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"Well robleo mate, this is not just your problem. It's almost everyone's problem including myself. "
Well put and +1.
My view is that you sell if:
- something has negatively changed in why you chose the shares
- you don't believe that the price will realistically recover
- it's keeping you up at night and you can afford to exit
I don't believe that a single management mistake is enough to exit - unless I no longer understand what the management team is doing. It's interesting to note that Buffett usually patiently waits for bad news before buying a target company - as long as he believes that it's a one time error. It's good to look up his history with Amex.
My stinker this year has been DEC. Bought for a high yield and because I read (and understood) the (clever) business model. I ended up -30%. The business model was unchanged and the sector out of love. But I no longer understood what the management team were doing. It got to the point where the first thing I did every morning was check the share price. I exited at -35%.
I've been sat on a large, negative position on a -25% position in PHNX for most of the year. I understand the business and respect the management team. Friends work there and tell me that the place is well run. So, there's nothing in the business that scares me and my view is that most of the share price is because of the macro environment (interest rates and SVB) and because the whole sector has been unloved. I'm currently at -15% and happy to hold.
I've also been largely sat on a -20% position in BDEV, which I bought because at one point it was trading at 35% discount to asset value; sat on lots of cash in hand; sat on a large land bank and well run. I also bought BDEV because it operates at the more premium end of the housing market - so has the ability to go "lower" cost if it chooses. It's much harder to "go premium" if you operate at the cheap end of a market than the other way around. I'm now +30% because the interest rate outlook is better.
I'm currently -20% in ART and buying more. They've just had a profits miss, which will pass and is thinly traded - so every piece of news results in a share price overreaction.
All of which makes me sound like a loser(!). Overall, the UK shares in my portfolio are up 6% this year in what has been a pretty rubbish year. So, I've won more than I've lost, which is all you can ask for.
My view on "paper losses" is that they're only that if you're still within your envisaged holding period. So, if I bought to hold for 10 years+ then it's a paper loss. If I bought in the expectation of a "quick" profit then it's a loss.
This is worth a read if you've not read it before. Warren Buffett on hamburgers - https://www.roywalkerwealth.com/2018/01/warren-buffett-on-hamburgers.html#
My understanding of the Ferovinum deal is that it’s essentially a deal where SMWS can choose to sell stock at a discount of 30% to the agreed B2B trade value. It provides fast access to £15m of cash flow without raising debt or having to fire-sale stock.
It’s not the retail value, which includes VAT, duty, bottling, shipping.
Just to provide confusion, the agreed valuations look to be above the asset values in the accounts - suggesting the stock has been “prudently” valued.
“Dogs.. why is aviva best income share in your opinion... isnt leg n gen higher divi and more stable? What about vodafone 10 pc and ripe for takever as it bottoms out.”
I wouldn’t argue you Av. over LGEN (over PHNX over MNG) - each has their own merits and each are surprisingly different businesses under the hood.
But, IMV, all of them are way better propositions than VOD, which is laden with debt; IMV poorly led; and struggles to impose a corporate culture over the various national cultures in its operating entities. The amount of duplicated effort within the operating entities is horrendous.
There is the oft-repeated Buffett quote that “It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Having variously worked in Av., LGEN, PHNX and VOD (across four countries), my view is that the first three are good, well-run companies that have latterly been out of favour; whereas VOD doesn’t quite make my hurdle rate for “fair”.
VOD is great if you want to take a punt on a takeover. But, IMV, a company in decline that is more dividend trap than ‘value’ income share.
"If the index-linked bonds are being held to pay for index-linked annuities, then LGEN's receipts on those bonds and payments on the corresponding annuities will rise about equally. So no gain from inflation."
Remember that only circa 30% of annuities are index-linked. And most of those have a cap (IIRC of 6%) on index-linked increases.
Whilst it's easy to get focused on bonds and gilts, the significant change of direction that Nigel Wilson brought with his "inclusive capitalism" agenda has been the buying of hard assets that provide (almost always) inflation-linked returns on assets with asset lives far greater than the likely annuities they back.
This £1bn+ commitment to redevelopment in Cardiff is a great example of what's being done - https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-brings-total-real-assets-investment-in-cardiff-to-1-billion-as-regeneration-continues-with-200m-build-to-rent-scheme
As is the £350m+ commitment to Bristol - https://group.legalandgeneral.com/en/newsroom/press-releases/bristol-city-council-secures-350m-investment-from-legal-general-for-bristol-temple-island-regeneration
And regeneration of Sunderland - https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-and-landid-top-out-in-sunderland
Whilst it's been the case that pension funds have owned hard assets for years, it was much less common for life insurance companies to own them. A (in my view) Nigel Wilson has been very clever about how the investment has been targeted. If you look at those schemes you'll see:
- (good quality) build to rent housing - giving (generally) inflation-linked returns
- secure, long-lease lettings to central and local government, which will have an inflation linkage on rent reviews
- good quality office space, but only if there is a proven local shortage
- hotels
- a lack of retail(!)
[Hotels might seem a little odd, but come with a huge tax perk that 100% of the build cost can be written off in the first year.]
Taken at 65, an annuity will typically pay out for 20 years. Meanwhile those hard assets will be paying out for much longer.
As an example - student accommodation built for the University of the Creative Arts and then let for 35 years on a full repairing basis - https://group.legalandgeneral.com/en/newsroom/press-releases/legal-general-secures-student-blocks-at-university-of-the-creative-arts-farnham
Personally, I think Mr Wilson has been much more canny than people currently give him credit for.
“In my experience, when companies say that they 'benefit' from higher inflation…”
Life insurance companies prosper on high inflation; high interest rates and high morbidity.
Only around (IIRC and I used to work for L&G) 30% of annuities are index linked. So high inflation erodes the value for the annuitant whilst high interest rates (relatively) protect the annuity provider. Higher morbidity rates (thanks COVID) reduce life expectancy - reducing overall payouts.
All of this will take 10 years+ to feed through - which is why investors get less excited about it than they should.
The 30% of annuitants with index linked annuitants generally overpay for the index linking in the first place (see below).
[Three, fun fact sidebars…
People who voluntarily opt to buy an annuity are statistically likely to live longer than those forced to buy an annuity - so get penalised in the rate they get.
Similarly, people who voluntarily opt to index link their pension are statistically likely to live longer than those who don’t. So get a worse rate.
The people who index link their annuity effectively shift their income from their “healthy” years when they can spend the money, to their “longevity” years when their poor health prevents them from spending it. So end up paying a greater proportion of their oen wealth on care costs.]
“I’d have preferred another dividend reinvested sub 500 before it’s rise”
It’s the case that we all want the share price to go up - except for our dividend reinvestments.
"Funny how Porchyboy rarely posts during rallies."
They are currently baiting peeps on VOD, BATS and BRBY.
...ok, not really.
From 26 October...
"Just hit my target 440, god I’m good, the backchat I got from you 🤡’s when I said months ago where this was going. New target 396 by Dec…..the stuff under the waterline with this junk still to come out…..enjoy. God I have made ridiculous sums of money shorting this year, get yourselves over to IG or someone and buy in the money PUTS on this rubbish and make 5x plus what you are making ( losing 😂 ) on U.K. ftse shyte like this. Dividend numpties."
Let's hope that Porsche1946 put their money where their mouth was and it's going as well for them as they deserve.
“Buy quality US growth every time.”
Is that the “quality US growth” like Alphabet that’s 15% below where it was two years ago…
…or Tesla that’s 20% below its peak two years ago…
…or META that’s 10% below…
…or the NASDAQ that’s 15% off its 2021 peak…
“Why is this share not trading around the £5 mark? ”
Risk premium.
If you can get a 5% risk free return by sticking your money in a bank then investors need 8%+ return from a “dividend share” to make the investment risk worth it - more if you’re in an unloved sector like insurance.
It’s a good company and IS undervalued. But patience is required for share price growth, which will come.
The way the Solvency II ratio is headed then I suspect the new chief exec will be in a position to do a share buyback in 2024.
“Why is this share not trading around the £5 mark? ”
Risk premium.
If you can get a 5% risk free return by sticking your money in a bank then investors need 8%+ return from a “dividend share” to make the investment risk worth it - more if you’re in an unloved sector like insurance.
It’s a good company and IS undervalued. But patience is required for share price growth, which will come.
The way the Solvency II ratio is headed then I suspect the new chief exec will be in a position to do a share buyback in 2024.
“ With just a 67% and 43% uptake not sure what effect this will have - thoughts welcome”
The offer was actually fully subscribed.
They were offering £350m of new debt to buy back:
- £428m of debt - 67% of which was tendered
- $500m of debt - 43% of which was tendered
So that’s £457m tendered. Over subscribed rather than under.
The new debt is being offered over 30 years with the interest being “fixed” with defined reset periods after the first ten years and then every five.
The rate is reset to just over 4% above the benchmark gilt rate - so the rate moves in relationship to the benchmark gilt rate. Details at http://www.rns-pdf.londonstockexchange.com/rns/7005V_1-2023-12-5.pdf%20 - I’ve simplified the terms a little.
Had the offering been undersubscribed then the SP would have dropped.
It’s achieved its objective.
The company has around £800m of debt due in 2025 and 2031. It is offering to replace £350m of this on what appear to be better terms to “manage the redemption profile”.
Part of this may well be an exercise in risk management - transferring floating rate debt to fixed rate provides certainty in the accounts.
“To refer to a personal taste of mine, I'm going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the 'Hallelujah Chorus' in the Buffett household. When hamburgers go up in price, we weep. For most people, it's the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don't like them anymore.”
…and…
"If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."
“An additional £910 million is set to be added to L&G’s contractual service margin - the future profits earned from the deal – slightly lower than UBS’s predictions of £1.3 billion.”
It’s lovely that overestimating something by 42% can be waved away with “slightly lower”.
Analysts. Gotta love them!
“Which stocks/funds do you know of that are consistently rising atm?”
If you’re a buy and hold investor then you’d be hard pushed to find anything - in the UK or US.
I’ve been a long term holder of the L&G Global Technology Index Trust that is either up 20%+ this year or still not at the levels it was two years ago.
Meta might be up 40% this year. But it was down 55% prior to that.
If you trade - and you’re good - then it’s been a great market.
Less so for anyone in more or less anything otherwise.
“ In which case there may well be a significant up tick next week?”
Normally, maybe. But you’d then expect it to revert to what is was doing anyway.
My sense is that market momentum is downwards at the moment - so I’ve unticked automatic reinvestment - which I don’t normally do.
“ It's just that Porsche was guessing and catastrophising on minimal evidence. In fact he presented no evidence.”
To be fair to them, there was a much greater attempt at throwing in facts than usual :)
@Dixon1 - IMV VOD is a debt-laden mess that's a classic dividend trap.
Four shares is far too few. In my opinion, at that level you're gambling rather than investing.
"... the current SP is entirely down to the geopolitics".
I don't agree with that.
A good third is certainly down to geopolitics. In addition to Ukraine and Gaza we have the wider issue of the US repositioning their trade relationship with China, which is dragging down the US markets.
A third is probably down to wider concerns about interest rates and the sustainability/serviceability of government debt.
The last third is about the availability of spare cash to invest and willingness of punters to invest in the markets. Whilst most of the shares in PHNX are held by institutions, much of the day to day to share price movements are driven by you and I.
I read an interesting article in the WSJ the other day about what's happening in the US markets. Much of which will be happening here...
One reason the stock markets went mad during COVID was that those people who were lucky enough to keep their jobs and work from home suddenly had a huge excess of spare cash. Estimated at something like $5tn. It wasn't being spent on commuting and couldn't/wasn't be spent on leisure. Given the poor savings rates, much of that money ended up in shares (skewed towards the older demographic) or crypto (skewed towards the younger demographic) - driving the prices of both.
What the US is now seeing is:
- the older generation, who have mortgages, accessing those investments to service higher mortgage rates - or moving to cash/Treasuries for the yield
- the younger generation, many of whom have been burnt by crypto and have never before seen worthwhile savings rates, shunning shares in favour of cash - their risk appetite having gone completely the other way
As a result, on balance, money is moving out of the market.
So liquidity is down.
Which drives up volatility and generally depresses share prices.
Which leads to the self-reinforcing loop of people moving to cash.
Shares have a lot in common with houses. It might be that only 3-5% of the stock is being traded at any one time, but it's the 3-5% that's being traded that sets the price of everything. Equally, if that 3-5% drops down to 2-4% then you've taken 20-30% of the liquidity out of the market - making it more volatile.
We also have sanctions on Russians and the Chinese state generally discouraging its citizens investing money outside of its borders as economic growth stalls. The west - and UK in particular - has always been seen as a county that doesn't seize assets. That is no longer the case. Making it a less attractive place to park dodgy money.
@Porsche1946 is right when they bang on about liquidity - it's a bigger issue than most understand. But it's not just the UK that's suffering liquidity issues. And - IMV - it has little to do with Brexit.
So, not JUST the geopolitics :)