Member Info for LunaNera

LoggyLogbot, that figure is reported by Stockopedia for EG. It's a forecast (ie estimate), so take it with a pinch of salt. On the other hand, you'd find it rather difficult finding another company with financials like SLP and at current price levels. So the estimate ought to be rather accurate.

Flakey, their FH2020 has all the info you need.

https://www.burfordcapital.com/shareholders/announcements-container/hy-2020-report/

So far it is flat with some rather impressive improvements on returns. They are going through great lengths to explain the business better than ever before. The BOD are doing their job (in case anyone wonders).

"Many corporate defendants used the pandemic as a device to try to avoid progressing with litigation and were reluctant to settle cases due to liquidity concerns. We did not see settlement activity return in earnest until June, and we still see court slowdowns and defendant efforts to capitalise on the virus. It is important to bear in mind that delay for us is simply deferral—and is often profitable for us. However, there is likely to be a significant uptick in litigation activity as the world normalizes, which will continue for years. The US has already seen more than 5,000 COVID-related lawsuits filed.2 US business groups believe that to be the tip of the iceberg. "

It's a rather succinct and candid summary of the year to date. For some market makers this may mean that they would need to rebalance in order to meet their (myopic) targets. Individual investors can be more generous with time....

I do like the outlook of BUR having some interesting opportunity due to the COVID-19 fallout (one can add Brexit to that waiting list).

So yes, short-term it may not look great but I see no need to rebalance since at low levels like this the price could jump rather unexpectedly and I would like to catch the move.

All in all their performance was unexpectedly positive given the challenges they faced.

Price is governed by supply and demand. It's that simple.

News or events can affect this, but also a plethora of other reasons. Without a survey the reasons would be rather difficult to establish.

However, when looking at the latest reported earnings and returns at a glance, things don't look so good. PE of 14 and returns in single digits would make it appear in the correct range. However, we all know that last January the earnings were almost as much as the preceding year (it was rather well explained in their annual) and thus I am not surprised the ratios are skewed at present.

Unfortunately the timing of.revenue is something the company has not much influence over, so we need to.chalk this off under a 'lumpy revenue period' and wait for the next return.

Worst case, a market panic due to another lockdown would result in a (welcome) further top-up opportunity... I don't think it would affect SLP significantly by the time the next dividends are due.

It is sometimes advisable to review ones approach before pointing the finger at others for ones' mistakes.

At 2000.00+ it was an extraordinary risky purchase. Consider my fair value calculation, which puts the company around 1500.00 and I want a 50% margin of error (or guaranteed return when I'm right), which puts the purchase price around current levels.

I may not suggests this approach would fit everyone, but it's still preferable to purchasing assets well over intrinsic value and then blaming others for ones' mistakes.

I just realised that I forgot to send MW a x-mas card to thank for the opportunity...

1:4 stock split...

Applying Graham and Dodd's little formula, I get a huge margin of safety and a buy at under 15.99 -- this is off the charts!

I am just researching this one, but thus far it's a flat out Zulu stock. Not sure why there has been such bad sentiment, but this could develop into a little gem. Let's see what's under the carpet...

Very happy if SLP is available at even cheaper prices... Let's hope the downward trend continues for a bit ;)

In human irrationality lies the opportunity for the astute investor ;)

Alavib, I would not consider speculation by others as a good indication as to the future of a company. A lot of things can happen in business, positive and negative alike. Nobody is able to predict the future (yet?). So you end up with a range of probabilities and different approaches on how to evaluate them. Listening to forum chatter is one method, another would be looking at charts. For my part I like to think about human activities and how our societies change. I look at the management's ability to cope with adversity and as well as the prospects of the solution proposed. I have seriously no idea where a share price is headed in the shorter term, but I would expect mood swings and mispricings to even out over a longer period. My valuations are rather simple (adjusted Graham and Todd formula) and they do bake a margin of error into it. I would expect litigation financing to increase over time. It is proposed as a new asset class and as such some degree of volatility is expected. This ranges from reasonable objections to the utter ludicrous (see Muddy Waters' claim of the company being a Ponzi scheme).

My only advice would be to be patient and see weaknesses as top-up opportunities if you can see the business doing well over the next ten years.

And remember, more listing means potentially more buyers -- but also more sellers. I never took much notice of their US listing as something of concern. However, there are a lot of previous investments that can unexpectedly come to fruition. IIRC the last annual report mentioned that timing was rather unfortunate and that in January the income was substantially more.

I like to fact that they can take an educated bet on a 30% return. Over time this ought to yield to some rather impressive compounding returns... I'd focus on that.

Making terrible decisions is part of getting to grips with investing. Of sorts it's unavoidable because for as long as the outlook is favourable, there is no good time to sell. Timing the market can lead to mistakes one regrets rapidly. I often feel that selling is much harder than buying, unless one held something that goes into irrational territory (see TSLA), but even then price action would make many seller (or short seller) look like a fool.

That puts me strongly in the fundamentals camp. As long as these are sound and management are excellent (SLP certainly oozes of good management), then I am happy to hang on to it, regardless of price action.

About 8 years would be the minimum horizon, unless there is a substantial disruption perceivable.

Oooh I do love it when stocks like this one go down in price! Hopefully it drops a bit more for a top-up opportunity :D

I tend to go with Graham and Dodds litmus test. After all, these are projections about a future -- which is never certain. I do, however, use rather pessimistic values for these. With a EPS (TTM) of 0.17, a 20yr bond rate of 4.60% and a growth rate equal to 3.75% (20 yr inflation rate), I get a fair value of 1.72. I don't dare using 5yr CACR growth rates because it's off the charts then!

I also want a 50% margin, so it's a flat out buy under 0.86p. This formula served me well, but one needs to look at the intangibles of a company as well (and these look equally good).

I am not too happy about recent price increases though since I'd love to build a bigger position at discounted prices over a longer period of time.

"The stock market is the only market where participants complain when prices go down"

Hope this helps...

I'm looking forward to markets throwing a sale... every single time... don't you? Shares like BUR are a much longer story anyways. I'm grateful for the opportunity adding to some positions at a further discount. The longer they stay low, the better ;)

Oh there is much better. Same PEG as BUR and higher returns. Lower P/E actually. Look harder :)

BigBaggerHungry, if they uphold their stunning growth in net profits at the current rate, this would take about 4 years, provided sentiment remains this low. It is not uncommon for businesses growing at this rate to eventually trade at much higher valuations.

Time will tell.

I would not mind another dip to 350p tbh.

dublin2: "Every time I try to diversify my holdings away from Burford I cannot justify it."

I do disagree with that statement. Not to contradict you, but there are quite a few interesting opportunities out there trading at an even greater margin of safety than Burford.

I am long Burford and I really like their proposition. So I am not saying that it is a bad position to hold, au-contraire, but it is important to remain open to the other opportunities to make one's hard earned cash work.

As far as the valuation for BUR is concerned, it is a bit skewed since important results came in AFTER their reporting deadline for the 2019 filing. Nevertheless, as a litmus test I tend to use an adjusted version of the Graham Formula.

The first test I run is whether the company sells at a 50% discount with at least a growth equal to the average rate of inflation over a 20 year period (3.75% - NOS).

Using a price of 721.00 with that growth rate and a TTM Eps of 65.7p (and 20yr bond yield of 4.6%) I get a fair value of 675.57 and a buy under 337.78p. I imagine quite a few people took a similar view recently.

However, taking their annual compounded growth rate over the last 5-6 years (CAGR) which is about 34% (stunning) of NET PROFIT GROWTH (let that sink in), the the fair value turns out to be 2576p with a buy under 1288p.

I'd imagine the reality is anywhere in-between, and the likelyhood of positive surprises can literally make the whole valuation jump dramatically (someone accused me being a fraud on this forum for pointing that out -- go figure).

So yes, it is a great proposition and I would love for the price to remain depressed for quite some time since it take me a lot of time to build a meaningful position (right now I am on the buy side :) -- it's in my interest for the price remaining low).

Just to put a few numbers in the air. Note that the Graham Formula is a litmus test and not something we would do when actually putting a purchase value on a business or for auditing purposes. However, it served me well over the last decades ;)

Hope you find this interesting. What are your estimations and expectations as to net profit growth over the next five years?

Best, LN

SLP trades at such large discount to (my estimated) intrinsic value, that I won't lose sleep over whether the purchase price is 55, 60 or 70 p even.

It's rather interesting to see that this company is neglected by the institutions.

Meanwhile I'll profit from building a position at discounted prices, hoping that the SP remains low for quite some time.

"The stock market is the only market where participants complain when prices fall"

whoops. Should have written "below intrinsic value". Apologies. Shame one cannot edit.

Mathurin, yes. It still looks like an attractive proposition. With their expertise they can make rather good bets on lucrative cases with a 30% margin.

Being a rather novel approach to litigation, the accounting is often mis-understood, ergo the recend disturbances.

This often leads to mis-pricing and sadly, a lot of egg on the face of people claiming fraudulent activity.

For those who are willing to dig deeper into the fundamentals, this is a great opportunity though. A share in this business is still above 50% discount to intrinsic value (for those who bother). Arguably, it was overpriced at peak levels, but recently it dropped way to far.

I would expect it to take a bit of time for market participants to understand how their business works. Even if some high profile cases wouldn't work out, the proposition is still rather attractive. For a very handsome return they can make rather educated evaluations as to how to deploy capital for a market beating return.

My biggest concern with this company would therefore be the staffing risk. It is highly reliant on the competence of a few. Replacing key participants in the process requires rather careful thought. Staff risk is therefore one of the key points to monitor. Without that expertise the business could land in troubled water rather swiftly. This is not an imminent concern but something to keep in mind.

Eventually, the share price will find it's just level. In the meantime, the depressed price is a welcome opportunity for those seeking to build a substantial position.