop on realising an asset back to shareholders), and their awareness of needing to delist/decost to reflect a lower workload/income.
Also noted in that Qouted Data piece that DGI9 topped their analysis of infrastructure type plays with the highest yield and value ratio, but then that is no surprise to either of us.
FAIR is mentioned this evening at Quoted Data. Only really to say "stay away" if you don't understand it! But hey all publicity is good publicity.
I've watched these weekly videos for a few weeks ago and would commend them:
https://youtu.be/mSQZLL-QxuU?si=V-6uwjFDe_MuFAnI
Have a good weekend - the weather is finally FAIR!
Agricore; yes CGEO has been excellent for me, but I've not sold out/down at all as there really is much more to come. I also hold BGEO, albeit I sold down too early, but one can't get it perfect every time. My rationale was that CGEO still have me 20% of BGEO whilst diversifying into other opportunities. Your Russian rationale is reasonable, but the reality has been that CGEO/,Georgia itself, has been very much a beneficiary of Russians' physical and financial flight to stability. Considerations here, CGEO's 20% holding in BGEO alone represents 75% of CGEO, despite being just 25% of their portfolio, and according to my calculations is earning a (BGEO dividend) yield of around 17%. The pharmacy business will be the next spin out in my opinion (a couple of years), but is already paying a dividend equivalent to 1.2 % of market cap. One has to consider currency impacts, but they do seem to manage their debt/FX.
I think it hard to buy again higher than i've sold, but I really do think you should reexamine. The RNS today, is a model of detailed simplicity and transparency. There is a couple of niggles in there in portfolio companies, but nothing to concern in the round. And yes the NAV (increased) is mind boggling.
And yes another FAIR 2cs chugging into the coffers.
Good luck, keep up the insightful/analytical posts I see elsewhere.
.... CGEO's NAV is over double the market price and growing. A great result congrats Damofarl.
I just checked my rationale notes why I sold and the reason I sold out was just after Ukraine War kicked off and my fear that the Russians would sweep through Ukraine and then either settle some scores in Georgia, or pressurise it into cutting links with the West (tanking the economy). Clearly I got that very wrong!! I should have paid more attention during Rocky III and James Bond as to the quality of the Russian Army! :)
Meanwhile FAIR announces another 2c dividend to be paid 21st September, just 5 weeks away :)
Damofarl, I was in CGEO for quite a while and did quite a lot of analysis on it. I sold it at 25% profit but got out too early because it's 50% up since! It's a really good shout, and I should at the very least have it on a watch list. Looking at today's results NAV
Agricore; i know we both tend to follow yield, but I also note you follow deep value. Do you follow CGEO? It has had a good run up recently, but to me there is still deep unrealised value in it. No dividend, but trading at an outrageous discount to NAV, and knowing we are akin in the value in IPO, and the patience required there, thought it should maybe be on your radar (if not already). Provides diversification both asset class and jurisdiction wise too.
Gavster-NBC; we maybe not be fans of buybacks, but they do seem to be working. One of my other dislikes of them is that invariably they are done at the top of the market, which we know with the NAV discount isn't the case here. Interesting to see them still buying consistently now at 51/52 seemingly with no let up which does suggest both confidence and cash to spare. Interesting too is the sheer number (proportionately) that they bought back around 48 which must have been value accretive (against both current SP and for NAV).
Do agree with you though that if they are swilling in cash, what new opportunities are they investing in - or are the just churning the quality of previous vintages?
Whatever way, looking good here for sure.
53 bid 54 ask.
Most welcome.
FAIR is almost my largest holding these days.
Gavster-NBC; we share a strong dislike for buybacks. My issue with them generally is how too often they are used to inflate (poor) performance and/or used to trigger performance related pay/free share issues. AND that I can't recall one that has actually enhanced value, although I do feel here could be the exception to my rule! I can't see any director/founders performance related share issues here, so that major misgiving isn't applicable to me here.
Divvy announcement - yes imminent, but we know it's 2c's.
I think we are all agreed that the currency correction is overdue and will provide us a tailwind.
TORO - I'm less warm (albeit unconcerned) on them currently - I do think they have had a blip/lost their way a bit recently, but that happens in these stocks from time to time. I see BGLF which was my first entry into this sphere, is voting to go into wind down which surprises and disappoints me, being as it has been such a consistent reliable income source....the upside of course is that, for the patient, the NAV discount will be realised (as can be seen with the fair realisation shares).
Agricore; thanks for the aa4 details, still researching, but definitely catching my eye.
As for LINV, I'll respond more on that directly on that board in due course, but thank you for bringing it to my attention - it is very much my kind of play of sustainable high yield and/or deep value. Quickly on it, as someone who holds a number of builders/property companies, I do think there is an overreaction downwards on such stocks that will correct, and I also note how LINV is morphing into earning income from servicing mortgages/loans, rather than trying to earn a margin on them. As such I have some understanding of this, having been invested in a US stock (RITM) for some time, which earns it's income as much (more) from servicing loans than originating them.
Generally - dividend data is a great sight, not least because of it's simplicity - indeed it was that sitr that set me off researching these kinds of stocks, with BGLF being the first.
Note the recent, seemingly solid, slow but sure rise in the SP, which to me is 50/50 performance and currency change. And with FAIR being my single biggest CLO type stock, I'm naturally pleased about that.
Hi Both.
Dividend announcement is expected here in the next week or two.
Thanks Agricore for that. Yes I use dividenddata all the time.
I tend to study it most in order of Impact. It's usually a tab when I using my browser for investments.
https://dividenddata.co.uk/exdividenddate.py?m=&fm=&sc=y&st=0
Damofarl
I see your points, however I have a massive distrust of PLC companies and any honesty I see to me is always the exception.
I'm against buybacks as you know because to me they all simply provide the liquidity for sellers, be it directors that want to sell allotted shares before they are declare as or allowing their city mate holders to sell out without crashing the SP.
I do however see the point that if a large seller was outing here, then the buyback would be buying larger chunks and regularly.
I also expect the pound to weaken against the dollar, in fact I'm still surprised by its current strength. Both arguments for strength (interest rates) and weakness (inflation) currently exist to compound us further.
I've recently increased here and also in TORO which I know you're also invested in, as the discount to NAV there has extended and the same arguments exist for a fall against the Euro.
Damofarl,
Mr T. (of IC not the A team) has published a recommendation on AA4 yesterday. (https://www.investorschronicle.co.uk/ideas/2023/07/31/a-hidden-stock-about-to-secure-its-dividend-for-a-decade/)
The gist being that Emirates may extend the leases for 10 years more - which would substantially cover the debt, avoid a secondary sale of the aircraft (at a discount) and therefore narrow the discount on NAV. It's a different dynamic to FAIR but the yield is about the same. The questions are whether Emirates will extend, and related to this whether global travel will continue to do well (enough) for Thai and Emirates to keep paying, and finally the pace that Boeing/Airbus can (successfully) churn out new aircraft.
Another one to highlight to you for consideration is LINV. I've topped up on this today. The yield is 10% and growing. It's a fintech play on mortgages. If you visit the LINV board I've put quite a bit of content there. The "technical deep dive" video is particularly illustative of the disruptive value of their platform. Think it's baby and the bath water right now where pessimism about the housing market means it's fallen despite a stream of good news.
I'd also like to share a cool dividend calculator/tools site I discovered: https://dividenddata.co.uk/
And to keep this post relevant to FAIR (!), here's an easy way to feel very happy to be a Fair Oaks holder. Plug in your number of shares and it displays the value of your past divis!
https://dividenddata.co.uk/dividend-calculator.py?epic=FAIR
2 of 2;
....are often just placed in the risky/specialist category without justification, by people who will chase Persimmon's yield without even a momentary consideration. I think in the high yield field, as with any sphere (growth/defensive/income) that diversification is the key, and just as investing in a couple of US pipeline companies a few years back diversified me, the airline leasing sphere may too. I am particularly positive on the airline industry (albeit not airlines/travel cos), so going to have a deep look and come back to you.
Sorry for the long post, but hey I'm hardly clogging this board up!
Good luck all.
Agricore; you make a number of points:
I'm not sure the buybacks are working as you suggest by reducing the NAV discount, as the very recent report suggests they are growing beyond 16% - I do think they are working in stabilising the SP, which may have drifted down otherwise to reflect the 10%ish £/$ fluctuation since Januaryish. And the increased volume of daily trades (highlighted in the report) are undoubtedly the explanation for the very tight spread now, which has never been below 5% in the 5 years I have held. Indeed, I have always discounted 5% on the way in, 5% on the way out, ie the first years yield b cause of the near 10% spread being the norm in this sphere.
Realisation shares. Yes I've just disregarded them, not selecting some, and how well they are doing. But we are still reaping the benefit too, still being in the funds that those shares represent in wind down. And to be fair, people that invested 10 years ago, that questioned the SP/NAV disparity throughout are now be rewarded. Good luck to them. Their rewards will end soon, ours are ongoing.
Cash flows/dividends. Yes, I mentioned in a previous post the safety net that level of inflows gives, albeit one should note they are lumpy ie not equally received throughout the year. Cash at hand of about 12.5% suggests they certainly have the ability to sponsor new issues, as you suggest, they are obviously not choosing to, like you, I believe a judgement call that I happily support.
I do think it's an interesting time for FAIR, as one Fund (II) is in rundown to 2026 (last investment 2021), so maximising income against minimal risk, and Fund III expires now, with a possible 2 year extension (then 5 year rundown), which means both that the high risk at initial investment has dissipated, and continually reducing whilst repayments/income are increasing/maintained. On that GavsterNBC has a point - will they be doing new CLOs to build a new future, new/maintained income stream.
Currency considerations. I think here the buybacks have minimised the drop I have seen across all my CLOs of around 10% due to the £ strength. I too see that dropping back, and I had even considered a new purchase here just on those grounds.
FAIR is throwing off cash. I still see a special coming down the line.
AA4/Nimrod. Interesting question. I actually looked at a lot of these stocks mid COVID, and at that time, whilst my gut was there was tremendous value therin, it was just a little beyond my high risk/reward profile. And I didn't consider again until you mentioned. Hindsight is a great thing - if I'd dipped my toe I'd be quids in now. That said, I've had a quick revisit since you mentioned, and I still think there is value/income in that sphere - I'm going to do a bit more research and come back to you more definitively on that! The 10%+ yield arena is definitely my focus, and with that comes risks, risks reduced/eradicated by research, as seemingly obscure complex stocks are often just p
Gavster-NBC - I don't think any director discord is at all related to buybacks, just as I don't think they are to facilitate an out for a major holder. My view is they were a judgement call at a time when markets were volatile, that compounding the yield/NAV of preexisting loans gave more certainty, more profit than new loans, at that moment in time. In the latest update, they specifically mention the preferential rate advantage pre existing loans have against the current market.
There seems to be a positive lift for stocks like FAIR investing in CLNs this week. Combined with the June uplift in NAV a nice end to the week!
Ah, speak of the devil here's the June monthly report. A 1.9% increase mom to the NAV is very creditible. No pun intended.
https://www.fairoaksincome.com/~/media/Files/F/Fair-Oaks-IF/Fair%20Oaks%20Income%20Fund%20-%20June-23.pdf