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The Covid-19 flare up may be good for us.
--> Construction as well as schools will be the last activities to close in the UK.
--> With the economy is turmoil, the "fiscal moment" we've been waiting for may actually come forward (a government fiscal boost to construction and other sectors to the economy).
--> Big money from entertainment, travel and hospitality sectors may shift to construction.
--> SIG is a fully recapitalised and safe company these days. And it's very VERY cheap for what it is.
In any case, I'll hold on tight to my shares and won't give them away for a third of the price they'll be at in 2 years.
Good luck --and no stress-- my friends
That was a good move Raleigh. I'm toying with the idea of adding more before Thursday.
A
The stock market is falling fast and may fall some more. It will rise even quicker in the next few weeks though.
The important thing is that on Thursday SIG shows it has the potential to make profits going forwards. The underlying profit before tax in 2019 was a respectable £42m.
https://www.sigplc.com/investors/results-centre
These days SIG is a safe, recapitalised company with a more inspired leadership. Their market that will receive boosts from the government. On Thursday we need to see that SIG has not lost much money during the worst economic crisis in nearly a century.
That's the important thing, that's the real economy. When big money returns to the stock market soon, we need them to come to SIG.
I wasn't going to sell till we go to 60p (I expect this to happen in late 2021 or 2022), so today's turbulance doesn't bother me at all.
Good luck my friends
Raleigh -- thanks for sharing this.
Union -- I don't think CD&R can sell their shares for a quick profit as you suggest. They own hundreds of millions of shares and if they try to sell them retail, that would lower the price below 25p. They'd be making a loss actually (especially if you consider their costs for contracts, deep accounting searches etc). If they try to sell bulk, they'd struggle too. Not many companies would be happy to take on SIG as a longer term project.
Most of all, I don't think it's CD&R's style to sell for a minimal profit. These guys are experts in retail turn-around, do extensive research and then work long-term on a company. After years of hard work, their shares are worth multiples of what they pay and then can either sell then or just sit back and collect the (substantial here) dividend.
Also, hedge funds are smarter than us and have much more info than we have. I wouldn't try to what they do if I were you... personally, my best strategy is to buy and wait here. I'd only sell if I suspected the share is ramped up and a crash is imminent.
Good luck whatever you decide to do!
Very good points.
Sadly, last day in Portugal. I hear the weather in England is good though...
My friends, perhaps my language sounds a little too confident but I do feel very confident about this share. I admit I know very little about the mechanics of construction (I don't even like doing DIY) but I take pride in the fact that I can spot a good company/share.
Besides all the inductive rational arguments I mentioned earlier and a few more arguments I could make, here's a couple of deductive ones:
1) This company is disproportionately owned by institutional investors. IKO, JPM, CD&R and others. These smart people did extensive research and invested tens of millions each. Many of them bought the share when it was at 90p or higher. None of them has bailed. They are confident SHI will rise.
2) Francis has moved his SHI shares into his ISA. That probably means he sold many other shares at whatever price they happened to be, to move his SHI shares in. Now, we all know Francis loves his money. He's not into meaningless and expensive gestures with his own funds. That RNS is winking at us...
I am confident that this will go back to 100p one day. I just don't know if this will take 12 months, 18months or 24 months when the market fully stabilises. It may well take months or years but it will happen.
I have invested £33.5K here and I'm not selling until I double that money (at least).
Best of luck my friends, whatever you decide to do with this share.
2reincarnated -- you're making some very good points. I also remember you're one of those who fully appreciated the bubble forming across the pond. It's good to be cautious about things when it comes to the markets.
However, I feel very confident that this share will rise considerably -- here's some points from me:
-- Over the last few years this share was on average at around 120p. Even in the years when they had minimal profits or (minor) losses, they stayed above 100p. This is because, even at 100p, the valuation was cheap for a company with so many branches in the UK/Continent and 2bn revenue a year. That's why the share rarely dipped below 120.
-- The share fell to 80-90p in February 2020 because SIG practically ousted their leadership (CEO and CFO together, a rare move) and there were concerns that there's something rotten/irregular in SIG's accounts. Basically, the market sell the shares because there was increased risk that something might be wrong. Yet, it proved that there was nothing seriously wrong with SIG's accounts. They simply ousted the previous leadership because of their uninspiring performance, not because they had done something dodgy. I remember many shorters on this site were trying to scare investors by saying that the audit would reveal dragons. But the audit was done and there was no hole in the accounts.
The market would normally elevate SIG back to 100p+ but then COVID 19 showed up and the share fell more.
-- It follows that even if we discount February's blip and also take into account that we have double double the number of shares now than before, the price should be around 60p once the economy stabilises.
60p is basically the bottom here once the market fully stabilises.
However, I personally believe that the share price will go above 100p again given time, even though we have double the number of shares. Why?
-- Because the increased number of shares also brought a lot of money with it (recapitalisation) and also expert investors who make super profits by turning around companies like SIG (look how they transformed B&M for example),
-- Because the new leadership seems more inspired (although I didn't like the bonus -- not happy with that and I won't lie)
-- Because the old leadership cut costs significantly before they left
-- Because the government launched an insulation scheme and will launch more schemes soon. "Build, build, build" is Boris's mantra and that makes a lot of sense macroeconomically.
-- There's trillions of stimuli/quant easing lying around. Unprecedented liquidity. Not everyone will buy gold (getting too expensive) or bonds (many have negative yields actually (!!)). Much money will go to shares. As long as your company has a market and is safe, prices will rise in this climate.
-- Construction is semi-insulated (sic) against a rise in infections. Cinemas, airliners, hotels and pubs will suffer. Construction will just put masks on and go to work.
Deb, you're a voice of calm and patience. The most constructive of all who post in here. A
Meant to say that Construction must already be higher than pre-covid levels. The data I posted is about July. With all this dynamism in construction, by mid September, the Sector should already be doing better than pre-covid.
The Half Year results will certainly show some damage to SIG but the trading update will sketch this dynamism and offer great predictions.
Importantly, on the 24th, everyone will see that the SP is way lower than the data justify. I expect this to be over 100p in less than a year. It will be over 40p in two weeks.
As I mentioned yesterday, the UK economy is dong much better than feared. Check out Table 1 in latest ONS GDP data.
https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpmonthlyestimateuk/july2020
Construction grew 8% in May, then grew over 23% in June (!) and now grew by over 18% in July (!). This is way faster than any other sector of the economy (services, manufacturing etc). It's now only 11% lower than pre-covid levels.
The data shows that construction is highly resilient and bounced back. I expect SIG share to bounce back to pre-covid levels soon (after taking into account the re-capitalisation effect on shares). The trading update
In fact, given time, I expect the SIG share to do better than pre-covid. SIG seized the opportunity to renew its leadership team and bring in some very serious investors. In addition, the government supports construction with initiatives on insulation and more things to come.
GLA
Raleigh, my wife says you're spot on in your impression of me!
The arrogant claptrap is smiling.
GL my friend
Don't panic, don't take it out on other people and most of all... don't sell your assets for a low price.
This is just another shorting attack. They'll need to buy back the shares soon and SP will rise. Hold on tight a couple of weeks and you'll make a healthy profit here.
GLA
I personally don't invest in the oil market and never studied it in much depth. In a sense, it's a good market because the demand is broadly stable and we all understand how it all works. It may also take way longer than people think to wean out of petrol. I'm reluctant to invest though because of the following two reasons:
1. It's a market influenced greatly by geopolitics. If Hamas, Iran, Trump or another 10 idiots decide to fire their rockets, my investment will be going down. I can understand what the policy will be in construction/insulation (we need to build more. We can only discuss how much more and where) but I can't predict geopolitics.
2. I'd be generally betting against technological progress. If a cheaper way to extract oil gets invented, or more reserves found (shale oil) or if a new technology shifts energy faster to nuclear fusion or hydrogen or something else, my investment will be going down. It may be fine for short term but long-term, historically, betting against technological progress has always been a bad idea.
Best of luck with it though!
You may well be right my friend, a bit of (impressive) profit-taking can't be too bad. Best of luck with your investments!
Greetings from Lisbon. Hot weather and tiles everywhere!
Sig seems to have hold on well in the past few days. It's only falling significantly today that the markets are actually rising. There is a countercyclical motion in SIG and I think that speaks very positive of the share.
As I had predicted in a previous post, the US markets, and particularly US tech are falling. I hope it will continue on and off for a few days . There was a bubble formed there and we need it deflated, not bursting violently (we need downs and then some ups in between, for a few more days). Apple alone can't be worth more than all multinationals together in FTSE 100. That was a bubble. Medium/Longer term, US markets falling is not a bad thing for SIG.
I think the trading update will be good considering the economic mayhem in other sectors. The furlough scheme meant some serious savings, construction opened up early with pent up demand and I suspect SIG is busier and busier with each passing week. Unless the trading update is a complete disaster, SP will go up.
As I predicted when the SP was at 27p, a few weeks ago, SHI will be in the 33-37p range just before the update. It will then stabilise at 40p+.
Appleby, I think you're planning on doing a big short here. I wouldn't do that now if I were you but each to their own. I shorted this too a while ago but now is not the time.
Market jitters will subside soon. The economy is doing better than expected, vaccine is near and the SP will lift to position for the market update coming soon. Monetary policy is very accommodating, fiscal packages are coming soon and the UK will rely more and more on construction. SIG is now a wealthy, fully recapitalised company with massive amounts of cash in the bank, very low debt, branches everywhere and 2bn revenue. SP will eventually go back to 120p or more here.
GLA
Damodubua -- thanks for your insights.
It sounds like you're in the know about insulation/building materials. Can I please ask for your opinion on rising insulation prices, as the ONS reports suggests. Any opinion if it's true and why it's happening?
In economic textbooks, rising prices happen either because of cost inflation (you buy or make something more expensively and so you need to sell more expensively too), or it happens because of high demand for that product (so you can get away for charing more).
*drop relatively less (not lower).
Good luck everybody
Perhaps a shorting action is triggered at around 33.5p. That's only ephemeral though - as we're approaching towards the trading update, the shorting will be triggered at higher and higher prices.
And who knows, in a year from now perhaps the shorting will be triggered at 83p and they'll be feeling lucky if they buy back at 76p. Just remember that if you're shorting with other people's shares (JPM, I'm looking at you)... you need to buy back at some point. The effect can't last too long if the company is doing well.
Deb -- Regarding my theory that the market regards SIG is a safety stock (due to being very safe, recapitalised, in a steady market and very very cheap for what it is)... there's some limit to it. If FTSE 100 drops to 5500 due to an external shock (war? failed vaccines?), SIG will drop too. It will just drop relatively lower than most other shares.
Union -- I'm personally relieved the US stock market fell a little. It's still a bubble though. Apple can't be worth more than the whole FTSE 100 together. It needs to drop more I think.
In any case, if US tech implodes massively there may well be panic for a few days. After that though, Trillions of funds may start looking for safer stocks. And here we come...
When CD&R invested in B&M, the latter was in a bad shape.
https://www.penews.com/articles/cd-and-r-co-investment-20130313
Today, a few years later, B&M is a strong candidate to enter FTSE 100.
https://www.retailgazette.co.uk/blog/2020/09/bm-set-to-enter-ftse-100/
I'm impressed by this journey and full of confidence for SIG. CD&R know what they're doing.
Perhaps SIG will rise FTSE 250 at some point. I imagine SP much much higher than 32p when this happens.
Thanks for sharing this Appleby. Please let us know what you find (and where you can find these packs/contracts you mentioned).
Unless there's a strong indication otherwise, I'll interpret this as a cost-cutting and rationalisation move. Part of the margin increase Francis promised investors.
Also, if news about cost-cutting hit the market AND there's an increase in sales+higher prices (as I think may be the case), the SP will only go higher.
Good luck everyone