Member Info for strictlybricks

"Congratulations everyone we have at last turned a corner , I wonder what Strictly Bricks made of today's events ?"
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Booboo, let me give you the numbers that I see as being relevant.

Because there's the story and then there's the numbers, and the earnings number that is important isn't the declared earnings figure (adjusted or otherwise) but rather the number that makes it onto the balance sheet adjusted for any dividends paid.

If you take the numbers provided by this website for Marks & Sparks, they show that net asset value per share for 2020 was 169.15p and for 2021 the figure was 104.97p.

This implies that the real loss per share rather than the mythical one that everyone here seems to take at face value was just over 64p.

The progress or otherwise of the book value per share is crucial, as it is from this that the vital ratios of price to book value and return on equity are derived.

Many here seem to have done well on M&S but I imagine they bought in post covid and caught the recovery well...?

I do not personally have the skill to call the short to medium term movements of the market, preferring instead to rely on sound underlying progress and trusting that the market will either keep up with that, or catch up in due course.

Before you shoot me down in flames ~ given that your previous response to me was vaguely insulting ~ why not just take a couple of minutes to go into the graphing tool for FT.com and pull up a graph for Bellway (it goes back to1991) and then add Marks & Sparks to that.

There is absolutely no comparison to be had, given that Bellway has made 3,000% progress and Marks & Sparks share price is still under water from the start.

The thing about Bellway is that their stated earnings are also the earnings, dividends adjusted, that make it to the balance sheet.

And even net of dividends they've made long term average progress of above 10% a year.

If some here are able to catch the price rises and swerve the price falls then all power to their elbow, as I am not in any way able to do that so I don't attempt to do that to start with.

And, finally, some other numbers I think are important.

Total liabilities for M&S haven't moved much, from £6,481m to £6,351m, however, the net balance sheet has fall by 38% from £3,708m to £2,285m, and that mean that liabilities as a percentage of balance sheet have increased from 175% to 278%.

If you think that none of this matters and that what's important is the mere 10p declared loss per share and the fact that the pundits aren't kicking off about it all, then fair enough.

But that's not how I see things... it seems to me that an awful lot of weight, presumption even, is being put on the notion that the joint venture with Ocado is going to come up trumps.

Strictly

Chilting, I fully agree with you on that... dividends only make sense if either the company concerned has limited options for re-investing for growth and so can't make good use of retained capital, in which case it therefore wouldn't be a growth business and so not one I'd want to invest in, or the share price is seriously below book value per share such that you could reinvest the dividends back into the company and still achieve more book value that you started with even after the tax paid on dividends.

Those opportunities are pretty rare....

A good example in my line of investing is Persimmon (as the name implies, I only invest in house builder shares).

Persimmon pay out a far bigger percentage of earnings in dividends than do the other house builders, no doubt for the cynical purpose of keeping the share price up which, of itself, further damages the return to investors from dividends in terms of yield.

This means that, even though over the past few years they have have had a return on equity that is superior to other builders, their shareholder total returns, being dividend yield plus percentage increase in book value per share, has been less than for the likes of Bellway and Redrow.

Persimmon's price to book value has hovered around 3 in recent times, which seriously dilutes the yield to shareholders compared to that for the others selling at less than half that PBV.

It's easy enough to get right down to all the relevant percentages and differences involved using a spreadsheet and junior school maths, but what surprises me is that most folk don't seem to bother ~ or, at least, that's been my experience with my own investing fraternity, and I've necessarily had to be like a dog with a bone about this with some of them in order to get the message across....

Like many here, it seems, a lot of my crew have inappropriately craved the dividends, but hadn't crunched the numbers...

But, at the end of the day, each to their own....

Strictly

"Strictlybricks, What on earth are you talking about? Are you for or against dividend return ?"
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Neil, dividends per se would be a rather big topic for discussion, but in respect of Mark & Sparks they are paying an unaffordable dividend based on the past four years' results ~ as I said in an earlier comment, they've paid out six times earnings.

They can only do that legally because they have reserves of past profit in retained earnings.

The upshot is that even with the top up of cash from the rights issue two years ago, their long term borrowings have more than doubled from £1.8billion to £3.8billion.

Unless M&S have managed to morph into a seriously successful online trading entity, or whatever, that is going to somehow magically multiply their bottom line (which may, of course, be possible, but I wouldn't want to count on it), how can the current trajectory they're on be sustainable...?

I'm not an M&S investor, just an occasional customer for their food, so it's not a question I need to answer for myself really....

And this is despite three sharp decreases in the dividend payment over the past four years, from 23.3p right down to 3.9p, which has still left the 2020 payout at three times earnings.

If you ignore the covid phase of sharp share drop and recovery due to that, you could draw a line through the five year price graph that shows a fairly steady decline from 450p to 150p, a fall of two thirds.

That some here might not much like what I've said above doesn't alter the reality that is there to be seen in the numbers.

And while my LSE moniker might be Strictly Bricks, it could easily be Strictly Numbers ~ as that's pretty much the sole basis upon which I've been investing over the past twenty years.

Strictly

"Clearly until the business performance is up to scratch, it would be rather foolhardy to pay out profits to share holders"

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Chilting, the thing about profits is that they have been virtually non existent in recent years and all Marks & Sparks are doing is effectively paying out past retained earnings...

Except that they did a rights issue on 325 million shares two years ago, when their share price was 50% higher than it is now, so they effectively took money in from share holders with one hand and gave it back to them in dividends with the other, diluting down assets per share accordingly in the process....

And you only have to look at the preoccupation with dividends on this share chat to have an inkling as to why they might have done that when to any more objective view point it makes no sense whatsoever.

One doubts that they can pull that one too many more times though...?

Are they in God's waiting room yet...?

We may be given an indication of that tomorrow...?

Personally, I'm happy to buy their sandwiches, but not their shares...

Strictly

I had a look at this before posting a comment the other day in a recent article in the Telegraph online about Marks & Sparks...

For the past four years, taken as a whole, M&S have paid out six times earnings in dividends....

Clearly, that can't continue, so it has to end sometime...

And their overall net margin during that time was 0.3%.

Wafer thin hardly begins to describe that....

And that's only to end March last year ~ covid hadn't yet hit at that point....

Strictly

"In my view, you are significantly overrating book value as an investment metric"
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TMT, you are correct insofar as I put high store on book value, or, more specifically, weighted price to book value (the weighting element is a Strictly Bricks metric) but I think we'll just have to agree to disagree on whether or not it's an over-emphasis - though I can say it's served me well for more than twenty years in the investing game.

The other aspect of this is that it's about relative book value and price to book value.

And Persimmon's is so much higher than either Bellway's or Redrow's.

I have a thing about cutting the cake as many ways as possible to see if I can find a maggot lurking somewhere that wasn't otherwise easy to see.

Given that the different builders made different balance sheet responses following the credit crunch, one of the things I did a few years ago was to take the pre-credit crunch BVPS high for each company, and compare it to now.

This then takes out differing land bank write down policies that happened in between, given the likely different agendas of different companies (I'm thinking of the now notorious capital return plan/directors' incentive at Persimmon, which tarnished the entire sector in the eyes of the press for a while).

And I've only got the numbers on the book value per share and don't currently have that adjusted for divs paid ~ that would be a bit of a mission to sort, but I now feel motivated to do so in the near future for such time as another discussion like this crops up so that I have the answer to hand... :-) ~ and just using the book value change, without the divs, does put Persimmon at a disadvantage because they've paid out so much more in dividends over the past eight years than have Bellway.

So, I may come back on here with the updated numbers as, if and when I sort them.

But I can say that, in the meantime, the extra divs from Persimmon do have a lot of ground to make up to put them back in the game against Bellway.

Because Bellway have grown from pre-crunch high BVPS of 934p to current BVPS of 2,695p, a gain of 188%

Whereas Persimmon have grown from 627p pre-crunch high BVPS to current BVPS of 1,045p, a gain of only 67%.

The thing is, Persimmon took a BVPS write down of 30% after the crunch, compared to Bellway's measly 3%.

And that serious write down came quite in handy given it was around the time of the start of the directors' performance bonuses....

The upshot is that I have a negative book value weighting of minus 20% for Persimmon against Bellway's 0% (Bellway being my benchmark share), so that puts Persimmon's weighted PBV on 3.79 against Bellway's 1.36.

Almost on another planet, in other words....

Obviously, we'll just have to wait & see how things pan out from here but, in the meantime, I'm certainly not experiencing any Persimmon FOMO.

Strictly

"Thanks for the thoughtful post. It's an interesting thought -- that PSN is too successful and it makes you nervous. I can't say I've ever thought that, but it's something for all investors in PSN to consider, I suppose."
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Taking My Time, if you give Persimmon the benefit of the doubt that their higher margins are not illusory or temporary or both, you are still left with the issues I've outlined below in my reply to Retired Banker.

However, there's more to this.

If you take Vlad's metric (or Bogdan which is his moniker he is known by in the Telegraph online) of "shareholder surplus", being dividend yield plus percentage of book value of retained earnings (which is very close to how I do things but Vlad/Bogdan has quite a following so his particular metric is fairly well known), then I have some specific comparison numbers drawn from my own spreadsheet records to compare Persimmon to Bellway and Redrow, which are the companies I prefer to invest across.

If, like me, you are solely invested in house builder shares (as the name implies), there's a blend of three things to make money from ignoring any movement from shares in and out of cash.

These are 1) shareholder surplus 2) additional profit from trading between house builder shares and 3) increase in PBV.

3) is unsustainable, which is why Vlad's metric is a good one because it removes 3) from the story.

Since the start of 2013 to date, total shareholder surplus for Persimmon has been 177% against Bellway's 265% and Redrow's 308%.

What this means is that if all three shares dropped back to their start of 2013 PBV, that's what you'd be left with.

And who is to say that that won't happen at some point...?

Especially if Persimmon's underlying out-performance proves to be temporary?

The only reason that Persimmon have outperformed the others in the market (as opposed to underlying company performance) overall is because they've done so well with 3)

As someone who is not invested in Persimmon and has no intention of doing so under the current circumstances, my suggestion to Persimmon share holders would be to keep an eye on what percentage of earnings they pay out in dividends in the future as compared to the other house builders...

Because I don't see how they're going to be able to extract themselves from the corner I think they've they've painted themselves into without a bump..?

As if and when that happens, after what I consider is likely to be the inevitable denouement to follow, they might become invest-able again for me...?

But, until then....

Strictly

Retired Banker
"PSN seems to generate way more net profit than it should, which makes me nervous. "
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I've only just noticed your comment as when I come on LSE for a quick butcher's at the comments it's mostly on BWY & INL share chats which is where I'd generally make any comments on any of the house builders.

I share your concern about Persimmon's profit however, as I see it, it's worse than that.

Persimmon pay out nearly all their earnings in dividends and also their price to book is at an eye-watering (for the sector, at any rate) 3.0 whereas 2.0 would be high for the sector at the best of times let alone still coming back from covid.

I suspect the one begets the other...

By which I mean, Persimmon have been so profitable in recent years that even though their PBV is so high, the fact that they're paying out nearly all of those high earnings means the dividend yield remains high and you only have to read a typical few dozen house builder share chat comments to see that, for many investors, dividends rule okay, and never mind looking through them to the story behind.

And Persimmon's high share price brings its own problems.... not for the now departed King Jeff, perhaps (and you have to take your hat off to him for what he made out of all this for himself) but for existing shareholders.

Firstly, because Persimmon are, IMO, stuck with paying out virtually all earnings to keep the dividend yield up for all the folk who don't look past that and so maintain the high share price, there's nothing much retained in the pot for growth.

Which allows for other great house builders, who don't make quite the same margins as Persimmon but who retain most of the earnings for growth, to be looking to overtake Persimmon in due course on current trends.

And if Persimmon cut their percentage of earnings paid out as dividend back towards a third which is the sector norm, their yield goes down the pan on current PBV and one might easily imagine that the share price would likely follow...?

From the point where I'd reasoned this all through for myself, I no longer invested in Persimmon.

This comment is not likely to make me popular on this board (a bit like being an Arsenal fan amongst a Tottenham crowd, perhaps?), but I see Persimmon's share price as being an accident waiting to happen as and when their performance stumbles.

Only problem is, no crystal ball, so I don't know when it's likely to happen...?

But that does bring it nicely back round to your concern... :-)

Strictly

"I also need to get on to the blog - Ideally want to chat to someone about the pbv thing "
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Oi Oi, there is much discussion on the blog about PBV and, more to the point, weighted PBV which is far more useful if you're considering enhancing your gains by trading between house builder shares.

The success of doing so has a twenty track record behind it, so, all in all, just pitch up there when you're ready as we're a friendly crew - and sorry to hear of the bereavement.

Strictly

"I'm confident it'll give the share price an initial bumpy of 2p.....then people will do the numbers and it'll fall back to it's natural 60p inclination.....80p or £1 feels like a loooooooooooooong way away........"
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Oi Oi, if you take the longer term perspective, it might be easier to be relaxed about Inland's prospects...?

Over the past eight years, since the start of 2013, Inland's price has increased by 218% as of just now.

By comparison, that has beaten Taylor Wimps at 163%, Battersea at 117% and Crest at 60%.

And, furthermore, Inland is sitting on a much lower PBV so, ceteris paribus and all that, more potential out in front of them in terms of market price uplift from here.

Take heart, sir...

And I write as someone also holding a shed load of Inland.

Strictly

"I was on the point of buying Redrow when things went sideways and now I've come up for air the share price has moved 90p.......question is - am I too late or should I buy them too. "
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Oi Oi, as I frequently point out, I'm not in the game of giving advice on buying or selling shares, but I can tell you that, as of now, Redrow is about three quarters of my entire holdings, with Inland making up nearly all the rest and a smidge in Bellway (less than 2%) because I didn't get round to transferring it out of my wife's account into Redrow.

If Inland was the same size as Redrow, and with a market liquidity to match, then no doubt I'd be holding more of them as the perceived value gap is a big one....

But it ain't liquid, sadly, so I ain't holding more..!

Redrow is selling at just under 1.3 PBV based on my estimated BVPS for April (my BVPS estimates each month tend to work out to be within a 2% tolerance of accuracy, one way or the other, once the figures are released ~ which is close enough for me) and that is still cheap based on their long term track record.

I take no view on likely market movements, as I am purely a seeker of perceived best value.

Of course, that little word "perceived" is one to conjure with...! :-)

Sorry to learn of your bereavement, and maybe we'll hear from you on the blog at some point when you're in the right frame of mind to make contact there...?

Strictly

"Painful isn't it?"
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Oi Oi, if you take a glass half full approach to this, Inland currently sells at around 0.75 PBV compared to Persimmon's 3.0 PBV.

That means you get four times the bang for your buck on all dividends paid out by Inland compared to those paid out by Persimmon.

And Persimmon pays a lot out in div, most of their earnings, in fact ~ no doubt to dissuade Sid & Doris from thinking it through too much...?

And Inland don't pay out much div, which means that although they have a somewhat inferior trading performance than Persimmon, their book value per share has still grown at twice the rate....

And when the happy day hopefully finally arrives for Inland whereby they've reached a more worthy price to book value, the bonus is that, on current trend, it'll be based on a relatively higher figure than Persimmon as against where the respective companies are right now...?

And, meanwhile, if Sid & Doris do finally wake up and smell the coffee, divi brand, well, who knows where Persimmon's PBV might end up....?

I would have thought that, starting as they are from 3.0 PBV, which is 50% higher than normal peak values for house builders in the good times let alone still coming out of covid, there's surely only one direction that can travel in..?

Which means Persimmon investors are far braver than me, sir...

Patience, Grasshopper... :-)

Strictly

Vlad, did you receive my email..?

Strictly

PS.

Typo.... that should have said "Wouldn't hold your breath on that"

"You should see if Mr Clyde fancies it. "
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John, after Mr Clyde's repeated salvos in Vlad's direction in the comments on his article, I would hold your breath on that.... :-)

Strictly

Vlad, I have now sent you that email in case you haven't seen it.

Strictly

"....you can always say no."
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Absolutely right...!

No it certainly is...!

You can let them know if you like.... :-)

Separately, I've seen you've made contact with our man in Brighton and I'm just having a five minute break from prepping my fortnightly feeding of the five thousand locally, and intend to email you later....

Strictly

"Hold on I get it, I will email Seagulls..."
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Yes, as with many things in life, when all else fails, read the instructions... :-)

Strictly

Seagulls, if you'd been unfortunate enough to have been watching Arsenal's truly dismal effort against Liverpool on the weekend, you'd have surely understood that I'm very much in a glass house throwing stones...

Once I saw the stupid, stick on, pig tails that Auba had adorning his loaf, I just knew we were sunk.... :-(

Strictly

Vlad, yes you are most welcome to join...

I've given you a nudge about that before but I took it that you weren't interested as you hadn't responded about it....?

If you go onto the Inland share chat (INL) you should see a comment there today by Seagullsfan (Brighton supporter.... I suppose someone has to be....?).

If you click on his moniker to go to his posts, and scroll back to 16th Feb, he's kindly put up an old email address to facilitate Oi Oi joining the blog recently without disclosing his own details...

He and I have previously discussed making that open for you to do too (see what a centre of conversation you are :-) ) and I'm sure he'll still be fine about that.

If you want to do that, please confirm once you have then I can let him know to go onto his old email and check for it and then we can take it from there....

As far as your real identity goes, I'm not sure whether you mean just disclosing that here ~ which, based on the above, is not an issue ~ or on the blog itself...

That would be up to you, but it's very much a private blog, by invite only, and is in large part originally composed of my family, friends and acquaintances and, as we've gone on, many of their connections too along with a scattering of people from here including a few of your followers who were motivated to contact me due to our conversations on the Telegraph - so there are already a few people on the blog who've probably been aware of your existence for longer than I have.

Everyone on the blog is who they are, albeit many often refer to themselves by their Strictly Wacky Races character names, but whether you want to remain incognito or not is up to you, and I can assure you that the readership isn't composed of stroppy cantankerous naysayers and, beyond a bit of friendly banter from time to time, mainly emanating from my direction, I like to consider that it is a friendly & supportive discussion environment.

So, over to you and just let me know here once you've sorted it, but I think I'll give Seagullsfan a heads-up in the meantime... they lost on Sunday, but I suppose he's well used to that...?

Strictly