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The latest monthly factsheet is out; as ever, technical, concise. Solid.
Commentary shows volatility in the collateralised loan market due to interest rate/inflationary pressures, and a reduction of issuance pursuant to such; NAV continues to rise; notable was mention of (continued) income from a number of their loans, and no mention of non/under performing loans. i.e. business as usual.
I do find it (encouragingly) perverse that this supposedly risky/specialist stock is so stable in uncertain times when considering supposedly safe stocks such as say Direct Line, are volatile/drop on events which in reality should have no impact on their business? What do i know? Except my experience here is that this is a wonderful counterweight amidst any balanced/spread portfolio.
Damo, a wealth of info! Many thanks! I will digest the next few days and revert. Cheers,
If you follow this type of stock, like me you probably think the large NAV discount has got to correct at some point, a large equity gain to be had; my experience in reality is that it doesn't materialise, and certainly not in a short time period. I don't think thats because of an ignorance of such, of shareholders, more an acknowledgement, a security to deliver the ongoing yield.
a lot is to do with tax, look at where all these sort of companies are domiciled (low/tax free jurisdictions), and that the professional (already rich ) people/orginazations at the heart, with large shareholdings want dividend income rather than growth capital gains, as generally taxed lower. I'll give an example.
I'm invested in LIV a small cap in this sphere; noticed the considerable discount to NAV, noticed it's considerable consistent cash/profit generation, and it's at that time large 7% dividend. I also noticed its considerably large single (owner) holding. People have differing views on a large controlling ownership of any Co - some think it shows aligned interests, some (like me), worry that if at a considerable NAV discount, they can low ball the Co private at profit at small investors expense. Despite my reservations, i took the view that that major interest would at some point want to realise the NAV difference, in the most tax efficient way to him - dividends, and as a shareholder i would benefit too.
For 2-3 years I was around 15% underwater equity cost wise, the divy making it equallish; the last dividend shot this into the profitsphere for me (i look for 10% pa growth across growth/income stocks), as the major shareholder did what i suspected - took money out the most efficient tax way possible, dividends; yes the NAV discount has fallen, it is still seriously high, and it barely took out the cash sitting at hand, forgetting its ongoing margin (profit) generation. These sort of investments aren't meant for the private investor, they are very much set up to provide tax efficient divvys rather than less onerous capital gains taxes for those already beyond allowances, high net worth people, hence i don't think you will ever see notable capital gain/SP appreciation. My views, and this area is risky if you don't research them, but i ave and happy to ride their coat tails. In summary, in this sphere, i don't think you will EVER see the NAV discount realised at one point in time, so no quick buck, i do think these discounts will be realised slowly but surely for the patient by way of yield. Sorry if i'm going on!
Hi Scandi; ive been in this sphere about four years now, and your SP movements pretty much mirror mine; i find there are quite distinct differences between the UK listed (irrespective of currency) and US listed stocks. Herewith my observations.
UK listed - low liquidity, large spread, relatively small market cap, minimal SP movement either way (ie no SP growth), consistent constant dividends, generally at considerable NAV discounts. Ungreedy incremental margin/profit generation. All dropped massively Covid day 1, all gradually restored to circa previous levels. Notable the minimal change to Ukraine events. Difficult to day/short term trade. Don't see ever really appreciating SP growth wise, as the growth is effectively paid out in the sustained high divvy.
US listed - high liquidity, zero spread, larger market cap, large (often 5% plus) daily SP movement either way ), consistent but constantly adjusted dividends, generally at notional NAV discounts but potentially illusionary as dividends often paid from income not profit (hence reducing SP and NAV with each divvy); dived at Covid day 1, never to recover previous heights, and in some instances requiring considerable retrenching to remain going concerns (IVR a perfect example); highly sensitive to not only macro but wider economic/political events, reducing both on US interest rate rise indications from December and the Ukraine conflict, and on the mood of the general market on any given day; often included in various ETF's be they housing/REIT/high yield ETF's and due to their liquidity/market cap very much on short traders radar (in my opinion a factor in the frequent high day by day SP rise/drops). Most are lowly rated by brokers, most have a substantial part of their business (in the mortgage loan stock area i'm invested) ultimately guaranteed by US Govt. Very day tradable - can move 5% within a day that the SP closes unchanged. Volatile. Currently at year lows, hence the eye wateringly large yields (especially for the US).
Generally speaking, despite the nature of what the UK and US stocks do as a business, i don't consider the UK stocks risky at all - i watch none of them daily, only monitoring their frequent updates/newsletters to check my original rationale remains. All were bought and suffered an immediate SP loss due to spread, all are equity equal or more now, all have thrown of large divvys that ive diversified into boring predictable 5%ish stocks.
The US stocks i do monitor frequently, i do consider risky, all are down SP and equity cost wise, but not when including the large divvy throw off and are still (currently!) positive/accretive. I do think they are all oversold.
I do prefer the UK stocks. The NAV discount brings comfort, and for the patient, at some point that will be realised and a bonus beyond the high yield will be realised.
As for REITs, some within this sphere US wise are REITs; i have a number of UK REITs (warehouses/GP surgeries) like their 5%i
Hi Damo, I just noticed this post. Actually looking at my spreadsheet I technically have 5 investments in this sphere which will be 10% of "AUM" ... Since I only built this portfolio during last summer and autumn I don't have much knowledge of its long term performance. To date the EUR investments are flat before dividends, the one Sterling is up 0.9pct before div but the two USD funds are down 15% and 5 pct respectively. The last two are down 10 and 3 pct after dividends... My intention is to add to this portfolio but will defiantly wait until I am more experienced in monitoring it. My focus at the moment is building a REIT portfolio across the UK and US. I run no leverage on my end (yet). Cheeers
Damo, many thanks for this! It appears that this board is vastly more informative and serious than boards of widely held shares. I am running 8% in this sphere across four investments in EUR, GBP & USD. I only put these on last summer and am still learning how to monitor/follow them so I am unlikely to change this the next few months. Good luck!
for openness, and to somewhat support scandiexpat's observations, i am also proportionally quite heavily invested in US companies that do similar to TORO but not in Company debt but household mortgage debt, but fundamentally the same business, borrow at 5% lend at 6%, the difference being the divvy. These 6 investments, , also totalling about 12% of my portfolio, are collectively about 15% down, all having larger market caps/liquidity/volatility but throwing of the same sort of divvys and they DO oscillate very much to macro economics considerations.
Yes i have 25% of my portfolio in debt!
scandiexpat; welome! I think my point regarding low liquidity/low movement has rather been proved with Thursdays market selldown, yet us TORO'ains are barely moved! I very much agree with most of your thoughts - diligence yes! Personally i think the first 2 are insignificant (inflation, rate movements). The way TORO operates it is constantly rotating/exiting/offering new debt, repricing as it goes, so as such, those 2 factors don't really impact as it is just selling money at a margin higher than it has bought it. War benefits no one except arms companies, and beyond life, it could cause recessionary impacts, which will impact the underlying businesses that are borrowing our TORO money, potentially raising the default rate. TORO seem very proactive and adept on this, as witnessed by their low/in line default rate at and through the corona virus. I don't think this needs hyper monitoring, and anyone that feels such, shouldn't be invested here, but i agree anyone invested here should monitor updates. Despite the very technical nature of this investment, TORO's monthly factsheets are refreshingly open, plain talking and accessible, and whilst ordinarily its NAV discount might suggest a red flag (as might it's yield), these factsheets inform you that that disparity is purely down to a misunderstanding of how it makes its money not due to any lack of ability, probity or performance delivery. They have also been incrementally increasing the debt rating of their loans, recycling up to better quality.
Notwithstanding my total confidence in TORO, anyone investing in this, or similar, should note their collatorising (sharing) is not dissimilar to the bundling of US mortgages, making a 'basket' that supposedly spread risk but actually on default/downturn concentrated it, that caused the banking crisis, and in that i agree with you ScandiExpat, not to micro watch but definately be aware of the risks.
Personally across my holdings in this sphere of stocks, I'm overweight, and more than i would want to be, but i'm comfortable with that and with the consistent throw off of divvis that that overweight is reducing such rapidly. Despite my position, i wouldn't recommend anyone have more than 5% in this sphere unless you understand the risks as well as the reward.
Lovely to not be alone here! Good luck to all; patience will out.
Thanks for these posts. Am a relatively new TORO investor and have also built an international portfolio of similar sector shares so it is good to hear your perspectives. I would add that at this macro-economic situation (inflation, rate movements, war, weak western leadership) it is probably important to hyper-monitor the credit markets behaviour and look for special updates from these companies on this.
raggedtp; welcome to our small and merry band! You make a good observation on the liquidity of TORO vs TORG, TORO hardly being liquid! A point i think answers Gavster-NBC's question. I'd definitely go TORO.
gavster-NBC; yes, the lack of liquidity/movement can actually be a boon. Take the Ukraine wobble at the moment, my portfolio generally 10% down, some considerably more as i have some esoteric stocks (potentially impacted by sanctions). And TORO drops not an iota! This and the 3 other stocks in a similar sphere i hold represent 3% each of my portfolio, which is enough for me in any company/genre - none of which have dropped. In none of them do i see a rerate/surge in SP, a slow sure rerate yes, but three of them, especially TORO have a considerable NAV discount, and have substantial cash as % of market cap. This provides comfort, as does the consistent unstinting dividends at 10% plus. If i wasn't "over" diversification wise in this sphere, i would definitely add. At one point my 4 shares in this arena represented 18% of my portfolio, they now represent about 12% because the consistent dividends they have thrown off, i've put into more staid boring lower yielding divvis like tesco. I don't see any magical rerate to SP reducing the NAV discount because i just see TORO keep on making margin (profit) i see the green you see carrying on. Their conservative way, will mean the divvy will conservatively rise, and as the SP slowly, very slowly, but surely rises, for holders today, long term patient holders, the yield will be proportionally astronomical.
Just a thought about TORG/TORO. I am in TORO and also thinking about increasing. I also have some V TA. They took have a sterling option now, VTAS. But there's no liquidity in it and the spread is even worse as a result. If you're going to buy for decades, it doesn't matter, but one thing I like about equities is the ability to sell them easily. And I think you'll find there have been no trades in TORG this week.
Hi Damofar.
Yes still here and I am very pleased with my purchase of TORO. Though still under 2% of my portfolio's worth it is always a reassuring number in green when I check and a very steady rise. I have vowed to increase as there is still the discount to NAV and the chart show's it's one of the few shares not to catch up on itself since the pandemic drop. I've tried to battle through the accounts but as you said previously, all very risky but also delivering. The only decision will be whether to add as TORG or TORO.
gavster et al; hope you are still here! Since my last comment, note the slow but sure SP uplift and the "boringly" maintained dividends! Due to my buy in position, i'm nearly hitting break even on purchase - you have done better! Appreciation and 2 healthy divvys!
I don't know whether the SP increase reflects greater awareness (wider audience) or just existing people like me that put a toe in, cautiously, thinking if it looks too good to be true it must be, watching and seeing it truly does deliver, and adding; whatever way, unless you are here for a quick buck trade, i stand by my previous post. It's lack of coverage/awareness is reflected in it's NAV discount which i don't see narrowing purely because i think their diligence will keep generating margin greater than the dividend. This is what i would describe as a patiently enriching investment - which frankly i find boringly reassuringly exciting!
gavster: you are not alone - ive been here for 2 years now! Pros are the dividend yield which has been consistent, and predictable; the con is, this isn't really a share popular with private investors, trade regularity can be sparse, and the spread has to be factored in on buying/selling. Because of those 2 factors, it's not a profit from trading type of share - it is definitely a hold for the long term take the dividends kind of share - to example this, my original investment has lost 10% of it's purchase cost in 2 years, but i have received 13% each year; i took the view, because the share doesn't really move/is hard to trade, that the first year covered the headline loss, and here on in i'm earning 13%.
I don't think the huge discount to NAV is because it invests/profits in debt, (see BGLF which is in similar territory but at a lesser discount) i just think small (and even professional) investors don't understand what it does so are wary. I'll be honest, i don't totally, the complexity of their instruments, but i'd boil it down to this - they borrow money at 5% and lend it at 8% and the difference is the divi. The risk is that the underlying borrower defaults, but their excellent factsheets, detail the spread of loans, and the considered debt risk rating attributed to them; this mix withstood the covid drop, without default.
The company seems well run, and risk averse in a risky sphere, with no obvious syphoning out (excessive mgmt costs/freebie share options etc). I'm a big fan, though i don't see the share price moving at all really in 5 years (so if it's capital gains i don't think this is the share), i do see it reliably paying that divi for 5 years. I do often think what will be the catalyst to grow the share price/reduce the NAV discount, and one of the reports alludes to their awareness of that. i think that (crazy i know!), an increased divi or special divi could be that catalyst - and whilst they are company dealing/profiting from debt, they actually have cash in the bank to do so.
I do note the VERY large trades that went through to day; there are often chunky £50k buy/sells, but in my 2 years here, those today were not representative, and for me, definitely stand out. Hope this helps - views mine
TORO has always traded at a big discount to NAV, due to the debt nature. Any other holders ?
NAV : 0.7585 Euros
SP : 0.5325 Euros
After some initial research, just bought a position at 54 Euros, ex-dividend expected in a few weeks time of 1.7/1.8 cents in line with the previous dividends IMO. Low volume.
Anyone holding out there can point to some pros and cons that might not be clear ?
Cheers and GL.
Payment will be made on 23 December 2020 to holders of ordinary shares recorded on the register as at close of business on 27 November 2020 with an ex-dividend date of 26 November 2020. The quarterly Dividend Yield remains targeted at 2.5% quarterly.
blimey,what's been going on with the enormous trades?
movement there.
ka ching