Member Info for strictlybricks

"I appreciate you taking the time to share your thoughts"

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FP,

You're welcome ~ even though my thoughts didn't seem to be universally well received here...? ☹

Strictly

Reg,

Yes, I suspect that we may be on different songsheets, but never-the-less...

2020 and 2021 were very poor years for Bellway, with ROEs of 6.5% and 5.3% respectively, easily put down to the triple headwinds of covid, cladding and Gove....

2022 looked like recovery, with an ROE of 15.5%.

Then it slipped back again for 2023, to 10.4%...

Up to that point, I had philisophically put it down the the above mentioned three riders of the apocolypse, i.e. Gove etc., but by early 2024 I had come to a different view...

Which was that these weren't just temporary headwinds, but likely a longer lasting market situation that didn't then, and still doesn't, favour house builders...

Of course I could be wrong, but I voted with my feet and reluctantly put my money elsewhere...

"Relucantly" because I thought that investing for me now in my seventies was now sorted, and that all I had to do was continue to dap between house builder shares as perceived opportunities to trade arose in order to continue to earn a decent crust from investing from here on...

However, instead, I had to dangerously venture out across the sea bed to find another investing hermit crab shell to dwell in ~ the insurance boys ~ which was all a bit traumatic for an investing wimp like me....

But, to come to your point, in early 2024, given that I now saw the headwinds to be something more than that, I came to the view that Bellway et al were hugely overpriced for their near and likely medium term performance.

And, okay, the price has dropped a lot...

But I'm still seeing them as being overpriced...

Clearly that has naffed off a few folk here, but then I'm not giving investing advice, just a personal view, and people can decide whether or not what I have to say has any worth or even not bother to read my comments if they think I'm talking complete b.llocks....

But, for better or for worse, I do generally back up what I'm saying with numbers....

And if someone thinks I've got any of those wrong, I'd welcome becoming enlightened as to where I've erred...?

Strictly

"A lot of shares have been bought back since 6 months ago, so there are considerably less shares in issue, which should push the value up..."

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Reg,

The BVPS of 3,005p, for 31/1/26 ~given by Bellway and with which I concur in the way I calculate and check the figures ~ is based on the net equity of the company divided by the shares in issue at that point in time, so will include all the share buybacks up to that point.

Obviously we'll have to wait for the full time whistle later this year to see what that actual ROE is for 2026 as a whole..?

I would add that I have tracked the progress of the book value of a single share for Bellway, adjusted for dividends paid, right back to when Bellway first came to the stock market in 1983 with a BVPS of the princely sum of 51p.

It hadn't occurred to me to start tracking this until around 2003, having started managing my own investments several years previously in early 2000.

However, it was Bellway's splendid track record which shined through looking at them on this basis which led me to start investing in them in a big way in 2003...

And that continued right up until early 2024, when the same number crunching process led me to sell all my Bellway shares in favour of investing in the insurance boys at that point.

At the time of selling, I had been briefly 100% all in Bellway having only shortly before sold out of Redrow upon Barratt's takeover bid for them.

In a nod to SG, and bearing in mind that I was only able to look in from the outside taking into account the numbers, the spiel and the track record, I considered Bellway and Redrow to have been the two best run house builders out of the big boys (well, in Redrow's case, only after Steve Morgan had returned).

Now that Redrow has gone, Bellway for me stands alone in pole position.

Despite some cynicism expressed here, I do have an affection for Bellway as a share ~ they were my benchmark company for many years and I also like that Jason Honeyman is a fellow London boy who also worked his way up in life without going to university ~ the sort of thing that gives me faith...

I am very concerned for the future economic health of our country, and especially for the house building sector, and I don't perceive from where any decent bottom line is going to reappear from for them for the forseeable...?

Of course, I could be being too glass half empty...?

So I guess we just have to see how things unfold...?

Strictly

PS. And thanks, Crossley, for your comments earlier.... :-)

"You have to question the motives of anyone who takes the time to post on a messageboard when they claim not hold any position.....why bother?"

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SG,

Because, as I said below, it was a share I was very much involved with for around twenty years, is one that still interests me (especially as some in my investing group still hold them), and one that I therefore still keep close tabs on...

And, hopefully, it's one I'll be back in at some point in the future as, if and when their prospects improve because it had a splendid track record for nearly forty years up to hitting the headwinds of covid, cladding and Gove, but in my view it isn't appropriate to be invested there now because the underlying current performance is so poor and although the share price has dropped significantly it hasn't gone down fully in step with the much lower returns...

So ~ hopefully that reasonably answers your question "why bother?"

And I'm happy to debate the numbers if you think I've got them wrong...?

Strictly

Z,

I wouldn't have a clue how to use Chat whatever...?

If you care to scroll back through a few of my earlier posts on BWY, you'll see I tend to usually summarise things in a similar manner...

I only aim to be informative in a factual way.... obviously each can take it or leave it as they so choose...?

Strictly

I haven't posted here for a while as I haven’t held Bellway shares for the past couple of years…

However, before then, Bellway was my benchmark share for the best part of twenty years while I was solely invested in the house builder sector ~ hence the legacy moniker.

I take a view on the house builder shares based on the progress of the book value of a single share, adjusted for dividends paid.

This method could be kyboshed by a rights issue, but fortunately Bellway have never got themselves in the poop such that they’ve ever needed to do one of those.

The book value per share movement from trading period end to trading period end, adjusted for dividend, gives what I term the reality check EPS.

The declared BVPS as at 31/1/26 was 3,005p (which also agrees with the figure derived from dividing net equity by the shares in issue ~ which I regard as the reality check number), plus 49p paid in div = 3,054p less BVPS brought forward from 31/7/25 of 2,989p gives reality check EPS for the six months of 65p.

This is less than the declared EPS at the half time whistle of 84.5p.

And 65p only gives a return on equity for the half year of 2.2%.

Double this up for the full year (and of course the actual figure achieved may well differ in due course once the full year whistle is blown, but I’m taking a view here) gives a return on equity of 4.4%.

The previous two years’ returns on equity, calculated the same way, were 5.0% each year.

Bellway’s long term average has been just over three times this.

And their average PBV has been around 1.3 for that performance.

Whereas, their PBV is currently 0.58, as against fair value on a PBV yardstick pro rata of around 0.4 to 0.45 ~ which I don’t imagine the share price dropping to..?

Otherwise, until and unless Bellway can show improved underlying performance ~ and I mean actual achieved performance rather than scribbler forecast (‘cos they ain’t been getting it anywhere near right recently), I sadly reckon that Bellway are still significantly overpriced for me even with this week’s seriously bad hair day on the market.

And so in the meantime I continue to stay clear.

Strictly

"...a buyback is for life (because of the ongoing uplift in EPS), whereas a special dividend is just for Christmas. "

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Meco,

A very apt and succinct metaphor which precises says how I see it too... I might borrow that line and use it on the blog..? 😊

And then there's also the difference to consider between the speculation about what share buybacks may or may not do to the share price as against the beneficial change, ceteris paribus, to EPS which is occasioned by said share buybacks...

The improvement brought about by reducing the number of shares in issue for any given level of company profit will be a matter of fact and will be defined by the simply mathematical sum involved in calculating.

Whereas, the share price at any time ~ well, that is merely a matter of collective market opinion….

But Buffett’s weighing machine vs voting machine does tend to come into play in due course…

I think that you and I seem to have faith in that, but I’m not so sure that that faith also applies to everyone who comments here..?

Strictly

Mike,

When you combine the two elements being discussed here on LSE LGEN chat at the moment ~ I mean, trying to get down to a reasonable estimate of how much may be available for share buybacks as things stand but then also taking into consideration the core point being made in the Substack article for which Nolo kindly provided a link ~ this surely has some potential to get interesting..?

Substack’s essential argument is that the insurance boys are being too cautious with their surplus cash and are over-provisioning for their solvency ratios ~ resulting in poorer return on equity and no benefit from the market in terms of rising share prices (not that I consider that higher share prices are a benefit to long term holders, but let’s perhaps not go down that rabbit hole…?).

So, it seems to be the case that the insurance boys are not only unnecessarily stuffing themselves up with surplus capital and not getting any positive market recognition for doing so, but they’ve also got our Rachel pushing them to release some of the capital, i.e. spend the money and don’t be so cautious & bl..dy tight…!

So, if this translates into some of the surplus going into further share buybacks over & above those already announced, that would surely mean that the total cash spend on paying dividends would reduce quicker than is already currently due to be in the declared plan.

And if there’s also further spare cash on top, all in all, this might start to bode well for dividends increasing from here by more than the proposed 2% a year…?

And the possibility of that happening very much IS of interest to me..!

Strictly

"I’d love to hear Strictly and Meconopsis’ views on it."

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Nolo,

In early 2024 ~ while resting my bones in Spain, and following Redrow selling out to Barratt ~ I shifted from having been 100% invested in house builders (hence the moniker) to 100% invested in the insurance boys….

In fact, currently, I’m 100% just in LGEN ~ which tends to encourage some here to make the sign of the cross at me with their fingers, retreating slowly backwards…

And I’m now out in sunny Spain again, replying to your comment… 😊

Rightly or wrongly, I considered that I reasonably understood what I was doing with house builder shares with over twenty years investing in just that sector armed with an absolute shedload of spreadsheets analysing the long term track records for these companies (I am, and always have been, very much a rear view mirror investor).

Whereas, I consider that my understanding of the insurance boys to be somewhat shallower ~ Meconopsis has been very helpful on that front (thanks, Meco).

But what gave me the confidence to go fully in with the insurance boys (other than that the house building sector seems to me like a busted flush for the foreseeable ~ so I needed to shift my aris in that respect), and which concurs with the theme of the link you’ve just put up (thanks), is a graph I constructed running a grid of dividend yield percentage lines across the share price graph for the past twenty seven or so years (the div figures are readily available on LGEN’s website).

This paints a very clear picture….

The only time in the long term past that LGEN hit the sort of yields it’s enjoyed on occasion since covid was in the credit crunch.

And, to me, the graph clearly demonstrates one of two possible scenarios now exists:

Either:

a) the market has perceived something bad coming down the pike for LGEN that’s taken eleven years and counting and still hasn’t arrived yet...

or

b) the market’s got it wrong.

The longer it continues, the more it seems to me that b) is likely..?

And I am also very happy that the share price is where it is ~ my only benefit of it going up would be for it to go up relative to the other insurance boys temporarily to take LGEN’s yield below one or other of those for PHNX or MNG so I can trade across…

And then back down again so I can trade back again..! 😊

This was the game for me for house builders for more than twenty years.

For anyone looking at a long term hold in LGEN and intending to keep the shares and just take dividends, why on earth would you want the share price to rise..?

That surely means less bang for LGEN’s buck in terms of shares bought back by them in the interim..?

Strictly

Meco,

But, more to the point and letting go of any temptation to speculate about what share buybacks may or may not do to the share price, if around 15% (give or take, allowing for your £400m) are bought back over the next three years, this might affect dividend increases…?

After all, at the guided 2% a year increase in these, that would mean a decreasing overall payout by the company in terms of cash outlay…?

And is that the likely plan..?

You are the man with a past inside track on LGEN, do you have a view on this..?

Could be a discussion point for the SB blog..?

Strictly

Meco ~ I was hopefully falling within Buffett's maxim that it's better to be approximately right that precisely wrong ~ actually I did consider that that the shareprice a year ago was lower, but the start of the Arsenal match was fast approaching so I was then distracted...

So I'll own that... :-)

Anyway, £400m one way or the other on a £2.3bn share buyback is not that significant when considered against the initial mooted buyback of £5bn...

Strictly

Mike,

Thanks for that ~ you are correct, I hadn't taken it into account...

So, a bit of schoolboy maths required here and please correct me if I'm wrong ~ it would be more of a senior moment on my part, if anything though, rather than a schoolboy error, as I'm in my seventies...

This was the relevant line in the Feb 2025 update:

"L&G anticipates an additional share buyback of £1.0bn following completion[3] and now expects to return the equivalent of c. 40% of its market cap to shareholders over 2025-2027 through a combination of dividends and buybacks".

So, 40% of market cap of £14.84bn is £5.9bn.

around 65p a share's worth of divs over the next three years on 5.63bn shares = £3.6bn

Leaving £2.3bn for share buybacks, which would be around 15% of the company...

Which is quite a lot, I reckon...!

But please check my figures, someone....

Strictly

"Lgen have already bought back 700mln, and plan on another 1bn after the USA PRT sale. Not sure your numbers are correct."

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Blue,

It was in the opening statement in their half time whistle on 6th August 2025 ~ which I've copied & pasted below...

"The outlook for our businesses is positive and we are firmly on track to achieve our financial targets. We are delivering on our promise to return more to shareholders with over £5bn in dividends and share buybacks over three years."

Events may subsequently move on and the numbers change, of course, but I'm simply starting from the reference to the £5bn and pointing out that that amount covers both dividends and share buybacks.

Strictly

"There will be a rerating when the market absorbs the handback of £5bn over the next 3 years."

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BB,

For the avoidance of potential over-exuberance about the prospects here, that £5bn does include around £3.7bn of dividends, so the share buyback with the remaining £1.3bn isn't as substantial as might otherwise have been imagined...

Strictly

"And 5bn buy back (thats a massive 30%)"

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Licker,

The £5billion is across share buyback s and dividends combined over three years ~ see this comment copied & pasted from LGEN's half time whistle on 6th August below:

"We are delivering on our promise to return more to shareholders with over £5bn in dividends and share buybacks over three years."

So, that three lots of divs at around £1.23 billion a pop, so that leaves around £1.3 billion for share buy backs...

Which is around 9% of the shares...

Which is not insignificant, but not in the same league perhaps as a 30% share buy back ~ that would be something..!

Strictly

"Morning , I was waiting to buy some of these, only for the dividends , as I had some spare money. I had been waiting for them to drop down to about 2.40ish now they are rising . Damn !! In two minds now what to do"

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Pace,

I think that Nolo has made some very sound points in his response to you which are worthy of consideration...

Maybe also take a look at a five year LGEN price graph on the Stock Exchange's graphing tool...?

https://www.londonstockexchange.com/stock/LGEN/legal-general-group-plc/company-page

You can hopefully see there that, if you take a steady line through the price graph, it forms a gentle dip down, bottoming out in October 2023 at around 210p..?

The thing is, dividends increased throughout that time, and continue to do so, and so the payout amount is currently moving ever further up & away from where it was in 2023 ~ and the expressed intention of the company is that, obviously barring mishap, that it will continue to do so....

So, it would surely logically take a subtly ever-bigger mishap for the share price to return to where it was in 2023 and even, more directly for your expressed entry figure, to 240p..?

That may, of course, happen in today’s very uncertain world, but the thing is that the odds surely continuously shift slowly against you as you go if you are sitting in cash in the meantime…?

It could be like waiting for Godot..?

This is, of course, a tricky call ~ and one which each investor has to make for themselves…

Strictly

“I think expecting to hold stocks any longer than a few months is a very risky strategy- anything could happen. Just look at PSN for example, you’d be better off had you bought in 3 months ago than 10 years ago. Stocks aren’t long term investments. ETFs are, but not single stocks.”

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Quick,

The example you give is valid but, from when I started managing my own investments, I’ve never personally had the cojones to go to cash during that time apart from late February 2020 to at least partly swerve the covid tsunami…

My personal mantra, applied at the time to house builder shares which was my only sector for investment until early 2024, was: “I am more fearful of being in cash when I should be in shares than the other way around”.

But that was because, as I saw it, the builder shares were nearly always undervalued apart from odd peaks ~ and even then there could be a different house builder share to switch to that avoided having to be in cash…

I was gravely wrong in the credit crunch, of course, and paid a price for it, but I’ve survived that… 😊

To come back to the point about timing, if you go to the wonderful LSE graphing tool (don’t know if the link below will work?) and make a “total return” graph for Bellway since the start of 2000, you get an overall gain of around 2,500%

https://www.londonstockexchange.com/stock/BWY/bellway-plc/company-page

I have been fortunate enough to substantially beat that from start to finish through consistently trading between house builder shares based on perceived value gaps but, nevertheless, that still represents a compounding gain of over 13% a year by Bellway, and that’s including the sh.tload of headwinds that the sector has had to face these past few years…

Strictly

Quick,

Taking a view by just a year at a time, I would tend to agree with you….

Buffett’s voting machines and weighing machines, and all that….

However, if you make a comparison graph with Bellway over a significantly longer timescale, courtesy of the London Stock Exchange’s graphing tool (an excellent piece of kit, by the way, that I’ve only comparatively recently come across, and especially given the “total return” option which has saved me a shedload of work for the sort of number crunching ~ I do being something of an anorak with this stuff… 😊 ), the connexion between underlying performance and share price performance is made much clearer….

Crest’s share price peaked in May 2017 at 631p but, since then, has fallen right down to its current 132p.

Whereas, Bellway’s share price in May 2017 was 2,826, and it’s currently 2,662p ~ so, by comparison, and to borrow from the Black Knight: “T’is but a scratch!”

Don’t get me wrong, Bellway is also still expensive currently (in my opinion) on a price earnings basis at around 14, and with a forecast of only single digit returns on equity for the next three years ~ which is why I don’t currently hold their shares either, having previously arguably been their biggest fan for many years given their past consistency and their average past return on equity of sixteen percent, which meant that, at times, Bellway was the ONLY share I was holding.

………………….

But to reflect upon the fact that Crest has lost three quarters of its share price and is STILL well overpriced (again, in my opinion, of course, and it is only that….) does surely say something about the underlying Vicky Pollard nature of the beast (Crest, I mean, not the Black Knight).

Strictly

It's perhaps helpful to bear in mind Crest’s past numbers in the light of what amounted to a recent profit warning in their latest trading update…?

At the end of their 2016 year, their book value per share was 271p.

As at their 2024 year end, it was 272p.

So that hadn’t moved in eight years ~ whereas, by sharp & happy contrast, for example, Bellway’s book value per share nearly doubled over that time from 1,522p to 2,904p.

The latest scribbler forecast EPS figure I have for Crest for 2025 is 8.97p, based on a profit before tax of £32m.

However, Crest are now talking maybe only £28m profit before tax so, pro rata, that would knock the 2025 EPS down to 7.85p.

That gives a price earnings ratio of around 17, which is historically high for a house builder…

Okay, on as price to book value basis, Crest are looking as cheap as chips, but then, so are the other builders that have far better track records than Crest.

And the £28m referred to above was only Crest’s estimate of adjusted profit before tax…

“Adjusted” is a little word that Crest do like to conjure with...

I mean, take their 2024 figures ~ they declared an “adjusted” EPS of 5.6p when, in the real world, they actually lost 40.4p per share…

So, putting all that together ~ and I am not making any forecasts or offering advice here ~ but remaining invested in Crest right now would seem to potentially be the triumph of hope over experience…?

And we’ve still yet to hear from Rachel next week… ☹

And I comment here as a past sinner ~ I have previously invested in Crest, but sold out on these in early 2024…

Strictly

"I think we'll see 40% price drop, peak to trough, in some property prices, as there was during GFC in 2007. "

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STT,

I make no prediction for the future on this (in any way ~ as I’m sadly not drinking buddies with Captain Hindsight), but the difference between now and back then, of course, is that builders are now generally carrying much less debt ~ which nearly did for both Barratt and Taylor Wimps back in the day ~ and also they pretty much build to order, rather than speculatively….

And they now take full deposits with exchange of contracts before building….

No doubt we’ll see how this unfolds and how better off it places builders now, but one possible indicator is how Telford Homes did back in the day…?

Telford Homes, some of you may recall, were a relatively small AIM listed London property builder for whom the share chat on LSE was generally very civilised and of a good calibre…

Anyway, their liabilities as a percentage of balance sheet looked horrendous at the time of the credit crunch, at over 300% ~ which probably precipitated the wearing of incontinence underwear at their board meetings on occasion ~ but, the thing was, they were fore runners in taking substantial, 10%, deposits and with exchanges of contracts for sales before building out (mainly) their flats…

And it very much worked for them, because despite the highly leveraged balance sheet at a terrible time for doing so, they came through virtually unscathed other than changing their accounting standards in 2008 such that they significantly rebased their book value per share…

So, this hopefully bodes well for builders now…?

My bigger concern ~ and why I’m currently in insurance boys rather than any builders shares ~ is the dismal levels of profits that have been achieved by builders in recent years (largely due to a series of headwinds) but also the relatively poorer levels of profits forecast for them by the scribblers for the next three years and counting…

As I see it, builders really don’t need any more woe on top of this to already be relatively poorer value compared to, say, ten years ago…! ☹

Strictly