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Terrace,

"This calendar year, including dividends, TEF holders have seen the value of their holdings increase by just under 29%,nothing glum about that is there?."

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

I agree - but then the impression I have is that the musketeers have mostly been in for much longer than since the start of 2019 and just using 2019 to date TEF performance is putting just about the best possible shine on it possible - certainly as compared to going back to the start of 2013, for example....

However, in any case, my post-mortem reference wasn't intended to be a comment about TEF's performance but instead about the fact that the regulars were/are mourning its loss as an investment option for them...

And yes, everyone can sit in the cash equivalent of waiting for the 350p a share payout for the time being, but at some point, no doubt, an alternative home(s) for their investment capital no doubt needs to be found, and surely, to any extent that it may or may not be useful, that's the relevance, or at least the aim, of this share chat malarkey...?

Strictly

Nige, Terrace, Rapper

Firstly, whether to be in cash or shares isn't an issue for me as my aim is to always be fully invested apart from having sufficient cash to be able to avoid selling shares for at least five years at any time if it comes to it.

So, to also respond to Terrace's comment earlier about share prices haven fallen lately against standing still in Telford.... that could have easily gone the other way, it's just the luck of the short term draw and my view is that one just has to let go of this and concentrate on value.

Secondly, Persimmon and their bundle of of cash.... yes, that is one way to look at it and another is overall liabilities as a percentage of balance sheet and that is the indicator I keep more of a close eye on....

Sector leader in this respect is Bellway, at 36%, then Redrow at 47% then followed by Persimmon and Battersea Dogs Home both at 49%.

Thirdly, for Rapper - re Crest, as I see from your posts that you seem to be a particular fan of that company...

For me, Crest are lying third, behind Redrow then Bellway, in terms of value.. their PBV is lower, which is good, but they pay a significantly bigger percentage of earnings out in dividend, which is not good.

Furthermore, their 2018 balance sheet gave a BVPS which implied an ROE of 22% for the year - somewhat better than we'd perhaps been led to expect... come the half time whistle for the 2019 match, and taking the h1 balance sheet and inferring forward for the full year using the scribblers' EPS forecasts gives a 2019 ROE of only 8%...!

In other words, the 2018 balance sheet was clearly b*ll*cks to some degree, but the easiest thing to now do for the two years combined is to average out at around 15% and, lo, that's about what the scribblers also imply for 2020 and 2021 so seems a reasonable number to work with.

So, that gives me three issues with Crest - which marks them down in the book value weighting process that I, and pretty much everyone on the blog, use...

1) their numbers can't be trusted too far

2) they pay out too much in dividend..... they've painted themselves into a corner with this in that as, if and when they reduce the payment they inevitably draw negative attention to themselves from investors who don't look much past the headline figures.

Even if, like me, you only invest in house builders, it's quite an illuminating exercise to stroll through a few years' worth of balance sheets for some of the FTSE100, from Vodafone downwards, to see how many of the big boys are shelling out a dividend that isn't really affordable (a bit like the euro and the Target 2 balance - a can that is being well and truly kicked down the road...)

3) their return on equity, which sparkled in 2015 at 26.7%, has now lost it's shine and they are no longer in the same league as Bellway and Redrow, at least for the time being...

Anyway, good to get a bit more of a discussion going here beyond just a glum post-mortem on Telford

Nige,

"What do you think of my conspiracy idea? !

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

You may have intended to direct that question at me rather than at James given that you seem to be responding to my previous post...?

I don't have a view on any conspiracy in respect of Persimmon - I'm more generally inclined in life towards the notion of c*ckup and cover up than that anyway...

But the biggest numeric indicator for me is the drop from 48.3% to to 26.5% ROE for Persimmon for 2018 from 2017.

The crew gathering here on this chat seem to be largely economic migrants from TEF, and I had previously been arguing on that share chat for some while essentially that the disappointing and diminishing ROE for that company was far more significant than had seemed to be being generally acknowledged...

Part of the problem there possibly was the comforting sound track from the MD - a person widely acknowledged, including by Yours Truly, to seem to be a very sincere & credible individual, who certainly passed my curry night test, yet the numbers were really increasingly telling a different story.

So, the more I go on, the more I don't trust narratives much if they aren't in line with the numbers...

And, as I've said, we do have this latest actual ROE for Persimmon of 26.5%, by my calculation, and we do have a company selling at around 2.0 x book value which is high for the house building sector as a whole although I readily acknowledge that there have been periods where individual companies have sat on much PBV higher ratings (TEF up to 4.0 x book in 2007, for a start, which is part of the story of why they're now accepting an offer of 80p a share lower than the share price of twelve years ago - even though all they've ever done during that time is make money...!)

So, we're only five days away now from the due date for Persimmon's half time score, so not long to go for all interested parties to find out...

I'm not into gambling and I'm not into trying to call the market short or medium term, but to my cautious self there seems to be plenty of short term opportunity for Persimmon's price to slide further relative to others (and it's price movement "relative to others" which is what matters to me, rather than actual price movement, given my deliberate decision to remain invested throughout... Persimmon are only up 4% for the year to date against Bellway 12%) and not a lot of potential for short term upside.

And, as I'm not in Persimmon anyway, this is largely academic for me beyond the further damage Persimmon might do to the general view of the house building sector at large among the pundits, the people and the government - and IMO they've already done plenty of harm in that respect...

A hugely more important date for me and most of the gang on the blog is 5th September - when Redrow's full time whistle is due to be blown...

Strictly

Nige,

I found the conversation that you and others have been having about PSN on that chat over the past couple of days quite interesting (I suspect that you and I aren't a million miles apart on our views and our approach to this game) - however, as this BWY chat may now become the new home for ex-musketeers and other assorted TEF orphans, I thought I'd put my three halfpence-worth here instead...

IMO, companies tend to have natures which show through in their track records.

PSN's nature seems to have been one of clever marketing together with a keen desire for big personal gain for the directors, even if it comes at a price to others...

Early days, Persimmon grew quickly - not organically like most of their peers but by buying other companies, shelling out for goodwill and thus impacting shareholder value.

However, big turnover equals big directors' pay, and largely sod the bottom line.... just look at Vodafone...

The clever marketing showed itself soon after the credit crunch when all house builders' share prices were on the floor and Persimmon "bravely" announced a 9 year capital repayment plan which went down a treat with the market - look at their PBV ever since.....

However, if one actually bothered to play the numbers forward on a spreadsheet, the plan was nothing special and the dividends paid were only really in line with what other top end builders were always likely to achieve.

But hats off the the PSN boys - they managed to slide a ginormous bonus plan past the shareholders in return - who were clearly half asleep dreaming of dividend riches to come.

And coming more up to date, we've seen a truly astounding return on capital that's happily coincided with the period for which the bonuses were calculated.

And now the top boys are off and away with their loot and we've had the 2018 ROE which, surprisingly, has fallen down in line with that of Redrow's now that they're past the bonus period.

Trouble is, you can buy RDW for 1.14 x book while PSN is at 1.98 PBV - i.e. a 42% fall in price is required from PSN to equalise these.

So, while I'm far too much of a wuss to hold PSN shares, I am interested to see what the update says next week about margins and ROE - especially as the new MD can fairly say "It was him, guv!"

I'm also interested to see how PSN talk themselves out of the bad publicity that has mounted up against them which has also unfortunately jaundiced opinion against the building sector at large.

Liam Halligan's recent expose on them on both Channel 4 and in the Telegraph surely won't have done them any favours and I'm not sure their kindly 1.5% customer retention for the usual shopping list of c*ckups is going to cut it..?

Until the 20th, then..?

Strictly

Nige,

"Totally agree with value idea, and from this point of view Imho psn the best value by far, due to the serious -ve media publicity.
Rel Price when 04/01/19 = 100 and last date 05/07/19:
psn = 96, tw = 114, bdev - 121, bwy = 105, rdw = 109"

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

I agree that PSN have a good track record, but I think they also have a track record for greed.

This is probably both a minority and a rather controversial view point, but down the years they fast-tracked growth through acquisitions - damaging share holder value by generating intangible assets on the balance sheet.

The point being, what directors are paid is based much more on the size of the company they're running rather than on how well they do (just look at outfits like Vodafone) so their actions (in buying businesses rather than just growing organically) in my view weren't fully aligned with the interests of shareholders.

And now we've had the Persimmon big boy bonus bonanza, which has damaged the reputation of the house building sector as a whole.

Compare that to Steve Morgan who owns a big percentage of Redrow but didn't even take a salary.

And Persimmon declared truly awesome profits in 2016 and 2017 - these were years that the bonus period was calculated for, of course - the return on equity was 32% and 48%, which was head, shoulders & torso above everyone else...

And now we're out of the bonus period, quelle surprise, the return on equity has fallen to 26% in 2018, about the same as Redrow's.

And now there's a new man in charge at Persimmon, untarnished with the past, who is to say whether there's any unexpected profit warning to come..?

Far be it for me to accuse Persimmon of anything but, at a PBV of 1.97 against Redrow's 1.13, that's potentially a hell of a height for the share price to fall from if there's a nasty surprise waiting in the wings..?

I took a substantial hit on Telford because I waited too long for firm evidence to be given directly by the company rather than acting based on my own interpretation of the numbers to hand - which clearly IMO showed the direction of travel and which I have argued the case for in this share chat in the past....

My instincts aren't good about Persimmon... and the best way to dodge a punch is to not be there in the first place and there are other places to park my investment capital - so I don't HAVE to be right about Persimmon, do I, I just need to keep clear in case I am...?

And, anyway, they're currently still way too expensive for the likes of me...

Strictly

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