Member Info for strictlybricks

Nige,

You may or may not prove to be correct as far as housing slumps being a thing of the past, but you might find it worthwhile going onto the Nationwide's website via the link below then click on: UK house prices adjusted for inflation...

https://www.nationwide.co.uk/about/house-price-index/download-data#xtab:uk-series

If you ignore the sharp trough between 2007 and 2015 which, no doubt, we can take to be a consequence of the credit crunch, there is still an overall drift down from 2007 to present in terms of house prices adjusted for inflation - though actual house prices have gone up over that time so perhaps, overall, it's a moot point...?

However, from both our points of view, certainly an area of interest to keep paying attention to... and of course, it's taken a bumpy journey of over 200 years for interest rates to fall to where they have and maybe we're now staring at the end of the road for fiat currency..?

Which, if that IS the case, would no doubt be of far more significance then whether or not the property cycle has been cured in this country...?

But that's probably not really a topic for here... :-)

And I wouldn't necessarily agree that Persimmon came through the crisis better than any other builder...

If you take a pre-crunch BVPS high for both Persimmon and Bellway - because "interpretation" of values on balance sheets would have no doubt been different for different companies going through the crunch, and, I would suggest, especially for Persimmon as I imagine they had that big directors' bonus in mind right from the get-go, then, on the most recent figures I produced on this - they're not fully up to date - Persimmon had gained 203% book value from their previous peak including dividends and Bellway had gained 234%.

And Bellway were the ONLY house builder to keep paying a dividend all the way through...

And you can currently buy Bellway for less than 1.7 PBV, while Persimmon will cost you 3.0 PBV.

Which is why I'm holding a lot of Bellway but zilch Persimmon.

3.0 PBV is historically scarily high for a house builder..... if you're right about the housing cycle, it may not prove to be high for the future... but personally I don't want to bet on that.

The biggest ever builder PBV that I have a record of is for Telford, in early 2007, after some years of consistently having made an ROE of over 30% from the start, i.e. they came ripping out of the starting blocks, and, as a consequence, they got up to a PBV of 4.0 and a share price of 430p.

Unfortunately, Telford never recovered that awesome profitability after the credit crunch and, even though all they did since was make a very minimal loss through the crunch (in comparison to most other builders) and then carried on being profitable thereafter, they still ended selling out last year at a price of 350p, some 80p lower than the pre-crunch high all those years previously...

Strictly

Dave,

I normally make any comments on the BWY share chat rather than here, so I'm a stranger to these parts.... but I came on here to read the trading update and happened to notice your comment and I thought that I'd respond...

My reading of the Bovis update is that it suggests an actual - rather than a mythical, i.e. "adjusted" - EPS of around 98p and so a return on equity of about the same as last year, about 12.5%...

I could, of course, be wrong - but even if I'm a bit out on this, it's hardly impressive against the likes of Bellway, on 21% ROE last year, yet sells at a similar PBV of around 1.6.

Over the long term, Bellway have beaten Bovis's ROE by an average of over 4% a year - which is a huge difference as the compounding effect over a couple of decades has gradually accelerated Bellway's value into the sunset relative to Bovis (or Battersea Dogs Home, the moniker it is affectionately known by in our circle - we're certainly not fans...)

Same old, same old, then..?

So, to my mind, Bovis would have to take about a 40% price drop relative to Bellway to be in the frame for me and I don't suppose that's likely to happen any time soon seeing as even though Bovis has been consistently seriously under-performing Bellway since the '90s, i.e. for over 20 years, yet the market still doesn't seem to have noticed!

So, the upshot is that I'm not imagining buying any Bovis shares any time soon as IMO there's far better value to be found elsewhere in the sector....

But, if I'm anywhere near correct in my assessment of the update, I would say that the market has responded rather kindly, rather than unkindly, towards Bovis today....?

Strictly

PS

Terrace,

I just saw your comment on Wimps chat.... might be stony ground for you there...?

Strictly

Terrace,

It’s all Ghost Dog & Inland for me right now, plus waiting on h1 from Redrow to see if I ‘m going to rehabilitate them back to a nought percent weighting?

Strictly

Based on Taylor Wimps' trading update this morning, I'm more than happy that I'm not holding any of their shares - it seems to me that they've really painted themselves into a corner with the humongous dividends they've been paying out, and look set to keep paying out, in a time of gently sliding margins...?

It seems to me that the price to be paid in return for keeping all the investors - all the ones who think big divs are a good idea, at any rate - happy, and who, it seems, are consequently keeping the share price so high relative to the perceived value to be found elsewhere in the sector, is likely to be pretty much zero growth during a period of some years where the return on equity has been nudging around 20% and may still stay up fairly well for at least the next year or two...

And this for a company that really has been the bad boy of the sector for any really long term investor (I mean, for long suffering, patient folk who have been holding this one since pre-2008...).

So, it seems to me that the likely upshot, as things stand, is a single digit annual gain from Taylor Wimps' share prices - if the PBV remains fairly constant, of course - compared to a likely double digit gain from other house builders who are only whacking out about a third of earnings in divs...?

I could, of course, be well wrong on this but, in the meantime, this definitely ain't one for me, Gunga Din...!

Strictly

Nige,

I still think it comes down to a simple but profound difference between our respective ways of investing, even if we are both pursuing the same outcome in the same sector, i.e. to outperform the house building sector by moving around between different companies' shares within it.

And that difference is that I am happy to continually pursue best perceived value and let that just take its course, whereas you seem to be trying to anticipate market movements to some degree..?

I'm not suggesting that that can't be done, only that I'm pretty sure that I'm not capable of doing it.

So I stick with my particular version of the game, which has yielded me an additional 7% or so a year for the past 7 years - even if I did make a bit of a c.ck up with last year's performance...!

Strictly

Funny enough tried to get on the other day but the wordpress link has disappeared from my emails . Can you email it to me again ,Certainly need to get up to speed !!!

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

Sain,

I've just emailed a link to you so, if you have any problems with that, just email me back directly.

Strictly

"For companies in table av inc 44.9%. By moving a float between them (at best times) I still think I can make at least 20% more than that i.e. 65% + with Divs on top of that."
..............................

Nige,

You've given that impressive statistic previously and, as I've said previously, it isn't one that I anticipate being able to anywhere near match...

However, as, to the best of my knowledge, you've had your system up and running for at least a year or two now, perhaps it would be useful to give an idea of how well it has worked in practice as well as how well you reckon it's going to work in theory...?

If that's information you'd be happy to share, I'd be very interested to see it...

Yes, if I'd simply held Barratt all through the year then, by my figures, that would have been a 62.5% gain on share price (on my year's figures - which were from 28/12/18 to 3/1/20) plus divs re-invested so nudging 70% all in compared to my rather pedestrian performance of 57.4%.

Given my relative under-performance, it was my worst year since I started keeping accurate records on this at the beginning of 2013.

However, a few considerations.

Firstly, yes, Barratt were best in class on market performance but, no, I didn't hold any at any point throughout 2019 because at no point were they perceived best value, IMO - the PBV start of year was 1.25 rising to 1.82 by the end of year compared to Bellway, to whom I give a better book value weighting, went from 1.17 to 1.57.

Secondly, I took a real spin on the skidpan that was Telford in 2019, without which my investing gain would probably have been around 8% to 10% better for the year...

Such is life....

Thirdly, a poor year is a poor year, but it doesn't necessarily make for a poor overall investing strategy over the longer term.

I can't give you the "including dividends reinvested" figure for Barratt (because they've never been in "the zone" for me during that time so I don't keep sufficiently detailed records on them), but their share price gain since the start of 2013 is 269% - which is very close to Bellway's which is 272% and, with divs reinvested, Bellway is 362%.

And my overall gain over that time is 580%, and while obviously this wouldn't stand up against the huge compounding impact of the additional 20% a year gain to which you refer, it does amount to an average 7% a year out-performance which I am not entirely displeased about.

As I suggested previously here, although you and I seem to be in essentially the same game - that of moving around between house builder shares to further increase gains in what I think we agree is an already brilliant sector - my approach is based purely on perceived value with zero concern about what that madman Mr Market might do next..!

Strictly

Sain,

I don't know if you still read the blog but, if you do, why not sign up for Strictly Wacky Races for 2020...?

If you do, you'll almost certainly up your investment game - you can see the results that the new investors there have achieved there last year with several hitting over 60% by the year end...

I think the likelihood is that this will be a much smaller year share-price-performance-wise, so my next task is to try to manage the expectations of some of the newer blog readers/investors, some of whom may be thinking/hoping that it's going to be like this all the time now that THEY have joined...!

Strictly

Demos,

I did wonder.....!

Now re-sent, so hopefully received..?

Strictly

Demos,

"...so I'd like to join Strictly's blog if poss ..?"
....................................
I've just sent you an invite from the blog together with some notes in an email.... just come back to me via email rather than here unless you dont't receive my missives...

Strictly

Steph,

Maybe think of any share sector as an onion for a moment, as that's one way I look at this...

Having spent more the last fifteen years exclusively focused on house builder shares - that is, apart from a brief partial foray into supermarkets from which I fortunately quickly retreated again - I have pondered as I've progressed, about what layers of the metaphorical onion I hadn't yet got to...?

Obviously one can never be sure one has dug all the way down to the centre, but I'm certainly now several layers further in than I was say eight or ten years ago - and for part of that I have to thank Persimmon due to the mind games they played (IMO) with investors and my then looking into trying to understand why they did what they did.

And I would say that my last four or five years' investment performance, as compared to that of ten to fifteen years ago, comfortably reflects this.

Now, obviously I don't know how well you understand how all the different number components go together, the best way of laying them out in a spreadsheet to be able to spot any maggots and all that (funnily enough, this is a conversation I've been having with James188 separately by email at the moment), but if you get that then obviously some of that applies to other sectors too.

But if I was an expert carpenter - which I'm not, it's only a metaphor - then that would surely imply that I was a practical bloke who could no doubt turn his hand much more easily than the real me to plumbing, plastering, etc.

But, even so, why start a different trade if I was already earning a good living at carpentry...?

And, barring Corbyn (and let's not get into that), house builder shares are still looking like a very good living to me.

Anyway, that's the point I wanted to make.... if you felt your knowledge is pretty much restricted to TEF I could understand that you might now feel you've lost your living investment-wise.... if so, and if you haven't been on the blog yet, have a look there - between us, that is, I and various contributors (some who are on this chat), have dug pretty deeply into the onion and we've written all about it there...

Someone recently and impressively read the whole thing in one long stint, from start to finish including all the comments, over about a three week period in preparation for coming on an investor workshop and starting from the position of knowing jack about investing.... quite a task - it's probably at least two Harry Potter books' worth now...

It might be worth considering whether a bit of time spent reading might make the difference to discouraging you from leaping too deeply into the dark....

A shorter, pithier version of this comes at the start of the film, "The Big Short"....

It's a Mark Twain quote:

"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so"

Strictly

Steph,

Perhaps a possible concern here for you is to be learning about the company having already bought in rather than to be buying in having already learned about it..?

Rapper, have any of your grandkids pitched up yet to sort you on your computer for the blog....? (PEG is explained there...)

Strictly

Terrace & Steph,

The two points you've raised, Terrace, aren't my only concerns about Persimmon...

See the comment I made a couple of days ago about this on the PSN chat...

https://www.lse.co.uk/ShareChat.asp?ShareTicker=PSN&share=Persimmon

Steph, let me know if you want to sign up for Strictly Wacky Races on the blog and I can allocate you a cartoon character (most of the regulars, Muttley, Peter Perfect, etc., are already taken so it looks like we're going to have to delve into characters who only put in the occasion appearance, like Brenna Bubbles, for 2020...)

And if you need another link for the blog, let me know...

Strictly

Steph,

As a PS to my previous comment, without wishing to get to my own hat trick on this, I wrote a rather lengthy spiel on the Persimmon share chat in response to a comment there underlining my concerns about Persimmon based simply on the numbers - and you've said that Persimmon happens to be your number two share behind Bellway...

Strictly

Johnson36

"How do Persimmon manage to get a profit margin of 31% when Barratt gets 18.9% and TW gets 18% ?
That is a bit of a mystery to me, it is a massive difference."

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

You might find the answer if you travel back to the pre Credit Crunch high point...?

Back then, just upstream of Niagara, Persimmon's book value per share peaked at 627p

It is now around 944p ("around" because that is my estimate for end of 2019) plus they've paid dividends of 910p since the previous high.

So, that's a total of 1,854p, which is 196% further on from the pre-crunch high.

By comparison, Bellway's pre credit crunch book value per share peak was 934p.

It is now 2,498p.

Add to this the 658p they've since paid in dividend gives 3,156p, which is 238% up on the pre credit crunch high.

Which is better than Persimmon's performance in respect of the number that matters most in the midst of all the puffery.

Bear in mind that, during this time, the Persimmon team had a notoriously high, open-ended bonus scheme in place dependent on performance which had been signed off by shareholders who perhaps didn't play with the numbers sufficiently beforehand...?

Once they realised what they'd done, as is well known, the boss was given the bum's rush....

What we have yet to find out is how declared margins pan out from here given that there is now new management in place - unsullied by the past and probably keen to start with a clean sheet - especially given all the bad publicity recently about Persimmon's p... poor build quality.

Already, the 2018 return on equity for Persimmon is virtually identical to Redrow's, 26.5% against 26.3%, so I await with some curiosity to see what 2019 brings for Persimmon...?

And bear in mind that Persimmon's PBV is 2.58 at close of play this evening - which is exactly double Bellway's 1.29 and not far off double for Redrow's 1.39.

That would seem like a big potential for a relative price drop at some point (I have no opinion on the timing of short term share price movements, relative or actual, for any company as I'm purely interested in perceived best value as it stands at any time and, anyway, that old b.st..d Captain Hindsight is never down the pub when I am...) for Persimmon against Bellway and Redrow if Persimmon's profitability does somehow happen to return to normal levels...?

So, the upshot is: I am not holding any Persimmon as I regard it as being far too risky at current prices relative to other large house builders.

But, of course, this is just my view based on my own research undertaken and doesn't constitute any advice being given here to anyone....

Strictly

Steph,

The sequel..?

You referenced me in part one of your trilogy here, so I didn't know whether you were seeking a response from me..?

Anyway, I have a challenge for you to take up, or not, as the case may be..?

You're signed up on the blog, so why not join in Strictly Wacky Races 2020.....?

No worries about including non-builder shares - Lazy Luke has half his money in Dechra (which scares the pants off me as an investment prospect), so that's all okay...

Then you can very clearly benchmark how you are doing each month compared to the others - who apart from Luke are pretty much all in builders' shares.

And the people on it are mostly pro active with moving money around - even though they are relative novice investors and they've overwhelmingly only come to this investing-in-house-builders' malarkey because of my influence and so they're mostly learning on the job...

Don't know if you keep up with the comments on the blog from readers but, if so, you can no doubt see what a positive impact on performance having to keep a focus has made as far as they're all concerned.

So, apart from bench marking against exclusively house builder share portfolios, assuming you're continuing in the musketeers' long term buy and hold approach, you would also then be able to be to benchmark that approach against actively seeking best value.

You don't have to trade in order to take part, and I can send you a simple spreadsheet designed to keep everyone's records the same way in the spirit of fairness...

Your largest holding you've said is Bellway... I'll drink to that as that share currently represents 88% of my investment holdings... but seeking perceived best value, i.e. only being in Bellway as, when and while it is perceived best value, has added an annual 7% extra gain to that of Bellway since my records on this began in 2013.

And, who knows - we might even get Terrace signed up for Strictly Wacky Races...?

There's a thought to conjure with... :-)

And, finally, I can tell you that, currently, James188 is in pole position - competing as Mean Muttley - though he's probably far too modest to tell you that himself...!

Strictly

Terrace,

Well, if you're happy with the compromise of the percentage as from the start of 2013 (because all these numbers are already there in front of me on the spreadsheet), with an opening price of 1,037p, I can tell you that investing all divs on the day received means you would have bought yourself another 0.242 shares in total and using tonight's closing price of 3,190p you'd have made an overall 282.1%

Maybe give or take a fraction of a percent....!

But almost exactly double Telford over the same time...

Who says I'm an anorak..?

Strictly

Taverham,

First off, I rate all the other relevant house builders with a book value weighting against Bellway - the Ghost Dog of builders' shares.... they've slipped along, silently and efficiently, scarcely noticed by LSE share chat aficionados, until the musketeers and others reassembled here after they were forcibly evicted from TEF...

I'm a big fan of Ghost Dog..... I've got 37 years of vital statistics on them and, in all that time, they've not really put a foot wrong...

So, when it comes to Crest, they've been pretty flaky recently and I suppose the previous boss either got a bit jaded with pushing out disappointing news, didn't see it the same as the new chap or, as you say,the new CEO is simply giving the kitchen the mother of all spring cleans...?

Whatever, maybe we'll get to a Crest balance sheet we can trust when the next one comes out - or maybe we won't...?

The dividend should probably never have got to 33p in the first place but, now they are where they are, they've probably, like plenty of players in the FTSE100, got to keep on with it and hope they don't end up becoming the new Galliford.

And a consequence of that is the new CEO is looking at pretty much zero book value growth for the next two years as far as I can see - so, yes, he may want to finesse the starting line a bit if he wants to appear heroic, as EPS growth is no doubt going to be harder to achieve for him than for competitors paying a more sensible dividend (the most sensible dividend of all, of course, being zilch) and therefore working off an ongoing and steadily increasing BVPS.

In the meantime, I reckon I'll just take the Crest numbers at face value at the bottom end of the range - they don't warrant better than that, IMO .... Crest have lost some serious brownie points with us lately - by "us", I mean not only with me but with others on the (Strictly Bricks) blog that I refer to in various comments made here, as that's where we tend to dig into this stuff more...

So, anyway, Crest has got a minus 35% weighting for me at the moment and, as of close of play tonight, that makes it 40% more expensive than Bellway in value terms...

So, until and unless I alter my view on that, for me it would require a rather serious relative shift in share prices to be in the zone once more...

And that might just mean that I miss out on a price bounce at some point - but I can live with that as I reckon that trying to predict short term price movements is a mug's game and I have a lot of faith in the notion that to continually pursue best perceived value pays off in the end.....

At least, it has for me these past twenty years..

That was all rather long-winded, and I'm still not sure I answered your question, but there you go... :-)

Strictly

Rapper PS

A while back, I recall you tried to sign up for the blog, but unsuccessfully...

I've just sent you another invite in case you're still interested and would like another attempt.... I recommend enlisting the help of someone who is nearer to the age of 8 than 88....

There's a lot more on there about Crest, Bellway, et al, from Yours Truly (and others - some of whom also comment here) than I put on here - especially these days...

You might even want to participate in Strictly Wacky Races - that'll most likely help you to up your game...!!!

Good luck...

Strictly