Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
“Please check my figures and do your own research.”
RM,
I confess I haven’t done what you’ve requested as I reckon we could potentially dive down a rabbit hole, here….
But let me throw a different thought or two your way to see if any resonate with you…?
I’m suggesting you consider firstly taking share price, as such, out of the equation initially, and just look to find a way of comparing underlying perceived value company by company ~ then you have an assessed constant against which you can apply the variable, i.e. share price.
For me & my investing crew, this comes by way of a book value weighting.
Bellway is my benchmark share, with a book value weighting of nil.
Crest is a long term poorer performer…
That doesn’t make it worth nil, just less….
These things are a matter of judgement, of course, and my call on Crest is a book value weighting of minus twenty five percent.
Whereas Redrow, well since the return of the king at any rate (that’s as in Wishbone Ash’s Argus, not Lord of the Rings, BTW) Steve Morgan after the credit crunch (and yes, I know he’s retired, but his commercial fire lives on), they’ve been a top performer and so, by my reckoning, are worth a positive seven and a half percent above Bellway.
Apply that weighting to the book value per share, and you get a weighted price to book value for each company to use, like a currency, to compare…
And THAT’S the all important traffic light for our investing circle ~ I mean, you can instantly see which share is better perceived value based on the metric of assessed book value weighting…
I’ve been investing for nearly twenty four years, and for the last twenty one of those years solely in house builder shares (apart from a partial & ill advised brief foray into supermarket shares ~ but then Warren Buffett c.cked up on that too, with Tescos, so I was in good company).
I can’t claim to have always worked this way ~ I only came up with the notion of book value weightings in 2014, but this metric has stood the test of time for nearly a decade for me….
But I suppose, for you, this boils down to whether the notion of separating perceived value from price is worth the candle..?
Strictly
"As a smallish investor in PSN (500 shares) & with cash to invest I would be interested in what those more intelligent than me have to say on this subject (are you there Strictly?). Particularly which companies in the sector are best positioned to benefit. "
Gary,
While I don't try to tell folk where to invest, I'm happy to let people know what I'm doing...
Over the past few days, I've been chuntering money across from Redrow to Bellway, such that am now invested:
57% Bellway
23% Crest
20% Redrow.
This is based on my having allocated Redrow a book value weighting of 7.5% above Bellway ~ the latter being my benchmark share.
And these two shares have been wobbling back & forth around each other in terms of perceived best value on that basis ~ which has provided some trading opportunities, albeit modest ones (at least I’m keeping the government’s coffers topped up with stamp duty)
I've been happy to take rather thin return trip gains between Bellway & Redrow of around 5% as, sadly, the more serious share price volatility between the relevant house builders that we’ve seen on occasion in the past has not been a feature of the market, generally speaking, for a while...
Having said that, house builders are still very much the only sector for me, as they have been for more than twenty years, so, as Winston Churchill famously used to say, “KBO!”
Strictly
Crossley,
Send me a separate email for the new GT spreadsheet & I can happily send you one, and I suggest read recent comments on the blog for thoughts on Redrow, et al....
As ever, and as you surely know by now, I don't give advice on what to buy or sell, but just say what I'm doing and why... :-)
You could, of course, put out an APB there by way of a comment requesting viewpoints on Redrow, or whatever, and someone, maybe Muttley or someone else with an (IMO) informed view, may respond ~ but that's their prerogative, not mine seeing as the blog is in my name...!
Strictly
Oi_Oi_
There are better builders out there to consider as options.....
And also.... probably.... at bargain basement prices....
I say "probably", as I don't have a crystal ball and also, sadly, I don't drink with the Captain (Hindsight, I mean).
But forty years' or so track record for some of them does very much stand in their favour...
Strictly
“Crest is down over 3% today, but if we look at the stats, there has been almost twice as many buys as sells. How can this happen??”
………………….
RM,
Well, I’m very clear about what I think about this, but you probably won’t find it very helpful…?
I take a cynical & jaundiced view of the market and its machinations…
My working assumption is that everyone involved in it is secretly conspiring & working against me ~ just me ~ to mess with my mind and so encourage me to make mistakes.
Whereas, companies have legal obligations when it comes to the numbers on balance sheets… in extremis, company directors can end up doing porridge….
And also there’s the reason why I pretty much completely ignore P&L accounts ~ which I regard as occasionally being great works of fiction ~ and concentrate almost solely on balance sheets and use those, adjusted for dividends paid, to calculate reality check earnings & book values per share, and, from these, reality check PBVs, P/Es and ROEs.
These are the core numbers, extracted in that way, that I’ve been using for many years..
And then there’s that you can lose/hide something in a P&L, but you can’t, without future consequence, in a balance sheet…
So, you have to keep carrying your “crime” forward, year after year, until & unless you account for it.
In the balance sheet…
So, the more years’ balance sheets you have, the safer you are in terms of being able to reasonably trust what you are looking at ~ because a “crime” committed on the balance sheet one year needs to be not only carried forward but also repeated in subsequent years if you want to sustain any artificially enhanced ratios.
All this may be bl.edin’ obvious to many, but perhaps not to all…?
So, the upshot of this rant is my suggestion to let go of all the other stuff, just look at the BVPS & dividends, and the ratios derived thereof, and track their movement over as many years as possible, while keeping a note of liabilities as a percentage of balance sheet for a safety check on the company.
From there, one’s task is to assess value.
And, from that, best perceived value between companies.
And to then make sure that those are the companies you invest in…!
And b.llocks to the rest of it, it’s just chatter…
…………………………
There ~ that was probably about as much use as an ashtray on a motor bike….?
As I repeatedly say on my blog, “I’m not the Messiah just a very naughty boy!”
Strictly
"If Help2Buy comes back it will come back to get first time buyers on the market and Persimmon are much more likely to benefit than Redrow who are selling huge houses and over priced entry level ones in a high rate environment."
..........................
Panda,
I completely agree with you…
However, the key word in your comment is “if” of course….
Meanwhile….
At the start of the year, the scribblers had Persimmon’s forecast 2023 EPS in for 145p and now it’s down to 81p, a drop of 44%.
Whereas, at the start of the year, they had Bellway in for 342p, and now it’s 327p, a drop of only 5%.
But the cigar was easily won by Redrow…
Scribbler 2023 EPS forecast start of year, 81p, actual result, 90p.
I would say that the root cause of my taking a hit today on Persimmon was my inability to confidently call a book value weighting for them from the outset ~ I was very upfront about that elsewhere on a private blog and (quite probably, but I haven’t checked back) here as well…
Whereas, it has been much easier to reasonably call a book value weighting over the years between Redrow & Bellway ~ who, if you put aside Redrow straying off the Straight & Narrow pre credit crunch when Steve Morgan was AWOL for a number of years, have been very similar companies in financial profile…
If there’s been a lesson to learn for me (there usually is when a loss has been taken) it could be that of sticking to companies ~ well, probably to just Bellway & Redrow, mainly ~ to trade between because in my view it’s easier to call a reasonable weighting difference between them and therefore easier to call perceived best value at any time.
And the market does pass the baton on that between them from time to time, which provides opportunities for further gains from switching, as well as giving the government a bung in stamp duty, and I haven’t done the calculation, but I suspect that if I’d just worked between those two shares for the past two decades I would have both an easier and a more profitable game…
But, I certainly ain’t complaining ~ the game of Strictly Bricks (as our blog is named) has been good to me so far….
I’m sounding like Joe Walsh, aren’t it..?
Strictly
RM,
As an update to my comment of last night, I've just gritted my teeth, taken the kicking between the legs, and sold my remaining small percentage holding in Persimmon at a loss to go into Redrow....
Given our differing positions on Redrow, this might make for some further dialogue between us in due course ~ I'm generally up for a civilised & sensible discussion here if it's about something relevant & useful... :-)
Strictly
RM,
It's fair to say that I do pay attention to charts, but these are home-modified ones overlaid on normal share price graphs that track PBV as, for me, it is that, not share price per se, that is the arbiter of what the market considers to be long term average fair value...
But they only give a guide of whether a particular share is historically cheap or expensive against cash.
Which is about as much use to me as a chocolate fireguard, except in reasonable extremis, as my game is to remain fully invested throughout ~ though allowing that I did partially swerve the covid tsunami, that’s the only time I’ve done that in twenty three years in this investing malarkey and I feel it was something that I pushed my luck on and got away with rather than being down to any particular cleverness on my part.
So, that’s not very likely to happen again…… except in perceived reasonable extremis…
So, given that I remain fully invested come rain or shine ~ and only in the house builder sector ~ what I require is a means, a currency if you like, to compare different house builder shares, at any & all times regardless of what the market is doing at large, to find best perceived value.
And it has to be only as good as “perceived”, because these things are a matter of making a judgment rather than a matter of fact.
And my way for doing this is about allocating an appropriate “weighting” to the book value of each house builder….
And that’s a matter of opinion, and the weightings do change & move around, and I do get them significantly wrong sometimes ~ but what matters is looking to be right more often than wrong overall…
Thus far, in this game, I have achieved that ~ though with a Strictly Bricks hall of fame (or shame?) for all the mistakes I’ve made.
And the most recent of these, and one I’m intending to rectify this week, has been over-egging the weighting for Persimmon.
And that has cost me….!
But, to borrow from Ned Kelly: “Such is life….”
Strictly
RM,
I don't do charts, I'm afraid, just perceived best value ~ so I can't comment on the validity of your calcuation for buy in price....?
With regards to Bovis/Battersea/You Can Run But You Just Can't Hide, aka Vistry, I have such a jaundiced book value weighting against them because I think they are a mug's game (a minus 50% weighting against my benchmark share, Bellway) that, out of interest upon reading your comment, I just checked...
Vistry would have to get down to a price of around 225p, without any corresponding downward movement in other house builder share prices, for me to be interested....
And I don't imagine that happening any time soon...!
So, while I suspect we don't quite see eye-to-eye on Redrow, I'm imagining we both rate Vistry as being a pile of p..p as an investing prospect..? :-)
Strictly
RM,
Ironically, someone was bigging up Vistry & Redrow in a comment in the Telegraph only a few days ago about Barratt....
I replied to the writer there, wholeheartedly agreeing with him about Redrow, given that it is by far my largest holding right now ~ at least until ex-div day Thursday ~ and wholeheartedly disagreeing with him about Vistry....
You don't need to read far back through many of my comments here to see how rude I am about Vistry ~ or Battersea as they are more appropriately known in our investing circle....
However, while I fully agree with you that they seem ridiculously overpriced, I would also caution that, overall, the market seems to have had a blind spot about them in their favour for more than two decades, so I reckon it would take a braver man than me to bet that it will come to its senses imminently....
Not that I’ve ever shorted a stock in my life anyway ~ I prefer to seek out best perceived value, follow that, and wait for events to catch up….
Mind you, I don’t always get it right… Persimmon being a case in point… I’m intending rectifying that on Monday, all being well….
Strictly
Crossley,
As it just happens, "Traffic lights" are likely to be referenced in my next post there, due soon, probably shortly after Redrow's ex-div date as that is relevant ~ so maybe just wait a while for that...? :-)
Strictly....
Crossley,
Unfortunately I was pouring over the results for a good hour or two before deciding to trade, starting reading about 9am, so while Mr Market got off to a slow start on Redrow, I was off to a slower one, but I still caught some today's rise at least...
It's more a matter of what the share price, relative to Bellway's that is, is doing as from 21st so as to give me two "green traffic lights" to trade ~ if you've understood about that from the blog...?
Strictly
Crossley,
No, it was Bellway....
I am mindful that Bellway isn't likely to go ex until early December based on the past, and I'm very much a seeker of dividends while shares are selling significantly below book...
Because the argument I've always made about the folly of buying Persimmon at 3 x book for a full fat div is reversed when you can more than achieve 4 x times that in bang for your buck terms with Bellway & Redrow currently...
So, I've sold Bellway for Redrow with the aspiration of switching back to Bellway after 21st September if the market is kind enough to provide a glimmer of an opportunity before December to do so in order to catch the div there....
Each div is around 4% yield, and each is only costing around 75p of book value for every 100p cash received, ignoring tax considerations.
Anyway ~ that's the plan, Stan....
And, if it doesn't happen, I'm more than happy sitting in Redrow based on its performance for last year as well as for the decade or so before that....
If you're on the blog (I think you are?) I put up the full monty of an explanation there this morning...
Strictly
PS
As a footnote to my previous comment, I referenced book value progress for Battersea against Bellway, given that Bellway is my benchmark share...
However, it would probably have been more helpful to compare against Redrow, seeing as not only is that the share in question but also Redrow have done particularly well over the same twelve year time span ~ in that they have more than quadrupled their book value per share in that time...
While Battersea have just sat there with feet of clay and gone nowhere, don't forget....
Perhaps just pause to consider that for a moment, and never mind what the market may think.... :-)
Strictly
Tavernham,
By way of a contrasting view, I was really pleased with the report this morning and bought in more shares today such that Redrow is now more than 50% of my entire investment portfolio....
A return on equity of 16.3% ~ and in the current economic climate too ~ and reality check EPS of 90.2p by my calculation, being BVPS 612.2p plus divs paid in year 32p less BVPS b/f 554p.
This was comfortably above previous company guidance of 84p EPS and included allowing for a 10.3p per share cost to insure the defined benefits pension scheme, so would otherwise have been over 100p EPS, which would have been record earnings for the company.
Liabilities as a percentage of tangible balance sheet were down to 52%, and they haven’t been lower than that since the 47% of H1 2019.
Final div of 20p, not 18p as anticipated.
Guidance for 2024 EPS is 41p, but then Redrow has a very strong track record for under promising and over delivering, and this seems to always catch the scribblers out..?
This is in sharp contrast to Battersea ~ whom some may know by their “You can run but you just can’t hide” name of Vistry (reminds me of Hermes rebranding as Evri) who blew their half time whistle on Monday…..
Promise the earth but deliver Fanny Adams seems to be their motto ~ their book value has gone nowhere in the past twelve years while Bellway’s has tripled, yet Bellway sells at three quarters book and Battersea is twice that, so it somehow seems to work for them….?
All of the people some of the time, and all that, I suppose….?
I’ve been at this investment malarkey for more than twenty years, but it seems there are some things I’ll never understand…?
Anyway, DYOR, and all that fine stuff, and remember that if there weren’t both buyers & sellers on any day then there wouldn’t be a market, would there…?
GLA
Strictly
Oi _Oi_,
I do wonder what the directors were thinking at the time in using their precious cash resources buying back their own shares at 28p a pop, as recently as a year ago, seeing as they've clearly been in bovver for longer than that....?
Strictly
Is Greg Fitzgerald the new Jeff Fairburn of the sector....?
I mean, Battersea’s tangible BVPS as of their half time whistle this morning was 568p by my calculation.
Which gives a PBV of 1.59 as of close of play tonight based on a share price of 900.5p...
For this princely rate, you buy shares in a company that STILL hasn't recovered its pre credit crunch BVPS high of 596p.
Compare this with Bellway, which by my calculation currently has a BVPS of 2,979p against their pre credit crunch high of 934p, a book value growth of 219%.
Yet by contrast, you can buy Bellway shares at a pauperly rate of 0.72 PBV.
The market moves in mysterious ways, it seems...?
Unsurprisingly, perhaps, I hold shares in Bellway ~ but not in Battersea…
Strictly
"But, as CRST is trading at almost half the equity on the balance sheet, then the return on market cap would be double the return on equity, so can’t we accept a “poorer” return on equity for CRST, being as half that equity was free anyway? "
..........................
RM,
As ever, look to the numbers…
As of right now, I have Crest’s PBV at 0.55 and Bellway’s at 0.72.
So, £1,000 would buy you £1,818 of Crest book value or £1,389 of Bellway book value….
Then look at the past five years’ average ROE ~ 7.2% for Crest and 14.5% for Bellway by my reckoning, working from the balance sheets rather than taking as read any mythical declared earnings…
Without bringing anything else into consideration, on the above ROEs and with no divs paid, in five years you would have £2,574 of Crest book value, in ten years, £3,644, and in fifteen years, £5,158…
Whereas, for Bellway, these figures are £2,734, £5,380 and £10, 587.
Straight away, increasingly no contest over those time scales…
Then, ceteris paribus, on top of this a £1 of Bellway is worth more than a £1 of Crest…
Now, you might say that Crest will morph away from being Vicky, and that its ROE will improve, and so the above isn’t an entirely fair comparison…?
But, on the other hand, you might stop to consider that Crest do seem to have their fair share of misfortune, including going t.ts-up in the credit crunch, and, who knows for sure, that may well continue…
The nature of things, after all…
And while it’s fair to say that they no doubt have a stronger balance sheet than last time round, it still ain’t as strong as Bellway’s ~ who were alone amongst the housebuilders in continuing to pay a div throughout the credit crunch.
As I said previously, Ghost Dog…. (I suggest you watch the film to understand)
Specific numbers on this are that Crest’s liabilities as a percentage of tangible equity are 69%...
Not bad, but no cigar ~ as Bellway’s figure is 45%.
So, all in all, I’d say that Crest will need to up their current game by a greater percentage than Bellway from here…
That seems quite likely to be do-able, hence I’ve bought some Crest shares, but for me and for most, if not all, of my investing circle, Bellway is, relatively speaking, like a comfort blanket….
Useful for when the economic climate is chilly…
Like now, for example…
In other news, the rabbit pie was well up to snuff, thanks, as was the walk up on the moor ~ and I’m now slightly overdue for a post-prandial nod…
Strictly
"I always find your posts interesting and informative, but I’m a numbers guy. "
.........................
RM,
In my view, numbers are the cold, hard, marble slab of truth upon which all the bullsh.t breaks itself ~ so I’m absolutely with you on that…!
Past five years’ average ROE:
Ghost Dog 14.5%
Vicky 7.2%
Past ten years’ average ROE
Ghost Dog 16.8%
Vicky 14.1%
Past 40 years, average ROE
Ghost Dog 16.0%
None for Vicky ~ she went t.ts-up in the Credit Crunch…
I’m now due to head our for a walk up on Dartmoor ~ followed by, hopefully (hopefully is because I live in the world of likelihoods, not certainties :-) ), a rabbit pie at the Warren House Inn….?
I mean, don’t anticipate any further reply straight off…
Strictly
“I guess we’ll see a TU from BWY in the next couple of weeks? It will almost certainly reflect the tone of CRST. Is that not of concern to you, particularly when there’s an expectation of superior performance, priced in to make up for the weaker PBV?!”
………………….
RM,
You may well prove to be right, and I’m certainly not making a prediction here as that really is a fine way to end up with egg on one’s chin, but I don’t think that I share your anticipation of a forthcoming trading update / profit warning from Bellway before their full time whistle due 17th October….?
This is what I mean about taking a slightly Buddhist approach ~ I mean about the nature of things….
And the nature of Crest is to be Vicky Pollard-like, and also to be flaky in their market assurances, and to be sometimes subsequently caught out by events ~ as indeed they seem to have been once again now…
Whereas, the nature of Bellway seems to be like Ghost Dog ~ quietly slipping by, relatively unnoticed, but getting the job done.
So, I may prove to be wrong, but this investing malarkey is about the world of likelihoods rather than one of certainties in my view ~ and again, I would suspect that the nature of Bellway is also to subscribe to the former rather than the latter…
I imagine that some reading this will think that I’m talking complete boll.cks here…?
But I can’t odds that ~ this is how I see the game, and it seems to have worked well enough for me over time…
One thing though, RM, is that the scribblers have the trough, as you put it, down for next year, not this one…
Forecast EPS figures for Crest are currently 17.2p for 2023 and 15p for 2024.
Strictly