Ben Richardson, CEO at SulNOx, confident they can cost-effectively decarbonise commercial shipping. Watch the video here.
Took advantage of the Xmas offer tonight. I think I went a bit overboard with this one though. Bought £140 worth of chocs! Thank God, for the £20 voucher.
So nothing I disagree with, makes total sense. What you described Wigan is pretty much the result of:
"In the short run, the market is a voting machine but in the long run, it is a weighing machine."
So of course short term TW can be undervalued or Tesla can get overvalued. But long term the price will come down back to Earth in case it's not justified. I don't short though so I'm more interested in the opposite - companies like TW that are cheap and will go up to their intrinsic value.
Sure, it doesn't happen for each stock and sometimes it can take years for the value to be recognised - but eventually it does. And you don't need Mr. Market to have an "aha" moment and re-rate it. The company can simply start buying back stock or it will be taken over by another company at a premium.
Strictly, I'd like to add that I'm not against buy and hold, I do have such stocks in my portfolio. If it's a great business I don't sell it at intrinsic value because I'm confident it will keep growing. However, I'm not sure a house builder is that kind of stock - it's a mature business and the growth potential is somewhat limited. The UK housing market is divided between several housebuilders and there isn't much room for growth other than from the population growth resulting in the need for more and more houses. That said, TW is probably great if you're a dividend investor and need the regular income.
I suppose all three of us have more or less the same ideas but our circumstances are slightly different - investing can vary quite a lot based on personal circumstances.
Strictly, I agree that it might sound like timing the market and of course that's always a risk. Personally, I calculate an intrinsic value for each share that I'm interested in based on DSF analysis (or similar that uses EPS). I add some margin of safety in case my understanding of the business is somewhat flawed or if something unexpected happens (Covid). I compare the resulting share price to the current one and decide whether to buy/hold/sell. So it's based on earnings and cashflows and not on timing. The timing bit is that it might take a while for a share to reach its intrinsic value and in some cases it never does (conglomerates for example, tend to trade at a discount).
TW is below intrinsic value based on my math.
Thank you for the excellent posts.
As trunky mentioned, this is a cyclical business - it depends on the housing market which depends on the interest rates and the overall health of the economy. So for me it's not a buy and hold type of business like a Facebook or Berkshire, for example. A quick look at the long term chart tells me enough - it looks more like an automaker than a compounder like Facebook.
That said, we're in a bull market for housing now and the share price doesn't really reflecting that. Even a rise in interest rates is not enough the explain why the share price is lower than it should be and I expect it to re-rate higher.
Wigan, regarding the dilution last year I agree with you. As I said share buybacks should be done when the price is cheap and shares should be "sold" (as part of M&A, capital raise) when they are high. TW did almost the opposite last year, they did a raise when the share price was average (pretty much at today's price I think). Instead they should've had some cash set aside for rainy days that they could've utilised to buy the plots instead of having to do a raise.
It really depends on the growth rate where fair value is and that's why it's so hard to value these growth companies. If growth is 10%, fair value is £27; for 12% I get fair value at £34-35; at 15% I get £41-42 (like the Morningstar lady); at 20% it's indeed £60.
From the recent RNS:
"These high comparative growth rates, combined with current demand and supply pressures, are reflected in H1 FY22 sales growth expectations in the mid-single digits. We do, however, expect sales growth to accelerate in the second half of the year to deliver full year sales growth of between 10% and 15%"
Most analysts seem to use the growth rates above, i.e. between 10% and 15%, as what they care about is the next quarter or two. So you get the current price of £25-26 and the potential to easily go back to £40-ish on good news. Then it really depends on how the company can execute.
Historically they've been able to achieve growth rates of 40% so I'm optimistic that the surprise will be to the upside and we'll see the share price back at £50-60 again sometime next year or the year after.
Same here!
Wigan, I really hope that management aren't paying too much attention to the share price and are actually focusing on the business. Many investors are spending a lot of time and energy looking at the share price, to their detriment I might add.
However, management should be focusing on the long term success of the business and on executing on their plans. The share price will naturally follow over time. So unless the share price is stupidly low in which case they can do buybacks or stupidly high in which case they can do some M&A, I hope they are mostly ignoring the movements of the share price. Just like most investors should, by the way. Going back to Buffett - when investing, have a mindset of a business owner rather than a trader.
I've followed T.Rowe's example and have topped up as well. Cheap as chips!
I think the capital markets day is on the 10th. I think there's a decent chance they announce a new CEO next week. If it's a good choice I can easily see the share price shooting up 10-15%! We could be back at £3 before you know it.
The environmental debate is a complicated one. Environmentalists try to push eliminating plastic, getting rid of nuclear, etc. at the same time they push for CO2 reduction. The problem is that the proposed technology - renewables, doesn't really work when it's more than 40-50% of the grid. What do you do on a windless night? Do the lights go off? We have no means of storing energy on a large scale. If you look at the way batteries have improved since Nokia 3310 to iPhone S6 (15 years) - battery capacity has merely doubled. The answer should probably be nuclear but the greens absolutely hate it. As a result gas prices are going through the roof. And that's before all cars move to electricity.
I'm trying to be optimistic but I don't see this energy transition working out. It's going to take longer than people think and probably all efforts will be on reducing CO2 and people will pay less attention to plastics in clothes, etc. Using less energy is probably going to be more than what most people can take. Taking their shopping sprees away would be too much.
Last but not least a lot of the people who shop at ASOS and BOO are working class kids. Global warming is more of a problem for the middle classes who have no other problems. Macron realised that the hard way after he increased petrol prices with a green tax and enraged the working classes which resulted in the yellow vest movement. He backtarcked promptly.
This is not just anecdotal - the environment is only 3rd among the most important issues for the British public and that's only because people lost interest in Brexit. It stands at 33% but only few months ago it was 24%. I guess the media banging the drums before COP26 has got people's attention but it might be temporary. Also the 33% probably don't shop at ASOS anyway and most likely correspond to the middle class, big city voters:
https://yougov.co.uk/topics/politics/trackers/the-most-important-issues-facing-the-country
Thanks Wigan, it's on the BBC now as well. Little detail though:
https://www.bbc.co.uk/news/business-59054358
"7. The cladding crisis
Many homeowners of high-rise flats have faced crippling costs owing to the cladding crisis, following the Grenfell Tower tragedy.
A levy on the biggest property developers of high rises to pay for the removal of dangerous cladding has been confirmed by the chancellor."
Tbh I'm more worried about increases to CGT. There's been talk about matching that to the income tax.
Going back to today's price action, I've no idea what caused it which is why I'm not a trader. My guess would be the budget, minimum wage increases, etc. But what do I know?!
Jonnie, sorry to hear that. If it makes you feel better, my average is 177, so 4% higher than yours. It was 178 but I scooped up a few today. I'm getting paid on Monday so hoping to add some more next week.
I'm 15% underwater here but don't intend to sell below 200. I think fair value is north of the pre-covid high of 230. More like 250-300. I can collect the juicy 5% dividends and reinvest them while I wait.
Just to put into numbers, let's say it takes 2-3 years for us to get back to 230. That's 50% upside from here plus 5% divi. That gives me 20-25% annual return on today's prices. No brainer!
molokai thanks for that, I didn't think about the options.
Just to put the record straight, I have to admit that I also sold a few around 500 despite saying earlier (at 440 price level) that I won't part with any shares. The main reason though was to average down in ASOS where I've had my head handed to me and also to start a position in Facebook. They tanked about the same time HOTC went up.
I still have the majority of my shares though and will buy back what I sold as soon as I have some spare cash. Though closer to fair value this share is still undervalued IMO!
anon, not so long ago you thought that 440 "seems miles away" so I'm not sure I trust your crystal ball.
I don't see what's the problem with Institutional Investors unloading. Actually, that's expected. Most of the big fish are basically short term, momentum investors. If they hold stocks that underperform for more than a quarter or two against their benchmark, they get FIRED!
So if a company says they will have a bad quarter or two (as ASOS and BOO have), these guys are heading for the doors. This gives us little guys an enormous advantage that the big boys with all their quants, researchers and data reports can't match. We can buy the cheap stocks as the institutional guys are selling and hold till they decide to come back. Once the company says things are back to normal the big money will flow back in and we'll make a ton of £££.
The only catch is that you need to make sure that the company you've picked will indeed come back and the problems are temporary. I think in the case of ASOS and BOO that's exactly the case.