Member Info for strictlybricks

"It is the cost of Land that is the main driver of high housing costs...the Government should just compulsory purchase land for new housing at its nominal market value... i.e. about £10K per acre...that would reduce new house prices by 50% overnight, would upset quite a few wealthy Tory landowners thought."

...........

Stan,

The “high price of building plots” is actually something of an urban myth…

If you take the Ryan Air of house builders ~ I mean, Persimmon ~ their plot cost last time I looked (several years ago, I admit…) was around 12% of sale price.

The other mainstream housebuilders, it can move around the 20% of sale price mark, give or take….

But there is a shedload of other stuff in the way these days costwise ~ aiming towards net zero, insulation, great crested newts, additional tax, etc…

On the bright side ~ and, let’s face it, there ain’t a lot to be cheerful about right now ~ at least Michael Gove is now out of the way….! 😊

Strictly

Over the years, from time to time, I have put up what I consider to be the “reality check” figures for Bellway for consideration here…

I’ve been a fan of Bellway for more than twenty years and, at times, have been fully invested with all of my capital into just this one company.

But times have been tough for house builders for the past six years, and I currently don’t hold shares in any house builders ~ though I still follow Bellway closely…

So, here are the numbers I have for them from the full time whistle this morning (hopefully no schoolboy errors or, these days, senior moments with the calculations?).

Net equity at £3,556.3m divided by 118.992m shares in issue = 2,989p BVPS as at 31/7/25.

Plus divs paid in the year of 39p & 21p = 3,048p, less BVPS b/f at the start of year (calculated the same way) of 2,903p = reality check 2025 EPS of 145p.

This is better than the declared EPS of 132.8p but some way short of the scribblers’ most recent prediction of 168p.

The directors typically put a brave face on things, but the following line from the report maybe nails it..?

“Since the start of the new financial year there has been a continuation of weak consumer sentiment which has carried from late spring. Customer demand has been affected by ongoing affordability constraints and uncertainties about potential taxation changes in the Government's Budget in November 2025”

Along with

“In the ten weeks since 1 August, the private reservation rate per outlet per week excluding bulk sales was 0.48 (1 August to 6 October 2024 - 0.49). The private reservation rate including bulk sales was 0.51 (1 August to 6 October 2024 - 0.60).”

The scribblers have 2026 down for an EPS of 188p… this to me is looking quite optimistic in the light of the couple of lines copied & pasted above from the report given the 30% leap in EPS required.

The 2025 return on equity was just 5% and the P/E is currently 17.

Still way too expensive for the likes of me, guv… ☹

Strictly

“Hi strictly am I to assume you are back into bricks? Or still more interested in lgen phnx mng etc which I also hold…”

…………………

Monkey,

Sorry for the late reply ~ I’ve not been on BTRW chat for a week or so and so have only just seem your reply…

You are to assume incorrectly, though….

I pay attention to three housebuilders still ~ that’s Bellway, Barratt and Taylor Wimps ~ but only to continue to reassure myself that I have done, and am doing, the right thing by staying away from house builder shares for now and for at least the foreseeable….

It's been a matter of breaking the twenty year habit of having been invested fully in that sector and keeping it broken…

From when I sold house builders in favour of the insurance boys, in early 2024, it’s very much been the right call for me ~ Bellway & Wimps have made single digit progress over that time (and that’s with divs reinvested) and Barratt Redrow have gone backwards (serves them right for taking out the best player in the sector last year, just like they did with Wilson Bowden in 2006, who were the best in class back then).

By sharp & happy contrast, the game of insurance boys has produced a total gain over that time for me of around 60%.

The prognosis from the scribblers for house builder EPS prospects is p.ss poor for the next three years, and probably counting, and then take into consideration that we may still have another four years of the current halfwits in charge and the damage they seem to be inadvertently heaping upon the sector with every move they make…

I’ve got to be careful here ~ this could descend into a rant…! 😊

But, anyway, to finish responding to your question, I am currently 100% in LGEN having moved into them in May from having been 100% in MNG…

That was worthwhile but, as ever, I managed to do a Syd Barrett on it (I mean I “reached for the secret too soon” ~ if you’re not a Floyd aficionado…?).

Good luck with the house builders if you’re invested in this sector ~ it may seem right for me to move back in to them at some point, but I fear that that time may not ever arrive….

Or, to borrow another line, like “Waiting for Godot”

Strictly

“My strategy has been for capital growth at higher risk… my portfolio is not (yet) structured for income, though over the next decade it more likely will.”

…………………..

Alas,

As it happened, I stumbled by accident from more growth-oriented shares to dividend-oriented shares only early last year…

I’m counting builders as being more growth given that the ones most worth investing in (IMO) typically only paid out around a third of earnings in dividend….

But now that they are earning in total less than the likes of LGEN are just paying out in dividend as a percentage, and once I’d come to understand that albeit somewhat late in the day (because I could have/perhaps should have, got to that realisation several years earlier, so I was slow on the uptake there…), after a short period of reflection about making the change, it became a no-brainer for me to stay put in my shiny new investing sector….

From the point of shifting in early 2024 up to now it has proved to have been very much the right thing to have done ~ given that Bellway, my benchmark builder share, has only made a few percent of progress over that time from start to now including dividends reinvested and, by happy contrast, the insurance boys have done much better….

Whether it remains the case for the next few years that the insurance boys continue to be a better place to be invested than the house builders ~ well, that obviously remains to be seen…?

But, in terms of underlying performance at least, the scribblers would have to be significantly out in their earnings forecasts for that to come about….?

A particular challenge for me has been to resist going back into house builder shares now that they have slid back substantially against the insurance boys, but my number crunching on them informs me that there is still a long way to go before they achieve relatively better perceived value….

So I am trusting that I will not succumb in the meantime…? 😊

Strictly

Rob,

I understand your caution and of course it's well justified and fully valid...

However, though it's been a somewhat bumpy ride for me over twenty five years of investing in such a manner ~ and especially in respect of the 2007/8 credit crunch ~ overall it has more than worked for me and for the others in my investing circle who pursue a similar investing strategy...

Strictly

“Most of us have realised what happens when you try the trading game, often the one you sell keeps rising and the one you buy drops”

…………………..

Rob,

You are of course correct in what you say….

But, as I’ve implied in my reply to Fin, I’m not trying to anticipate share price movements….

For me, that would be folly…. I don’t have the skills, and I don’t happen to be drinking buddies with Captain Hindsight either…

But I do take a view on value, and I continually seek to be holding the best perceived value in shares…

So, take LGEN and MNG for example….

Earlier this year, I was holding MNG shares as their dividend yield was better than LGEN’s…

That situation changed in May…. The best perceived value shifted to LGEN…. So I took the substantial gains I’d made up to that point on MNG and shifted to LGEN during that month.

And, of course, if you make a comparison share price graph between LGEN and MNG, it’s there to clearly see that, based on anticipating short term share price movements, I sold too soon….

But I think that the all-important point that you’re missing is that that doesn’t matter to me….

Because I’m still sitting in best perceived value ~ just that that now happens to be in LGEN rather than MNG…

And, of course, the relative share prices ~ and so also the relative perceived value ~ may continue to drift further apart…?

However, even if that does happen, I’m still sitting in best perceived value…

But, based on history, it’s likely that they will move back across each other at some point ~ I just necessarily have to keep paying attention for when that happens…

With no forecasting abilities whatsoever required….

Which is just as well ~ as I don’t have any… ☹

Strictly

“Gotta be a better opportunity to be in big time at the end of the year…”

………………………

Fin,

You may well be right….?

But, firstly, that’s above my paygrade to take a view on…

And also, secondly, I’m too cowardly to want to try to call it anyway…

How I invest is to aim to call “perceived relative value” between the companies I invest in within a sector ~ and for the insurance boys (where I’ve been for the past year and a half, so I’m a relatively new kid on the block in this respect) this is straightforwardly relative dividend yield percentages…

Up to early 2024, for twenty years, my investing sector was the house builders and for that I deployed the home grown confection of “weighted book value” to assess perceived relative value…

Over twenty years, it worked well enough for me for house builder shares and so far, over the past year and a half that I’ve been investing in the insurance boys, I’m comfortably ahead of all three of them compared to where I would have been if I’d bought and held any combination of their shares…

So, while others here may feel confident enough (and sufficiently skilful enough) to call the market, that is very much not me ~ and given that my current way of doing this has worked well enough, I intend to stick to the old maxim of if it ain’t broke then don’t fix it until such time as it proves to no longer work…

For me, the aim is to be winning the lottery in slow motion… 😊

Strictly

“But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?”

………………………

Lending,

You appear to be on a similar song sheet to me in this…?

My investing position is ostensibly neutral in this as, barring trading opportunities, I am now in my seventies and, excepting a future shift of investing strategy into other than the insurance boys, the plan is to draw down on the dividend income and not reinvest into further shares for the three companies, i.e. LGEN, MNG and PHNX.

So, on that basis alone, future insurance boy share price movements don’t figure.

However, as I suggested above, that is “barring trading opportunities”.

I was previously in the game of house builder shares for twenty years ~ hence the moniker ~ and that game regularly threw out opportunities to trade between similar calibre builders which gave rise to the opportunity to fairly consistently increase gains over and above that of simply buying & holding a basket of the same shares…

It has become apparent to me within the past two years that the prospects for these two different sectors have reversed ~ I mean, going back to before covid, why would I want to buy a sector returning 6% or 7% a year when I was already in one returning around 10% more than that just in underlying performance…

And, with also now having a more straightforward currency for trading ~ that of dividend yield rather than weighted book value used for builders ~ I am hoping that opportunities will still manifest for me in the game of insurance boys as they did with the game of house builders…

Historical price comparison graphs inform me that they have done so in the past, and we have already had one juicy one this year to date with MNG rising and crossing the value line ~ albeit hindsight told me I traded too soon.

But such is life ~ I can’t odds that nor can I complain about my gain from when I first bought LGEN in early 2024 against how LGEN of itself has done over that time…

So, I live in hope that there will be more opportunities to come ~ even though LGEN’s recent poor relative price performance is such that it is fairly well nailed into the “perceived best value” box right now so cannot be usefully traded out of again… ☹

To sum up, for my game, I want neither overall price rises or price falls ~ just ongoing moderate inter-share price volatility to create more crossover opportunities.

Which in turn can increase my dividend income at a greater rate of knots than just waiting for the companies to do so by gradually increasing dividend per share.

It’s quite a simple strategy, really…

Strictly

“For a low growth business. would you rather get a 10% yield on a sp of say 250p or a 5% yield on a 500p share? I know what I would choose.”

………………………..

Lending,

I agree with what I infer is the drift of your comment…..

If a rational investor is holding LGEN shares for the dividend income ~ and particularly if they are intending reinvesting at least part of that dividend back into more LGEN shares ~ surely wanting the share price to go up is the investing equivalent of wanting to shoot oneself in the foot…?

Other than, that is, looking to take advantage of relative perceived mispricing gaps to trade between other similar high dividend shares, when opportunities arise, to further increase overall dividend income….

Strictly

"Question is whether there is a reason...is it justified?"

..........................................

Dave,

If there IS a justified reason for it, it's been a long time coming....

If you are prepared to take a view on LGEN’s value to you based more or less solely upon its dividend, on the basis that:

1) There’s an impressive twenty seven years and counting track record of dividends available to be seen on LGEN’s website….

2) The directors presumably know their business better than the assembled scribblers and sundry punditry who all help to drive the price

and

3) The directors presumably want to keep their nice well paid jobs and an unexpected change of trajectory for the dividend ~ i.e. downwards ~ would likely f.ck up the share price and their reputations along with it…?

Then, if you made yourself a graph of LGEN’s dividend yield going right back, it’s clear to see that, since early 2014, the yield graph might look like the trajectory of a drunk staggering along the pavement but the overall and very discernible direction of travel for the yield is upwards ~ from 4% in 2014 to over 9% now….

So, unless a prospective investor thinks that the yield will continue to overall increase due to falling share price ~ as opposed to maybe dipping temporarily into a higher yield percentage when the market has its knickers in a twist for whatever reason ~ then right now is looking like a good time to be in to me…?

And I’m definitely not giving out investment advice here ~ but the above is very much why I’m in LGEN big time….

Some might argue I’m in too heavily ~ but then I’m imagining we’re all over 18 here….

Strictly

For the past twenty or more years, I have calculated "reality check" earnings by taking the tangible net equity at the end of the accounting period, divided by the number of shares in issue to give tangible book value per share, adjusted for dividends paid during the period, less tangible book value per share at the stat of the period.

By this method, I can unambivalently follow the progress of the value of a single share, adjusted for dividends, over as many years as I have access to records for.

For me, this is the ultimate "cut the cr.p" indictor, and it has served me well over the duration of my investing in house builder shares...

But it might be contentious for those persuaded by a "Vicky Pollard" style of reporting figures by companies ~ some of which are worse than others...

By this method, I have book value per share for 30/6/25 of 436.8p ~ which concurs with Barratt Redrow's figure.

That was: £7,873m balance sheet less £1,174.8m goodwill and £408.4m intangibles = £6,289.8m divided by 1,439.825m shares in issue.

Add 17.6p div paid in the year and subtract b/f BVPS 451.7p gives the princely sum of 3p EPS for 2025.

Or, in ROE terms, this is 0.7%

Declared EPS for 2025 was 13.6p

Strictly

"Ex date 10 October. Pay date 31 October."

.........................

HQ,

Careful with that axe, Eugene ~ the record date is 10th October which makes the ex-div date the 9th October...

Payday is 14th November...

Strictly

Eckie,

To perhaps underpin what Crossley has said, and to add another bearing to this, you could take a look at LGEN in terms of historical dividend yield…?

A share price graph will straightforwardly show you that yes, 2015 was an expensive year for LGEN in any event…

But if you care to make yourself a graph showing the share price moving through the dividend yield, this clearly shows that the yield was touching down as low as 4% around that time…

In other words ~ and I can tell you this straight off because it’s clear on the graph ~ lower than it had ever been previously since before the credit crunch, and lower ever since…

If that’s not a warning bell, what is..?

Even at the point of hitting the absolute high share price that it’s ever been at ~ at the end of 2019 ~ the yield had improved by that point on that price to 5.5% ~ even though that share price high was greater than 2015.

So, I would say it’s a matter of how much income you want for your capital if you’re looking to invest but without wishing to speculate with the share price…?

The yield has overall, but unsteadily, improved over the past eleven years or so and has visited better than 9% three times since late 2020..

Up to the current one, these moments have proved to be good times to buy for someone looking to speculate fairly short term on the share price…

We are currently in one of those moments so, of course, without that old b.stard, Captain Hindsight, here to guide us, we don’t know for sure whether that will continue to be true..?

Perhaps more noteworthy, to give added perspective, is that, prior to the past five years, LGEN’s dividend yield was only once ~ and very briefly ~ better than 9%...

And that was in the immediate aftermath of the credit crunch…!

Eckie, this might seem to be something of a convoluted post ~ but, trust me, a picture is painting a thousand words here, and all that, and it is very clear & easy to see all this if you make yourself a similar graph to mine…

And I can tell you that I had to make mine using colour pencils for dividend yield grid lines overlaying a printed off price chart as my computer graphing skills are p.ss poor ~ if not non-existent… ☹

But if it’s a matter of investing some serious money and not wanting to get it wrong if you can help it, what price the bit of effort required to give yourself some further insight that perhaps not everyone else who is investing here has…?

Strictly

Svend,

As a footnote to our discussion, I’d just like to add this….

At the end of the day, popcorn or no popcorn, it really only boils down to just one thing….

Compounding….

(The below figures are based on the growth in the book value of a single share, adjusted for dividends paid, in each case…)

The king of compounding, Wilson Bowden, grew at an average 22.3% a year from 1983 until 2006 ~ at which point, those bar stewards over at Barratt bought them out (a plague on their house for doing that..!).

Bellway has compounded at 15.6% from 1983 to date…

Vistry has compounded at 9.9% since 1997.

I am not anticipating these companies doing anywhere near as well as this from here on for the foreseeable..?

Of course, I could be wrong…?

But, at the end of the day, it will be whatever it is going to be ~ and I’m out and you (and many others here, I imagine..?) are presumably in...?

So, maybe we’ll remember, some way down the line, that we’ve had this conversation now ~ and perhaps even re-visit it here…?

Strictly

Svend,

I think we may have now beaten this one to death....?

Perhaps what remains is to wait and see....?

You from inside the arena, and me from the sidelines....

And whether popcorn is appropriate, maybe we don't get to find out until later...?

Strictly

Svend,

Back in the day, many years ago, I identified eleven criteria that could apply to prospective shares to buy which Bellway ~ the benchmark share for builders in our circle and the “Ghost Dog” of house builders (in that it was long term best in the sector but that many investors seemed not to have noticed…?) passed these with flying colours…

Copied & pasted here, and hopefully survive the “Post Message” button being pressed..? 😊

1) Price to book value less than 1.5.

2) Average return on equity at least 15%.

3) Price earnings ratio less than 10.

4) Good track record for at least 10 years.

5) Organic growth rather than takeovers.

6) Not in a heavily regulated industry.

7) No competition from abroad.

8) Not in a technology industry.

9) Caters for a real, ongoing need.

10) Doesn’t spend much on fixed assets.

11) Easy to follow accounts.

However, Bellway now falls down on 2) and 3), and Vistry, IMO, falls down on these plus 4) and 5).

Additionally, all house builders now also fall down on 6).

And i mean, big time..!

I’m not intending listing all the changes, but I imagine we’d could all come up with quite a few…?

The thing is, back in 2000, when I started investing, I’d initially included shares from some water companies before I’d had my “epiphany” about house builder shares in 2003…

But would you want to invest in water companies these days …?

They’ve become one of the bad boys of the market these days, haven’t they, and regulated to b.ggery…?

Well, steadily, since the cladding issue, following on the heels of King Jeff’s mega £100m plus bonus at Persimmon which gained national notoriety, so it seems have the builders…?

But, the thing is, until & unless the government nationalise the house builders, how can they force them to build more houses than they want to when the builders can’t see adequate return in it..?

The credit crunch had the dramatic fast burn effect of virtually halving national output of houses…

I’m seeing the accumulation of extra regulation ~ let alone the extra layer of tax and the money coerced out of builders for cladding as they were the easiest targets to squeeze ~ being the likely slow burn equivalent…

The government can’t have it both ways, I reckon…?

Anyway, many may disagree with me here but I’m not looking to achieve some sort of consensus ~ I'm just discussing why I’m now on the side lines here…

But I still give it all plenty of thought…

Strictly

Svend & Green,

Thanks for your replies ~ always good to discuss things with people who are polite rather than point-scoring or petulant, which seems to sometimes be the case here...?

My concern about "Capital-light" is that I've seen it before with Telford....

I am concerned about what the present government may inflict further upon the sector though…

Only in this morning’s Telegraph online was an article about changing landfill tax criteria that could add £24k to a new build..!

This on top of other “great initiatives” like building out plots with planning consent to a schedule ~ that, and overborrowing, is largely what got the sector into trouble back in the credit crunch…

Builders are now making a significantly lower return on equity than previously ~ and that’s before any “Capital light joint ventures” are considered (a la Vistry).

Overall, house prices have not increased beyond inflation for twenty two years (per the Nationwide’s statistics, available for all to see online), and yet wannabe house buyers are often still struggling to afford them…

So, without wishing to dive too deeply down this particular rabbit hole here given that I’ve spent a lot of time reflecting on all this anyway and have discussed it copiously elsewhere in a blog, how are all these extra homes to be built without significant tax payer subsidy…?

And how can the government currently afford that subsidy as we gradually move back towards becoming more of a renting society than we have since the Thatcher years…?

And one of you might point out that this is hardly rear view mirror stuff…?

Well, in one way you’d be right….

But not when it comes to looking at the track record of a Labour government….

And I don’t mean Blair’s lot ~ I mean Sunny Jim back in the day and the “Hello chaps!” from the IMF in the seventies… ☹

It may be that none of these things particularly faze you…?

But they very much do me ~ and that’s why I’m currently sitting it out in insurance boy shares for the foreseeable…

Strictly

“Rear view mirror is fine but don't only look back 10 years.”

…………………

Green,

I’m referring to individual companies rather than indexes because I only invest in a very few individual companies, and not funds of any kind…

And for these I still look at track records going back decades as I’ve accumulated that information over the years for the few companies I’m interested in.

So, I guess that means that I agree with you..?

Strictly

"Strictly, what you are basically saying is that it's time for Vistry to shine and compete with or beat Bellway from now on; if so, it's game on. "

..................

Svend,

That is very much NOT what I am saying...!

But, I would repeat, that a market obviously needs a buyer AND a seller to function ~ so from that perspective it's clearly a good thing that folk take differing views.... 😊

If you make a "Total Return" graph for Vistry on the Stock Exchange's graphing tool, i.e. including dividends, Vistry has returned precisely nada, zilch, nothing, for investors for the past decade...

I am now completely out of all house builder shares ~ let alone Vistry ~ since early last year....

It took me several years to get to that point, in having initially allowed for the sector’s poor returns being down to a series of headwinds ~ I mean, covid, cladding, Gove, etc.

I saw these as likely being temporary problems for the sector to endure and it now seems I was probably wrong as it’s looking to be more long term with no end in sight…?

And having enjoyed twenty overall good years invested almost solely in this sector, it wasn’t easy to let go of the familiar comfort blanket of Bellway and Redrow ~ but Barratt taking Redrow out of the game was probably the nudge I needed… 😊

So, I was slow off the mark, maybe, but I’m now being cautious and am regarding the house builders as maybe being yesterday’s men as far as high returns on equity go ~ until and unless the projected future earnings for them not only change direction of travel but significantly so…?

I’m very much a “rear view mirror” investor, Mathew 7.16, and all that ~ and, on that basis, Vistry doesn’t come anywhere near being in the frame for me either now or, most probably, in the future…?

And the latter would probably require a Damascene moment ~ though whether on my part, or Greg’s, I couldn’t say..?

Decades of relative underperformance shout “Don’t touch with the proverbial..” to me…

Anyway, my sense is that, unlike me, you are very much a fan of Vistry ~ so all the best with that…

Strictly

PS

The last bit of my comment just now was cut short...

It was:

"And, before you or anyone else says it ~ yes, I appreciate that I need to get out more…! 😊"

Strictly