RE: Results to 30 June 202319 Dec 2023 17:38
I have now had a chance to review the ShareSoc webinar. Franco does his best to liven it up at times, but if you’re struggling to sleep I’d recommend it! Anyway, my takeaways from it:
- Fund has mostly traded at a premium (~4%) to NAV throughout the year, only unsettled by market events when the share price moves but the NAV doesn’t have time to before the share price recovers. Hence a short-term discount to NAV. If people ever want to top up, look out for those opportunities!
- Pull to par opportunity of ~7% based on top 20 bonds held. In other words, barring “events”, the should be a modest increase in value there.
- Politics is what causes the losses (e.g. Credit Suisse where Swiss politicians decided to rewrite the rules about debt, or Raven in Russia where Putin’s invasion of Ukraine caused the investment loss). More political events could happen, we just don’t know.
- The fund has to invest at the more risky end of the market to generate the yield (we know that). But it also means the political events have more impact.
- QT means there are now a lot of sellers of government gilts and one big buyer. It should keep the prices high for a while. As everything is priced relative to government debt that should be good for bond values in the short to medium term (1-3 years I would say).
- Franco thinks we are basically at peak interest rates, and rates will fall. But unlikely to go back to the ULIR (my interpretation of his remarks). So there should remain opportunity to invest in bonds to keep the yield high. But I don’t expect anything other than 0.01p increases to the annual dividend.
- The 3.05pps reserve is there “to be used, not to be a badge”. So I am sure they will use it to keep the dividend where it is.
- REA should complete a disposal which will allow them to clear their arrears to pref shares. They need to do this before they can do other things they want, like pay an ordinary dividend.
- Franco hinting he might work for another 3 years to make it 50 years in the industry. What’s the succession plan?
NCYF is almost touching 50p. I don’t think I would add more at that price, but if it dropped to 47p I could be tempted for a buy and hold. And keep you’re eye open for a non-specific “political” issue that hits the share price but not the NAV.
Let luck be upon us!