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Continued....
And my view of the FTSE100 at that time was that, overall, and to borrow from Kipling, it was “A trap set by knaves for fools” and I’d analysed the entire index just a few years previously so it was an opinion based on personally researched numbers not mere personal jaundice…
So, I don’t think I overlooked the big insurance boys (I haven’t gone back to check the numbers for this comment) so it’s probable that their share prices at the time against dividend payouts made the yield far less than the 10% it is now…?
And bear in mind that the Game of Strictly Bricks (which is where I get my nom-de-plume here from) was producing an average gain of around 20% a year with underlying house builder ROE combined with inter-house-builder trading for further gains on top.
So, as of how I see it now, the two roads forward seem different for the medium term compared to back in the day…?
What happens as, if and when Bellway & co get back well the right side of 10% ROE, or the insurance boys start to disappoint, well ~ I don’t know yet…?
But, as of right now, I’m 36% Bellway, 14% LGEN, 25% M&G and 25% Phoenix.
I appreciate that having that few number of different holdings would likely make many here shudder, but I am someone who has been happy & comfortable for the past twenty years to be 100% invested in a single share if I’ve thought the perceived value warranted it ~ as I fortuitously was in Redrow at the time of the Barratt takeover earlier this year…
Nice to have got something right…! 😊
Strictly
It's foolish to invest those percentages in any single shares imo, but hey it's your money
So best of luck anyway
Strictly, as Mr Buffett states common mistakes with investors is buying into the scenario that investors need a diverse portfolio. Buying less than a handful of companies is a very good strategy and buying on the dips has served me very well.
I’m like yourself and have a reduced holding in the house builders, but I’m minded to the fact of interest rate reductions and whether the Tory’s do something with stamp duty in the next budget. It’s quite clear that rotation is now in play and investors are buying the London market
so finally, and hopefully investors will see stocks increase to the eye watering PE’s afforded to the yanks, or least better than the historic lows.
Something to think about.
Finley1 - " . . . as Mr Buffett states common mistakes with investors is buying into the scenario that investors need a diverse portfolio . . . "
Is that why Berkshire Hathaway 'only' owns around 40 shares and 65 companies?
I’m fairly well diversified but with a few holes to fill out. Easy when you’ve been fortunate enough to catch a bagger to think that’s the way to go…. Experience has taught me otherwise
“Is that why Berkshire Hathaway 'only' owns around 40 shares and 65 companies?”
Number of companies isn’t a good measure of diversification. It’s the relative levels of investment.
The graph here shows how undiversified Berkshire is currently - https://www.investopedia.com/buffett-berkshire-hathaway-annual-meeting-2024-8643136#toc-2024-05-04t185435023z
Hi strictly, thanks for your reply.
I’m pleased to hear about your recovery from a dire experience through the 2008 financial crisis. Single company investment certainly heightens the risk through such a period. I’ve been through four crises in the market, 1987, tech 2000, financial 2008 and Covid 2020. In each I lost c.50% of my equity. The lessons for me were don’t panic (or panic early), and don’t overtrade – others will have their own strategies. For my part, I was on a 6-month sabbatical during the summer of 2008, surfing and working games reserves in Africa. In October I was in a lodge in Zimbabwe, when the English owner told me about the financial crisis – the first I’d heard of it. Later that month I returned to market chaos which only turned the following March – remember Haines bottom?
I recall your focus in the housing sector was on tangible book value. Given Bellway’s focus on organic growth I could imagine Bellway featured in your recovery plays, but my focus is on the macro, as was my question yesterday - what’s different this time round for the house builders. While I understand your decision to rotate to a different sector, I’m left wondering why you think the traditional builders will return to their previous growth rates, albeit starting 3-years out.
I’ve posted my macro view to the Vistry board, in which I attempted to make the case that it will be different this time for the traditional builders, hence my preference for Vistry’s partnership model. I post my ideas in the hope of receiving a response along the lines, you’re wrong and this is why!
Yesterday, the FT posted an article on housebuilding. The key stat is that the number of completions would fall from an average 210,000 over the past 5 years to 160,000 over the coming year (to March each year).
It prompted me to write a post, again expanding on my current views on the sector macro. I didn’t post – didn’t see the point - but I came to this LGEN board and saw your post, which piqued my interest in your reasoning.
While researching my post on the FT article I came across the interest rate chart in the link below. It graphically illustrates the following wind the house builders had post 2008, and the headwinds they face today. When the latest peak in the house price to earnings ratio was 7.0 (2020), the BOE interest rate was 0.1%. It seems a forlorn wish to expect that ratio to be achieved again while interest rates remain much higher. The current forecast is for a reduction to 4% by the end of 2015.
https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate
* For balance I'll post later my thoughts on LGEN. I don't think I've posted here before.
In isolation, no. However, even allowing for the size of their holding in Apple, Berkshire are still well diversifiedacross other shares and businesses they own. I just think it can be an uneccesarily high risk for private investors to hold a very concentrated portfolio.
That's my view but each to their own.
Zac, when I’ve put my feet up watching the television, and the ever helpful YouTube. I’ve listened to dearest Warren and the late great Charlie Munger, and it was often stated that
the small investor can do very well from a handful of stocks, and if they are not that confident in that strategy then just buy the S and P 500.
I dare say you of course know all this, and of course it is each to their own. I know you like the managed funds, do you by any chance have one for India, I’m curious ?
Thanks,
Finley.
Finley1 - yes, I can recall Charlie saying that on numerous occasions. That's fine if you know what you're doing! I recognise that my circle of competence (another WB/CM saying) is fairly narrow so tend to have plenty of diversification within my portfolio.
I do like managed global equity funds and also tracker funds. Nothing directly in India as yet.
I also still like the odd dable in single shares. Although I've been moving away from them over the years and was down to my last in LGEN, I couldn't resist both Nvidia and Microsoft last year. I consider my purchase in Nvidia, especially, to be a lost opportunity . If only I'd have been braver! Never mind as a pensioner living off his investments I need to be careful. Not too careful though!! Good Luck.
I need to look at the Indian etf scenario. Probably safe to say I think they have done all rather
well and I’m probably late to the party. As businessman they are immensely sharp, so it would
be fair to say that you would assume that any legitimate investment would do rather well.
Famous last words and all that, I’ll let you know how I get on.
Thanks,
Finley.
There seems to be a lot of different investing strategy's here, the best one of course is the one that you are happy and comfortable with
I guess i have gone a bit more cautious as i'm getting older, a split of 60% funds and 40% dividend shares i find is working well for myself and i would not put more than 10% of my portfolio into any one share, but each to their own as others have mentioned, if you are happy with what you are doing that's all that matters
let's just hope we can all keep making a good profit from this one
Mid-60s, retired and happy to be currently 89% in individual dividend paying shares and 11% in funds. Only down on 2 of my 15 individual shares, so things looking up lately. A maximum of 13% in any one share, which is of course LGEN!
Someone was bleating about loss of capital being unacceptable despite the fat dividend. Well it hasn't happened to me, quite the opposite in fact but then I hardly ever buy at the top of the market and so my average is £2.35 for this great share. If I can't buy at a fairly low price, I go elsewhere or sit on my cash.
Londoner,
"I recall your focus in the housing sector was on tangible book value. Given Bellway’s focus on organic growth I could imagine Bellway featured in your recovery plays, but my focus is on the macro, as was my question yesterday - what’s different this time round for the house builders. While I understand your decision to rotate to a different sector, I’m left wondering why you think the traditional builders will return to their previous growth rates, albeit starting 3-years out."
My concern is very much that the house builders may not get back to their former glory.
Bellway have averaged a return on equity of around 16% for the past 40 years.... that's pretty awesome ~ to put some numbers on it, they've turned a starting BVPS in 1983 of 51p into a 2023 BVPS of 2,871p plus paid out 1,361p in dividend over that time...
How many investors have beaten that...?
Of course, you'd have had to know to be in Bellway at the outset, and the irony for me is that I sold my business (which gave me the capital to invest) in 1984 but didn't start managing my own stuff until 2000 and didn't have my house builder share epiphany until 2003.
It took me ten years of paying attention and trading on perceived value gaps to firstly catch Bellway up and then finally overtake its performance through trading.
So I could have profitably sat on my a.se for a decade and done nothing if I'd have only known about Bellway from the get go.
Not for nothing is the company affectionately known as Ghost Dog in our investing circle.
......................
"I’ve posted my macro view to the Vistry board, in which I attempted to make the case that it will be different this time for the traditional builders, hence my preference for Vistry’s partnership model. I post my ideas in the hope of receiving a response along the lines, you’re wrong and this is why!"
In sharp contrast to Bellway, Vistry is somewhat less-than-affectionately known as Battersea in our group.... as a fellow London lad, you'll no doubt understand the connotation..? 😊
We've had much discussion about this company on our blog ~ several of us agree that we see it as the triumph of jam tomorrow over past track record.
To put some numbers on it, from 1987, Bellway's BVPS went from 183p to 2,871p with 1,282p of div, whereas Bovis/Vistry BVPS only went from 185p to 600p, with 701p of div.
Over the past decade, Vistry's BVPS has stood still...
And yet, for this dubious confection, one pays a PBV of over 2.0 for Vistry compared to below 1.0 for Bellway....
Maybe they will yet emerge triumphant and, of course, it takes a buyer and a seller to make a market, and clearly others see this very differently to me...
If you would like to chat about all this on our blog, which was until very recently dedicated to house builders but now also embraces the big insurance boys ~ which has come as a bit of a shock to some of the folk on the blog ~ let me know....
Stric
Robleo,
I actually thought I was being a bit of a wuss investing across all three of the insurance big boys rather than just going for one, but that's because I'm new to this sector and there is a certainly sense of safetly in numbers...
Whereas, within the house builder sector, where I am more confident, rightly or wrongly, of what I am about, I have been happy to be invested 100% in a single share on quite a number of occasions when and for as long as, to my view, that company has been the stand out best value...
Of course, I'm not Warren Buffett and I haven't always called it right... ☹
But I'm happy to stand on my track record if anyone wants to judge me on it and this game has been providing me with a decent enough crust for the past twenty four years to be much more than just satisfied with it.
I wish you well though, following your own path of a blend of shares and funds...
Strictly
Strictly, in my very humble opinion, you could have switched into something else much worse than LGEN. I'm a long termish investor here and been through the highs & lows on perhaps far too many occasions. Sometimes I question myself for holding this stock, but something tells me to persevere. My strategy for what its worth, is to secure tax free dividend payments to supplement my pension in a couple of years time. I may sell a few closer toward the time and invest elsewhere to reduce my exposure but thats a decision for another day. Good luck here.
Going for a Sector is one way of doing things but it wouldn’t be mine, I prefer cover in various unless there’s a reason to avoid
@Finley, The Indian fund I use is AIE. It is an investment trust. Gone well over the last few years, a drop off in the last week or so. New to this board as I bought in to the dividend capture strategy in one of my ISA accounts. I thought I would have to hold over the summer at least but been surprised by upside momentum.
Does anybody have any bullet points that could persuade me to hold? My dividend capture strategy has worked so far this tax year.
GLA.
Jinkar thanks for the reference I’ll have a look. In answer to your question regarding holding Lgen, my take is that the American market is overvalued, the ft 100 appears to be on a up trend
and there is always constant chatter of take overs. Aviva was recently attracting speculation so one would assume that someone has also run the rule over Legal and General.
Even if there was a bid for another insurer the sector would perhaps benefit from any potential take over. So, it’s definitely one to hold is my view.
Something to think about.
Phyl
I'm afraid your dividend s are now taxed
Unless you are on low income and I certainly don't know anyone that is on a low income can invest in the market.
I am retired employee of prudential cache securities and I have stated on here that I have been invested in LGEN
For over 5 years at least and they are not performing as some of their peers like Aviva.
I think if my memory serves me right the highest price over 5 years has been ,3.09.
Let's hope things in the world change sooner rather than later.
Dividend reinvestment seems at the time to be ok or at least it sounds that way but consider when you get your dividend the shares have recovered to
Well above your ex dividend price so therefore when your money is reinvested
You will not receive as many shares as you would as the price has risen again.
Hi Fisherking, many thanks for your response. TBH, I'm not altogether sure how LGEN calculates the dividend reinvestment rate. My understanding is that they work out an average price based on low to high SP over the period of time between XD and payment date. I may be wrong on this and will gladly be put right. In terms of the tax situation on dividends, this is something I'm a tad more savvy. Remembering that my particular LGEN holding is kept in an ISA tax wrapper, here's the official word on the matter:
"You do not pay tax on any dividend income that falls within your Personal Allowance (the amount of income you can earn each year without paying tax). You also get a dividend allowance each year. You only pay tax on any dividend income above the dividend allowance. You do not pay tax on dividends from shares in an ISA" .
Hope this helps clarify the matter of tax on dividend payments. Good luck.
I think you need to reset your password strictly, someone is pretending to be you on LGEN & MNG!
Seriously now, welcome to the rest of my world. As well as TW., BDEV & PSN I'm also in here, MNG &, for better or worse, JUP. All had their merits at time of purchase, but it's been a bit of a roller-coaster. I bought my MNG for 205 (stop laughing) so that's not too bad, my average here is 277 so not great, & I don't even want to look at JUP although I only have a tiny holding. They've all helped supplement my income, and I'm still hopeful I might get my shirt back eventually. I don't do tips (I'm a terrible investor, mostly) but as you've stepped out into the shark-infested waters, you might want to run the rule over REDD & MEGP. Both still appear to have considerable growth potential whilst already paying a decent dividend.
Good luck, don't forget where your footings are though. K
Fisherking, I don't pay a penny in tax on my dividends. But then, I've spent the last 20+ years diligently moving investments into ISA's for me & my wife, taking advantage of the excellent annual allowances available.
No tax on dividend held in an isa account you can earn as much as you like.