Member Info for Meconopsis

"So it could drop even further? Or is PHNX at bottom already after the recent drop? That is the question."

My view is that absolutely everything is going to drop. The US is heading into recession, which will bring US stock markets down; the UK is probably going to have a soft landing; US and UK interest rates and bond yields haven't yet peaked; we have another "shock" to come from the war in Ukraine and the situation in the Middle East is going to provide short term inflationary pressure. The only short term respite might come from the rumoured moves on Just Group or Aviva materialising.

IMV, there's absolutely nothing wrong in the fundamentals. But the macro-environment isn't on anyone's side.

I've lost more money than I've made by trying to time the market. Otherwise, I'd be tempted to move to cash for a bit.

“Who TF is Frasier Crane?”

Sorry. I’m clearly showing my age!

https://en.m.wikipedia.org/wiki/Frasier_Crane

@Porsche1946 - more of a Trabant level contribution than a Porsche one. As usual.

A prediction unsupported by facts is a guess. So give us some facts to support your prediction.

Go on. Show us how even a moderate paper loss on some long dated gilts brings the house down.

If you’re a technical trader then that’s all good too. Technical traders and chartists support their moves with facts.

To paraphrase Frasier Crane “we’re listening”.

"Pleae say where you look up aviva div as almost 8 percent. here its 7.37 at 404, it will be less for those who bought at 425. (I added!) Its annoying not to have exact div info when buy shares.... div pc based on last two payments, and based on forecast next payment, and next xd date and a note on anyting which will materially affect next payment."

The last two dividends have given 31.8p, which is a 7.87% yield at 404.

Dividendmax are showing 8.2% at the current share price, which factors in an expected 5% uplift in dividends. Dividendmax is a good place to look if you want historic dividend payment information, which you can view for free. You need to pay for access to their forecasts, but the dividend yield shown reflects those forecasts.

It's important to remember that the Aviva Board have committed to keep the monetary value of dividends stable, regardless of share buy backs. The last buy back cancelled 2.15% of shares - so that will feed directly into your dividend.

@AllAtSea - regardless of the takeover code, a listed company is more or less obliged to comment on a significant share price movement that’s counter to market conditions.

Unless they can’t.

Just a picky point, but Aviva is sat on excess capital rather than cash.

It is pretty easy to do whatever you want with that capital if you buy the company.

This is the type of company Buffet buys - good fundamentals; cash generative; excess capital; a bit of a competitive moat; competent management team; and fundamentally underpriced.

“ Phoenix Group moves money into government debt amid confidence in interest rate peak”

Apple News link - https://apple.news/A1JXQ87jlTbmlLz1wI6ijEA

Telegraph - https://www.telegraph.co.uk/business/2023/10/08/retirement-giant-backs-uk-gilts-amid-bond-market-rout/

Https://www.insurancetimes.co.uk/news/aviva-declines-to-comment-as-takeover-talk-surfaces/1445801.article

"Aviva declined to comment when approached by Insurance Times".

That, to me, suggests that an approach has been made.

Convention is that the company would confirm they hadn't been approached when asked directly and given the significant share price movement.

You decline to comment if you're having a discussion that hasn't reached a conclusion one way of the other.

"Have you ever enquired if you can transfer stock from your SIPP to ISA, but then again you suffer a 15% tax charge etc."

You can't do that. Any movement of money (or shares) out of a SIPP would be crystallisation event and trigger the Money Purchase Annual Allowance.

All you can do is sell in your SIPP and reinvest the proceeds in something else. And buy in you ISA using ISA money.

@highstakes - don't call me Shirley ;)

Let's do some facts for Toff's benefit...

From the annual report - https://www.thephoenixgroup.com/media/yt1hulz5/phoenix-group-annual-report-and-accounts-2022.pdf and recent half year results - https://www.thephoenixgroup.com/media/wpznwj0v/phoenix-group-hy23-interim-financial-report.pdf

Bond yields went up yesterday, which means bond asset values go down. Decreased bond asset values have three impacts on life assurance companies through crystallisation of a loss through being the distressed seller of a bond in order to meet:

- LDI collateral calls (Phoenix doesn't engage in LDI - annual report page 31)

- a very significant lapse risk (Phoenix reinsures around 50% of that risk - annual report page 35

- collateral calls against their hedging instruments.

Phoenix hedges what they deem to be the unrewarded market risks from equities, currency, inflation and interest rates (annual report page 31). Phoenix might be subject to collateral calls against these hedges and were able to meet these during the Kamakwasi debacle (annual report page 31). Nothing that's happened in the last few days even comes close to that shock.

Phoenix makes much more use of hedging than L&G, Aviva, Just and M and G. The use of hedging makes the IFRS accounts more volatile (annual report page 29).

It's worth understanding that a reduction in bond asset values will reduce the Solvency II ratio coverage. The impact of Kamakwasi was a reduction of £0.4bn. Again, nothing that's happened in the last few days even comes close to that shock.

In terms of how the business is doing...

They've doubled their new business premiums; doubled its bulk purchase annuity YOY and had a slight increase in AUM (half year report pages 11 and 12). Their investments have had more credit upgrades than downgrades (half year page 11).

They are sat on £2.7bn of future profits in their CSM (half year page 16).

They are holding near £300m of surplus cash (half year page 8).

The reforms to the Matching Adjustment currently being proposed by the PRA give more opportunities to life insurance companies than they take away - https://www.bankofengland.co.uk/prudential-regulation/publication/2023/september/review-of-solvency-ii-reform-of-the-matching-adjustment. I used to work in the industry, so you'll have to take this latter point on trust.

Phoenix is currently being shorted, but has been shorted for years. The current short positions are currently below average. There are two reasons that an investor shorts, they:

- genuinely believe that there's bad news lurking in the future

- just "trade" that company in the way that another company trades GBP-USD (a friend used to do that all day, every day) - they become intimately acquainted with how news affects a company's share price and believes that that particular share is more volatile than its peers.

Glg has been shorting Phoenix since 2021.

"The predicted share price fall was a fact."

That's not a fact, it's a prediction. Predictions not supported by facts are guesses. All I can see is guessing.

Facts might include observations on the fundamental flaws in their asset holdings (investment ratings of which improved in the last half year); defaults of income streams (none); use of LDI (not used); flaws in their hedging strategy; adverse impact of regulatory changes (the latest changes are probably positive).

Lots for you to grab hold of there. Show us some analysis and insight and we'll probably be more willing to listen.

"The 12 percent dividend is a giant red flag - fact"

Give me a source that defines ANY given dividend yield as a GIANT RED FLAG please.

Recent "wisdom" has been that a dividend yield above 4% might be a cause for concern. But that was in an extremely low interest rate environment. In a higher interest rate environment then you'd expect the dividend yield to increase to reflect the risk premium of holding the shares.

Ignoring the possibility for growth, then yield is a function of share price, but yield also influences and informs a fair share price. So, one way of getting to a fair share price is to look at what the share price should be to provide an appropriate yield.

In truth, the whole UK life assurance industry is out of favour at the moment. Phoenix is definitely more out of favour than others and I suspect there ARE some market rumours.

"IIs have been dumping their entire holdings in this dog - fact"

Seemingly, you haven't as you hold a long position and are a fantastically successful investor.

“I’m reading the market and making extraordinary predictions on the future share price movement, which have been both consistent and accurate. 

One only need look at my previous posts to verify that. I’m a hugely experienced trader…”

“I actually have a small long position going back a long way. In at an average 623. The impending dividend with be my third.”

These two statements surely do not align.

A “highly experienced trader” would cut their losses.

This is worth a read first...

https://www.bankofengland.co.uk/-/media/boe/files/speech/2019/an-annuity-is-a-very-serious-business-part-two.pdf

If anyone is interested in what the PRA are proposing...

https://www.bankofengland.co.uk/prudential-regulation/publication/2023/september/review-of-solvency-ii-reform-of-the-matching-adjustment

“surely the co sec selling 100 000 shares is absolute no confidence in he future? switch to leg n gen ???seriously, what are your views, (yeah I know chairman bought, and em bought a further 1200!!!!!!!!!)”

A buy is usually a better indicator of confidence than a sell being a lack of confidence.

The Chairman has committed £400k of their own money to the company. That shows absolute confidence.

The company secretary selling £400k MIGHT show a lack of confidence.

But, equally, much of that person’s remuneration will be through shares and they could just need the money for something like a house move. Or they could just be diversifying. My money would be on a house move at that value ;)

"= Citadel and GLG"

I wouldn't take GLG's position too personally - https://www.lse.co.uk/share-prices/short-positions/funds/glg-partners-lp.html

Similarly, Citadel have been in an out of short positions on PHNX for a while - https://www.lse.co.uk/share-prices/short-positions/funds/citadel-advisors-europe-limited.html

"For the UK market the second shoe has yet to drop when millions of mortgages ) including B2L) will renew over the next 18 months which will be crippling for millions, depressing house prices and demand."

I completely agree. One of the "features" of the modern mortgage market is the lagginess of using interest rates to manage the money supply, which is effectively what the Bank of England is doing. In the old days the interest rates would go up and we'd all feel the pain immediately. Now, that pain only impacts 25-30% of the people with mortgages immediately. There will be people on five year fixed rate mortgages who will never feel the full brunt of that pain in this interest rate cycle.

Interest rate rises are proving even less effective at controlling spending in the US where 20+ year mortgages are common.

"There was I thinking it was completely obvious I was being sarcastic."

Sorry mate - I was awake far too early this morning! :)

'Meconopsis what do you mean by "floor". Our job is to estimate a fair value, which for you is 165p and you buy at a discounted price. And 80 is less than 165. I assume you reckon DEC is a quality company otherwise your price estimate, which should also factor in the quality of the business, would be way lower.'

Alessandro, with all my other investments I understand where I believe the lowest price is that my investment could go. I've realised that this isn't the case here because I don't understand the company well enough.

I'm following a buy, hold and reinvest dividends approach. I'm also trying to ignore the capital value as I believe the market is fundamentally underpriced. But, interestingly to me, it turns out that I'm happy doing that only when I understand where the likely lower end of my capital value is. And, as much as I read the financials, I can't do that here.

'Eh.... It sounds like that really successful investing strategy of "Buy when it's expensive and sell when it's cheap... " '

Quite possibly Gavstar :) I certainly subscribe to the "make more money than you lose" approach.

I'm out at a 10% loss after dividends on an investment that represents 4% of my portfolio. The portfolio is up 10% YTD over what has been a pretty difficult year.

And I'm down a lot more on some other investments and am quite comfortable with that.

In this case, it's my lack of understanding of the business that's the issue. Not the company.

'That’s the problem with many PI’s IMO.'

Quite possibly Trek. We seem to overlap on a lot of investments and I value your posts and insights.

Let my loss be your gain :)

@Harrybarker - I didn't say.

I agree with the valuation. It's the timing that's "somewhat optimistic" :)

"Sorry, came to say good luck with your re-investment, Meconopsis."

Appreciated.

Having reflected on my unease, I think it's because I - personally - can't articulate the floor value of DEC shares. Ironically, I've got a good view of current fair value (around 165). But if I can't see the floor then it means that it's not for me. Personally.