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In my view a positive article on Samoas and LGEN in the ST today.

Apologies for being off-topic - and if you have seen this before - but it reflects some of the debate on this board.

https://s3-ap-southeast-2.amazonaws.com/atpt-blogs/The_Parable_of_10_Men_in_a_bar.pdf

Eccles04: the problem with quoted yields is that sometimes they are quoted on the dividends paid in a calendar year and at other times on the dividends paid on company’s financial year. The quoted yield on this site is calculated on a dividend of 19.64p that relates to neither - so where this number comes from is a mystery to me.

Services of Elon Musk, perhaps, to help sort out the bloated UK state? Well perhaps not, but it must be done.

A quarter of my council tax just goes towards paying for council pensions!

The problem with looking at International indices is that there are the magnificent 7 and there are the rest - the former dominating and being about 40% of the S&P500 and 20% of the world indices.Their growth has been truly incredible.

“The Magnificent Seven group of large-cap technology companies—Apple (AAPL), Nvidia (NVDA), Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOG)(GOOGL), Meta (META), and Tesla (TSLA)— gained 63% in 2024, after rising more than 75% the year before.”

Dizzy just looking at the numbers. I won’t be betting one way or another as my crystal ball is cloudy.

DB - The only conclusion one can draw from your experience I’d that you hugely overpaid for your shares in LGEN or you the interest rate on your bank account was super generous.

For calendar year 2023 LGEN paid a dividend of 19.64p and in 2024 20.63p equating to a yield on say a moderately high 240p SP of 8.2% and 8.5% respectively. How can that not beat bank interest?

The moral of the story is: If you want to make money on stocks don’t overpay. But then you don’t want to learn from the mos t successful investors of all time like Graham and Buffett/Munger so best you stick to bank accounts - you will sleep easier.

“why would a rational investor buy companies/shares where the P/E s are in their 50’s or higher, it’s not sustainable mathematically.”

If you are talking about value stocks - like LGEN - the answer must be they would not buy at those PE ratios as a 2% net income yield is less than the yield on cash.

But if a company is expected to increase its earnings by say 10% plus over the coming years then one is talking about a different ball game. Of course future projected future earnings have a large degree of uncertainty about them but that is the nature of the game. I would have loved to have bought Amazon, Nvidia etc. when they made no profits at all, but did not have the vision through the windscreen the Captn. talks about.

Growth shares value is all about future - not present - earnings and if you get your vision and assumption right, mathematics will provide you with the sustainable answers.

Guitar solo - certainly worthwhile pointing out the difference between banks and insurance companies. Very different animals.

And their gearing/ leverager requirements quite different. . As Buffett points out: “Insurance companies get their money upfront when people pay their premiums, even though the actual costs (claims) might come later. This makes it an appealing way to do business.” Contrast this with banks who have to borrow something like nine times their equity to make any decent money. I hate highly geared companies and the 900% geared banks make them fragile in my estimation. I no longer invest in them.

Personally, I have never liked “E” or net profit as a measure of worth of a company, as it includes items like D, A and write downs - all of which are non-cash items and not always relevant to assessing a company.. And it does not take into account present capital needs. For my own analysis I always add these non-cash figures back to E to give me a “cash E”which has more meaning to me.

And it has even more meaning to me when I subtract CAPEX and changes to net working capital from this “cash only E” to give my assessment of Free cash Flow (undefined by accounting standards), but in the end is the figure of most relevance to me. It is after-all the money left over when all business cash expenses have been accounted for - and which Buffett refers to as the “owners funds”. These are the funds that can be used for acquisitions, dividends and sharebuybacks before having to raid the piggy bank or using other financing options. The use of these “owner funds” often requires BoD - and sometime shareholder - approval.

But working it out for LGEN is a nightmare - for other companies it is simple as ABC (Cranswick for example, where they do all the hard work for you).

Happy and successful investing to all in 2025.

‘I don't need to read books to know where I'm making the most money.”

Perhaps not if you are happy with the returns you are getting on your investment, and don’t anguish over every downward gyration off the SP.. But to make the most investing in stocks where better to lean how to be successful than to study the “teachings” of the most successful and insightful investors of all time (Graham) and those that have developed those insights to a new heights (Buffett). These insights have served me well since adopting those approaches many years ago, as I suspect have others on this bb - and to me it is the only logical way to go.

But as long as you are happy and successful with your own approach, I am happy for you. Do it your way.

“If these are so good why wait for them to drop? Buy them anyway.”

If you want the answer to this read Chapter 8 and 20 of Graham’s book “ The Intelligent Investor”. Then study the chapter on the behavioural aspects required to invest successfully. If you don’t understand MrMarket and the need to invest with a margin of safety, stick to highly taxed and inflation destroying bank deposits.

Sorry - and 50% on comparing total shareholder return vs FTSE100 and similar FTSE companies. Conclusion! What LGEN CEO wouldn’t prefer buybacks over dividends?

I don’t think there is a SP target per se. They share plan of the CEO depends on EPS growth (50%) and comparators

“Price is what you pay, value is what you receive!!!”

Captn. I thought you covered some of Buffett’s key points - many could learn from those IMHO.

Another way of thinking about the above is that the SP does not determine the value of a company, rather the value of a company determines (or it should) the SP - share being what it’s name suggests.

Sorry - my understanding was incorrect. Ignor my lost post.

My understanding is that there are two types of plans to reinvest dividends - DRIP and SCRIP. The tax situation is different - DRIP incurring no income tax while SCRIP dividend plans incur income tax. The service offered by brokers like II is a SCRIP to the best of my understanding. If I am wrong, which I don’t think I am, I have been paying income tax on my occasional SCRIP dividends unnecessarily.

Although I don’t participate in it, I believe LGEN does offer the possibility of a DRIP dividend, but whether this is possible through a broker like II, I don’t know.

Zac - different issues sure - but with a common, yet a diametrically opposed, effect. Surely a share that represents an increasing ownership of a company must be good, just as surely a share that represents a decreasing ownership of a company must be bad for the holder of that share. The logic is consequential IMHO.

Buffett, for one, has been quite vocal on these matters for decades..

Anyway each to their own analyses, observations and beliefs. If their approach works for them, great, and I wish all fellow investors in LGEN the best of luck, because luck is what is sometimes needed to be successful in the investing game.

‘Well, I'm firmly in the camp that buybacks don't offer me, the shareholder, any additional value.”

In that case you will be in the camp that believes that issuing shares to pay for share based compensation does no harm to the shareholder. It does - it costs him/her as does any other business cost. The less reputable CEO’s may argue that issuing shares is free to the company as it does not incur any cost for the company. That may well be the case, but issuing shares dilutes the ownership of a shareholder in the company _ so each share has less claim to the future profits of the company. A long term loss to the shareholder where buybacks create a long term gain for a shareholder. If you don’t believe the one, you must logically also not believe the other. If you do the maths, and believe that the SP must eventually reflect the intrinsic value of a company- which depends on all future earnings -you can only logically draw one conclusion.

“I have NEVER seen share buybacks”

A pity, because this has not been my experience.

Over the short term it is often not that obvious as, even if 5% of the shares are bought back and cancelled, is effect would only manifest itself slowly over the year, and is a small change compared with the gyrations caused by Mr Market’s ill mental health. And this presupposes that the share were bought back at a low price, that the profitability is maintained, and nothing like interest rates have affected the discount rate used to value companies.

If you want examples of how share buybacks have been used to good effect look at Apple and even Buffett’s Berkshire Hatherway where the duel compounding effect of increased profitability and increased ownership represented by eash share has worked wonders over the years.

Spot on Captain. I look at LGEN as yielding more than 10% this year if you factor in the share buyback which reflects the total amount given back to SHs. Ok, Mr Market may take time to reflect this buyback in the SP, but, overtime it should as there are fewer shares in issue for the same cash generating capability of the company.

The way I see it, from a fundamental point of view, is that dividends result in a saw tooth behaviour in the SP - falling on ex div, and then rising slowly as the company accumulates profits.

Buybacks result in no immediate change in the SP - the cost of the buyback being offset against a greater share of the company by the shareholders. The SP should then rise slowly as again the company accumulates profits for distribution to fewer shareholders.

How Mr Market behaves on temporary changes to the supply / demand balance is another matter.