Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I have sold half of my current holding acquired at a ~ 520p ave this am , not because my confidence here is dented(I still hold a significant number) but because I am going to be, literally, all at sea for many weeks and unable to respond to the sharp SP moves which now seem to typify this share, and banking profits has become my new mantra in this dynamically unstable investing world in which OCDO's volatilty is extreme(this is the fourth 40/50% move up in less than a year!)
I shan't be posting for a while but wish you all, whether positively or negatively inclined, a succesful investing year, and for long term holders (which I remain) a positive news flow,
'bye for a while.
I don't do predictions,'cos no-one can know with any certainty what is likely to happen, nevermind what unforeseen events may occur, BUT I do expect POO to remain elevated for most of this year, I cannot see the Ukraine situation being resolved any time soon and even if it is, Russia's oil is unlikely to find a market in the west for years to come, so as they produce about 10% of the worlds supply, even if it is all sold at sub-market prices to China/India its availability will not count as part of world supply and will not IMV affect world prices, hence I see POO and Shel SP remaining firm for some considerable time, I will hold and add on weakness.
My boring old-fashioned folio had a comparatively good year last year and I expect the same this year, Shel, IMB,and SMDS all did well for me, with timely, profitable exits from BT and GSK early in the year, a good divi revenue and value-oriented ETFs earning me a decent positive return . I wish those, who like me, invest here and in boring stocks held long-term a good investing year, you won't be hearing from me much for a while as I am off to spend the rest of the winter in warmer climes, happy new year to all!
Worth noting that much of China's air travel is internal (it's a big country). In 2021 internal Chinese flights accounted for 18.9% of the world's total (cf US where internal travel constituted 24%).
The reopening of China to travel both in-country and internationally is the crucial condition needed by RR for a significant SP recovery. As I stated a few days ago, civil aerospace is RR's largest and (normally) most stable revenue stream worth up to £ 8 bill. per annum. This article, a link to which I posted recently, shows the impact China's travel and airline capacity has on worldwide totals :
https://www.oag.com/blog/airline-capacity-2019-2022-travel-recovery
China is second only to the US in seat capacity and its reopening will (assuming it happens and continues) is worth IMV 20-30% on the RR SP over the next few months.
Just read a piece in today's WSJ which reminded me of my conversations in Vancouver lately. It attributes a loss for the year by bricks and mortar retailers to "shrinkage" a euphemism for theft, costing them collectively $49.5 billion. Another of the many benefits to food retailers is that stealing while taking a delivery is pretty difficult.
The same point was made to me by the store manager I chatted to who bemoaned the losses from self- checkouts ," Grab and run" theft and even armed robberies of the alcohol sections of N American stores .He was seeking to employ extra security at significant cost .
More of the benefits of and reasons why the next decade will see near- universal adoption of food delivery.
Hi, I posted briefly here a couple of weeks ago on buying in . I have since added and now hold at an ~ 86p average.
This post aims to set out why.
First and foremost my investment aims are modest - an annual 'folio growth of CPI +10% (tho' that's obviously hard for this year and I won't achieve it for only the fourth time in 30+years).
To meet my targets I invest primarily in ETF's, funds(mostly bonds) and large companies both here and in the US.I hold about 40 positions which I intend to hold indefinitely , but that may mean anything from a few months to a few years.
I also seek to generate a significant part of my returns from dividends and eg for this year that will come out at about 5.5% of my total folio value.
Finally I, like most of us, aim to buy low and sell high - obvious but not always easy.
So VOD has been on my radar for some time, five years ago the SP was 220p,only six months ago it was 130p.
I now judge the likelihood of substantail falls from here as low and of a recovery as high.
Ok you'll all be saying but why should VOD recover , well IMV much of the recent fall is directly attributable to external factors affecting the economy of the UK and other countries in which VOD operates , Covid, the war in Ukraine, high inflation, rising interest rates......IMV all of these factors either have passed or will pass and/or the world will adjust .
Perhaps the two key factors are whether VOD's customers can afford to pay for their services and whether VOD's resulting revenues are sufficient to manage the debt position. My view is that mobile connectivity in all it's forms is now seen by pretty much everyone in the developed world (and many in the less developed world) as an essential of modern life and is therefore almost as price insensitive as food and shelter, so I have little fear of revenue attrition. Can VOD meet its debt liabilites? - Yes, those liabilies are substantial (about 3 bill euros per annum) , but the average WACC is 3.4%(well below inflation) and the term of the bonds is from 2022 out as far as 2059(coupons range from <1% to 7.875%), so there is a long time available to pay and VOD's prices, which are index linked, mean that revenues will continue to rise faster than repayments .If VOD had any doubts in this area I cannot imagine it would have embarked on a £580 mill. share buyback.Additionally, I am pretty sure that the sum of VOD's parts is worth a good deal more than its current MC and , in extremis , sales of some of the less core businesses can be effected, and maybe even if no undue financial pressures emerge, an easy win for a new management structure would be to rationalise.
I shall hold confident in a decent return over the next few years.
Those of you who have read my posts on here (how wise!) will know that I regard airline travel capacity as one of the key variables affecting the RR SP.While the post-Covid recovery is most definitely happening the following link shows that the mega markets , North America, Westen Europe and North east asia(ie mostly China) still have some way to go.
https://www.oag.com/blog/airline-capacity-2019-2022-travel-recovery
see table:
Scheduled Capacity by Region 2019 - 2022
Recent events in China suggest that the near 30% shortfall for each of the last three years may not be made up next year , and broadly I don't expect RR's major revenue stream ,(civil aero) to reach the ~£8bill of 2019 until 2023/4. nevertheless a figure approaching £6 bill for this year and maybe £7bill next year is encouragingand SP positive. I hold/add
Value: As far as I can tell, Kroger does not split out how much of the sales are online. Their last accounts do reveal that total sales will probably exceed $150 billion this year ($113bill at the third quarter). Those third-quarter figures also quote online sales growing at 34% Y-on-Y, a figure which can be maintained or increased over the next few years as the biul-out continues, as we know Kroger is currently contractually committed to 11 CFC's and have identified a further 3 regions where they are looking for a site, there is no sign of them slowing down their rollout.
As a thought experiment, I have calculated that if online sales, whether from CFC's or instore fulfilled reach 10% of the total, (not unreasonable?) that will be a revenue stream (at the 4% figure revealed in the last presentation)of $600 million pa to Ocado. Given Ocado's current market cap of a little over £5 bill, Kroger (MC $ 31 bill) could take them out at a 30% premium with a notional 10% pa return on investment. Likely ? I don't know but IMV gives a signal of the NPV of the Kroger /Ocado link-up.
Expat..... just to be clear the equinox deal is about bulk pricing for wholesale service to other businesses and has little or no relevance to customer pricing, where competition should reign. It's my understanding that BT's scale, now and in the future means that they are pretty much the only carrier in a position to make an equinox-type offer.
While BT's action could clearly be seen as "predatory pricing"ie lower the price, destroy the competition and then jack prices up when you are a (near) monopoly, I doubt that there is any likelihood of it being challenged/prevented by Ofcom or Gov. As said below who is going to argue for higher prices in the current climate .Additionally, as I have posted before the concept of multiple suppliers of a utility to homes is nonsense, we don't have multiple water supplies or electricity or drainage to all UK households why on earth should the UK spend billions on cabling every house multiple times???
I expect a minor outcry from BT's competitors, the likelihood of at least one competitor signing up (and hence saving the costs of their own fibre, maybe even contributing some cash for the joint enterprise?)
As the markets appear to be showing, this is a tactically astute move and will simplify the fibre field at a significant benefit to BT in the medium term , I will hold/add.
I have on a number of occasions on various boards on this site made the point that very few shorts are "naked", they are often used to hedge long positions(whether stock or debt)in the shorted company, as part of a long/short"pair trade" with a similar competing company, in situations where rights issues , bond issues or forced disposals create anxiety and SP pressure or as part of complex "quant" strategies based on upcoming news on interest rates, inflation, exchange rates .......
There are a few companies which specialise in shorting who believe that their research has uncovered something the markets don't know and who then, of course, publish to seek to "prove " their negative evidence and drive the price down .
In the case of Ocado the long grind down, accompanied by the crises of the last couple of years has made shorting here(and in many other companies) a profitable bet, I suspect that this may no longer be true unless/until the SP has risen some considerable way from here.
For the record I have absolutely no problem with shorters, they serve a useful purpose, are entitled to make money any legal way they can and often provide a sobering counter to the misplaced euphoria of investors both institutional and private.
Daz.....no, as a normal shareholder for some years,I acquired many thousands of "c" shares worth fractions of a penny which I accumulated, then sold, incurring dealing charges. The revenue they produced was a tiny fraction of the cap app of the "a" shares.IMV RR will over the next few years return to being an SP growth company and not a significant divi payer, I plan(hope) to hold for a 100%+ SP rise over the next 2/3 years!
Having not visited this board for some time and recently skim read the last few weeks posts I note the regular reference to the return of dividends asa harbinger of SP rises. As someone who held RR through the 2009-2019 decade I feel the need to pointout that RR has always been both a reluctant and ungenerous divi payer.While betweeen 2009and 2014 the SP rose from ~40p to about 1240p that growth was not accompanied by significant divi payments,instead the company issued "C" shares at the rate of dozens per each "A" share held BUT valued at a small fractions of a penny. Holders were required to sell the "C" shares if they wanted a cash return on their holdings . Without going in to the details the scheme had various tax advantages for RR and disadvantages for shareholders.
I doubt the return to such a system but fully expect RR to issue small or non- existent divis for some time to come and holders must accept that SP apprreciation is the only reason to hold here.
Those who are sufficiently interested to dig deeper are referred to this table
https://www.rolls-royce.com/~/media/Files/R/Rolls-Royce/documents/investors/c-share-historical-information-july-2019.pdf
Brief study will show that the cash return on RR shares remained miniscule even while the SP trebled.
I'v e just come back from Vancouver (this years chosen spot for the family based in Sydney and Singapore and UK to have our pre-xmas get together) and while the guys were skiing and the girls hit the malls, I was wandering and watching stuff.
OK I'll get to the point , Vancouver is a typical modern city and it has all the criteria of such, major road networks busy with traffic, shopping malls , mega food shops, lots of foot traffic..... , so I thought I'd do a bit of research and this is what I learned.
Over 56%(and growing by 1-2% pa )of the worlds population now lives in a city.
Very few of them own a car
The average weekly shop in the developed world costs 150-200$ and weighs >10kilos
I spent an hour or so in the local Safeway , a mega sized food shop and one of canada's biggest chains.
As in the UK there were dozens of staff pushing carts with 8 shopping baskets on them loading delivery orders from shelves, in conversation they said they had an hour to load 8 baskets and they were paid 18-20$ per hour ie the direct labour cost of each basket is 2.50$ (given employers additional costs it's probably more like 3-3.50$)
the average basket size is about 150$ and safeways profit margins are low see this from a local news outlet, Moosejaw today (honest!)
"For Sobeys/Safeway, the profit margin on sales ranged from . 07 per cent in 2018 to 2.48 percent in 2021, averaging 1.77 per cent. For the current year in the first six months, Loblaws{another N America chain} showed 3.4 per cent profits on revenues. Sobeys/Safeway had 2.62 per cent profit on revenues.8 Nov 2022."
So it doesn't take a genius to see that they are probably losing money on each basket.
Using my business card (I set up a boutique investment company a few years ago so that I could operate as a Family Fund) I wangled an interview with the store manager who among other things said "delivery is the way to go - everybody is doing it but almost none making a profit- but we have no choice, we have to offer it and wait 'till market saturation reaches the point at which it is profitable....."
I continue to hold OCDO.....
see this quote from the FT :
"GMB Union “reluctantly accepted” an improved pay increase of 8 per cent from DS Smith"
It may be a mere coincidence that SMDS also announced the closure of a Kent factory and MR said
“The other parts of [DS Smith] are subsidising the UK. And that can’t go on forever,” said Roberts, adding some of its UK factories are now lossmaking."
The company is now more internationally focused and more profitable.
....for this share so I'm buying!!I held VOD way back in the 90's and watched the price rise beyond all reasonable levels and then buy Mannesman in perhaps the worst takeover of all time, at which point I sold having made 400%+. I have not held since until now , buying at just below 89p.i may lose money nd the Sp may in all probability fll from here , but it is my view that revenues will carry on at stable levels and the enormous debt can be managed until rates begin to fall again(early next year). I have the patience to hold for at least two years and even if VOd is reduced to selling off parts of its empire , i fully expect the Sp to recove from its currently ovesold position.Apols for the typo's, i'm at heathrow, sans spellcheck and hoping my luggage was on the same plane as me from Vancouver!!
Currently in Vancouver and the N American view is that Biden's release of the SPR with the sole objective of swinging mid- term results has worked.BUT the US will now seek to replenish and they don't have enough financial incentive to drill more fracking wells while borrowing costs are high so they are pushing OPEC to raise output. It looks like Saudis may comply. The general view here is that we have another year of high ($80-120 prices)whatever the Ukraine situation is. Strong belief that there is a lot of relabelling going on in oil cargoes, lots of ship-ship transfers and many countries complicit in repackaging Russian oil.The N American general distrust of European government's commitment to fight Russia militarily or economically is widespread. They fear that a cold winter would shatter resolve and that Putin is banking on that to wear down western commitment to support Ukraine.They are buying oilcos.