Member Info for strictlybricks

Sain,

PS.

I've only just clocked that the Sleepless Nights and Elvis references were Lindisfarne-related... sorry for being so dim (I did see them live, once - but wasn't really that big a fan...)

And you'd definitely better get your coat..!

Strictly

Sain,

That sounds to me like a cack-handed request to join the curry contest..?

Strictly

James,

Our discussion here about all this yesterday has sparked some reflection and thoughts today, and my intention is to make all this the main topic of this end of month's post on the Strictly Bricks blog...

I obviously have the opportunity there to make it a more detailed spiel, along with being able to include some relevant graphs, etc., and also it's then out there for my circle of folk who are in this game but mostly not, I reckon, signed up to this TEF share chat...

So, that'll probably be for the first weekend of February, after I've closed off my month's figures, so if you want to continue any discussion there, please feel most welcome to do so.- you might even spark off some of the others to comment...

The other point I wanted to mention about the blog is the curry contest... just a bit of fun, maybe, but the more serious and useful aspect, IMO, is that, like having even a small wager on a horse race, you're then almost certainly paying more attention...!

There's only three of us signed up for this at the moment, and you're welcome to add your name there...

I have the impression that you're spread across other sectors beyond house builders, but that's alright - if I was a gambling man, which I ain't, I'd be happy to put money on the notion that house builders most likely to come shining through as the sector to be in this year providing the "Fog on the Tyne" clears before the end of the year...

Then, if it's alright on the night, hopefully we will all feel like we're living in Dingly Dell.

I'll get my coat...

Strictly

James,

You could get biblical about this.... I mean Mathew 7. 16....

What I'm saying is - I put a lot of store in track records, in respect of companies as well as people...

So, while I would accept that it's partly crystal ball, the key word there is "partly"

If you ever read far enough on the blog, you'll know that, over the past six years, which is the period for which I have well-enough detailed records, the part that's not crystal ball has made a significant positive difference - just over 8% annually against benchmark Bellway....

Doesn't sound much, unless you're an aficionado of compounding.... then you'd know that it is....

What is required for this to continue is for the builders to continue to almost swing together..... the key word this time being almost...

Or, alternatively, to continue with the Lindisfarne theme I've chanced upon, that they remain nicely out of tune...

Strictly

James,

I'm with you on that one - to the point that, ideally, I wouldn't want Telford, or any of the other builders I'm interested in, "gobbled up" at fair value, let alone "on the cheap", as that then takes them out of play for the future for the likes of us...

However, there's probably not much that we, individually or collectively, can do about that - beyond engaging in some massive ramping operation (unlikely to work anyway) so I reckon it's probably best not to think about that possible outcome too much - and at least it would give you a one-off bonus on whatever shares you were holding...

As William Ralph Inge said:

Worry is interest paid on trouble, before it falls due"

Strictly

James (et al),

You're signed up on my blog so you may well have read the recent post which used a footballing analogy with the ball being the value and Ronaldo's legs being the market price...?

And that's what this is all about, I reckon...

Controversially, perhaps, I think investors who are happy to let the market inform their notion of value probably deserve the outcome that the market will almost inevitably inflict upon them in due course.

Whereas, if you are prepared to make your own assessment of value and, furthermore, are prepared to have courage in your convictions such that you're prepared to follow up on your evaluation with hard cash, well, then I think there's more potential over the longer term for the world to be your lobster, Rodney.

My own approach, as I've referred to many times here, is buy and hold.

But that's not buy and hold any particular company's shares, it's buy and hold the sector, i.e. house builders.

And that means I don't have to try to call the value against cash, and whether the market's right or wrong about that - and this does seem to cause a fair amount of consternation on this share chat, and particularly in recent times - I only have to take a view on whether the market is making one share better value than another and decide which is which at any given point.

And I don't have to get it right all the time, I just have to do better than the market overall...

And I'm imagining that, to a lesser or greater degree (and allowing that also, maybe, you'd each pick different words to describe it), we all probably think that the market's a nutter.

So why let it faze you? - as long as you're prepared to be patient and are in a position to wait out the downers...?

So this boils down to the fact that I'm not at all bothered if Telford zigs when other builder shares zag.... in fact, I'm delighted when that happens because, as I see it, that's just providing opportunity.

And that clearly puts me in a different box to the musketeers - but such is life, and we each have to pursue a strategy that we deem works for us....

As I said in my previous comment yesterday, right now, I perceive the builders I'm interested in - being Telford, Bellway, Redrow and Crest (if we ignore the tiddler, Inland) - as being neck and neck in terms of value, to the point of being almost too close to call.

But history informs us that these situations tend to be temporary, and I'm not imagining the current one will last long - especially give the current political environment...!

Strictly

James,

To put two relevant but seemingly incongruous points side by side in response to your post yesterday....

Firstly, of all the builders I track the performance of, Telford are comfortably in pole position in terms of book value per share growth against the pre-crunch highs... by my calculation, they're up 199% against Bellway, in second place, at 178%.

Third, but some way behind, is Persimmon, at 133%.... none of the others even make treble digits.

So, judged on that marker alone, one might imagine that Telford would have the highest price to book value of them all...?

But this is the second point.

Putting aside Inland Homes, a relatively newbie tiddler, Telford has the lowest PBV of the lot at 1.02.

This seems pretty crazy.

The difficulty, of course, is that Telford is midway through significantly changing its business model.

While the story is about both de-risking AND minimising the tying up of capital - the latter of which may well be more of an issue for Telford than for other builders given the nature of their business of building flats in London - we haven't had either a new black swan event to see how well the de-risking works out in practice, nor sufficient time to see how the overall profitability works out in terms of that single indicator, return on equity.

So, not only do we have a shed-load of uncertainty with Brexit, which has clearly knocked all builders' share prices back, we also, I would say, have further uncertainty that is particular to Telford.

My own view is that, as of close of play last night, Telford, by a sliver, is currently best value amongst the builders I track (barring Inland - but that has market liquidity issues to be borne in mind so I don't want to get in too deep there...) and that's allowing for an ROE that is inferior to that of Bellway and Redrow going forwards (though I'm not sure about that in respect of Crest?).

But - how do you price in the de-risking..?

Frankly, I haven't done so at this stage - because, while we have management's word on this, and the regulars here all express confidence in JDS & crew, we haven't seen it tested thus far.

In the credit crunch, the fact that Telford took 10% deposits with legal commitments from buyers to complete proved pretty bomb-proof....

Bellway's strategy was different - they came through fairly unscathed by having the least leveraged balance sheet in the business.

Now, with that deluge still in recent memory, all the builders have strong balance sheets, give or take...

Bellway's still has the strongest, though...

To sum this up, as I'm now rambling a bit, IMO Telford has the potential price growth that all the sector shares due to the likelihood that the uncertainty has to end some time, but also, IMO, some further potential of price growth against its peers.

It's currently my joint largest holding along with Redrow.

But I also suspect that further patience is required of us all....

Strictly

Well, based on the three post-new year trading updates we've had thus far (from Taylor Wimps, Persimmon, and now Battersea Dogs Home this morning...), it would seem that both the market and the pundits have been somewhat more fazed by Project Fear than have the punters - who still seem to be putting their hands in their, and the taxpayers', pockets in droves for new houses built by our finest...

I got the feeling the builders' updates were almost saying "Brexit, what Brexit..?"

Or, as the French might say "Plus ca change..."

Or, alternatively, yet another example of Kipling's two imposters "Triumph & Disaster" (and personally, I reckon that recognising that, and trusting in the notion that it applies, is probably the most important guideline for us investors - and especially in this sector...!)

So we've still got the vote of confidence tonight - but, like Syd Barrett, Jezza may just have "...reached for the secret too soon" and instead perhaps could have waited until after the second vote on the deal....

Over the past couple of years, I don't think many people will have got rich betting against Theresa May - who apparently is likely to win tonight too...?

Now, I think I need Steph to help me out here, but now they've tried booting the PM out, and failed, and if they also fail to boot her party out tonight, then what's to stop a proper Brexit happening on the 29th March providing the PM wants it?

She's consistently said no deal is better than a bad deal - she's never wavered from that - and if Parliament decides her deal is a bad one, and if she as the head of government doesn't introduce a bill to stop Brexit then, beyond revolution or assassination, that's it, isn't it - I mean, a done deal.... Brexit goes ahead by default?

I mean, and please correct me if I'm wrong, Steph - or anyone else who knows their stuff on this - but it's only the government that could bring a new bill to parliament, isn't it - whatever tweaks the opposition or back benchers try to bring to the house?

Meanwhile, I'm sitting out the winter in Spain in a rented pad out here (but, being a wimp, I have got our flights booked back to Blighty for shortly before 29th March...!) and, now watching from afar, it all seems a tad surreal that such momentous events are unfolding back home..

Even in the updates from the builders.... it seems that Bovis are making serious strides towards being able to relocate away from south west London... perhaps I'll even have to reappraise them and move them off the bottom rung in my ratings..? (well, off the second from bottom..... they're already above Galliford, of course...)

Strictly

Nige

"Just one for you 19 for me"

That was the Beatles, not the Kinks...!

I have to admit I had to google it, though.... I knew the Kinks song, and was pretty sure that line wasn't in it, but I didn't know it was a Beatles line (not really being a fan of theirs)...

I don't normally go on the PSN chat, usually just look at the TEF page here...

Never heard back from you on the blog - so hope you're still doing okay in this builders' shares' malarkey..?

Strictly

1GW

Much as I dislike doing it, I'm going with the scribblers' figures at the moment for forecast EPS....

Thereafter, I mean beyond the years of scribblers' projections, I necessarily have to put some sort of annual EPS growth figure in for my basis of working which is to draw comparisons for 2026.... long way ahead, I know, but it makes sense to me to do it that way and is all seeming to aid clarity about making trading decisions for what are not huge margins on "return trip" trades...

I have only 2% a year EPS growth for Crest (they pay out a lot of div, after all) and 4% for Telford, and this leaves the thus projected 2026 ROE (the most important indicator, IMO) at 11.8% for Crest and 11.6% for Telford.

This will obviously almost certainly be well out in due course, and no doubt will continue to be constantly adjusted - by both the scribblers and then by me looking further forward - but if, like Lindisfarne, they all swing together then that much lessens the impact as I'm much more interested in comparative value between builders than in absolute value.

My aim is to beat just sitting and scratching my bum (i.e. just holding the same shares all through) by 10% a year - it's a tough target, albeit self-imposed, which I ain't quite achieving but I'm not that far off....

You have to have something to strive for in your dotage, don't you...? :-)

And I give each house builder a weighting against Bovis (the Battersea Dogs Home of house builders, in my view, so it rates zilch) and the higher the weighting (though these themselves do continue to shift to some extent as time unfolds...) the more highly I rate the company concerned.

So, I have Inland at 50%, Telford currently at 60% (and that might nudge up to 65%?), Crest at 65%, Bellway at 90% and Redrow at 100%.

If you could see the history of my book value weightings since I started doing this a few years back, the percentages have moved around so much it's embarrassing - but I had to find my feet with what was a new concept for me and hopefully they're now adjusting due to new information in the marketplace rather than my just being a ****in my thinking processes..! :-)

On a closing note, I enjoy reading, and contributing to, this TEF share chat, though there does seem to be a fair amount of talking up the fear and uncertainty here lately...

At the end of the day, decent builders over the past few decades have averaged around 15% to 16% return on equity, and the market has (under) rewarded that performance with an average price to book value of around 1.5.

That is the situation at its most boring & useful - and providing it continues to hold true it is by far the most important reality check, IMO.

Everything else is mainly speculation - and fear or opportunity depending on your take on it - along with being something for us to chat about here..!

Perhaps we all need to get out more..?

Strictly

1GW

I concur with your recently announced share move - I've just transferred some more across from Crest to Telford myself this morning - though I was obviously not fully compos first thing this morning as, on one of the trades, I managed to buy Crest rather than sell them, which then required reversing... so that cost me a few bob... :-( .

This leaves me back with Telford as my largest holding once more - as they were at the start of last year. But back then, unfortunately, without having the benefit of the Captain with me at the time, I'd sold some of them too soon in the spring... but it all came round again later in the autumn, and the upshot was that I'm happy with the year as a whole as, never mind that I've still gone backwards on price, I have moved forwards significantly in underlying value.

Providing, of course, that one takes the view that the recent price volatility is mainly Brexit froth & bubble and is not likely to be of lasting real consequence....

In declining order of percentages, I'm also holding Redrow, Crest and Inland.

The market was pretty thin this morning, so it was a faff getting all the trades through - I suppose most players are more sensibly engaged in somewhat more festive activities still..?

Or just sleeping them off..?

Anyway - a happy new year to all the regular crew on this share chat... :-)

Strictly

Rapper,

I've got Telford's BVPS currently at 321.5p (this is using the scribblers' 2019 EPS figure of 49.2p and assuming only 20% of the profit in H1, as I'm struggling to venture my own EPS estimate during this period of pre-Brexit palaver...) which gives a PBV of 0.84 on the closing price of 270p.

However, living in the world of likelihood, as we do, rather than the world of certainty, as we might wish to, I'd say you've most probably bought a bargain though - Telford's share price has never approached a PBV as low as this outside of the credit crunch period up to some time in 2012...

And think what a joyful run up the share price had for the two years following that...

If I hadn't been sleeping off a pub lunch, I might well have traded into a few more myself this afternoon... :-)

Strictly

Terrace, looking at your most recent two posts, you didn't take my and Sain's comments to heart, did you..?

Anyway, I thought Alex Salmond was funny in the Christmas message one - so thanks for that.

Strictly

Terrace,

Have you considered the possibility that you may be a tad too grumpy to be a greeter....?

Perhaps it might be helpful to lower your ambition a little and think in terms of collecting the trolleys at Tescos...? :-)

Strictly

Steph (et al),

The SNP ended up with rather a lot of MPs in the last election because, effectively, the "Remain in the UK" vote was split between all the other parties....

If the unionist parties had got their act together, and only fielded one candidate between them in any one constituency, I imagine the result might have been somewhat different...?

And the wee Scottish human hot air blower might not have been quite so vocal since...? (that's probably serious wishful thinking, mind...)

What you're suggesting could do the same here - I mean, one option just for the Remainers and various ones for the rest.

If we suspend any scepticism for a moment and go with the notion that the PM is actually trying to bring about Brexit, surely she won't fall for that one..?

And as we all seem to be giving our three halfpence worth here, my view is that we've had the referendum for "Shall we stay or shall we go?" - and the nation has said GO...

So, that's now sorted.

The PM has said it's her deal or no deal, so maybe that would be what was on any ballot paper for another referendum, i.e. just the two choices...

Or maybe there can be others too: Canada; Norway; Norway minus plus; or Liechtenstein plus minus multiply, take away the number you first thought of...?

The point being, we've voted to leave as a nation (including the Scots, having already decided they want to remain part of our nation) and now it's about how we leave.

Or, if democracy (for better or for worse) means anything, that's surely how it should be...?

I don't suppose any of the key players, in either the cabinet or the PM's inner circle, are likely to be particularly regular & avid readers of this share chat, though, so I guess at the end of the day we're all really just ejaculating into each others' ear holes here about this... :-)

In the meantime, I remain fully invested and have plenty of Telford shares.

One thing though, builders' share prices might be up and down like a bride's nightie at the moment, but trading must be pretty thin as I've found it less than straightforward to get fairly modest-sized trades through lately (I seem to be engaging in a trade-del-dia this week, every day....).

Has anyone else similarly found trading to be slow...?

Strictly

I don't usually comment on political matters here... a bit risky, I reckon - best to stick to what I think I maybe know something about on the whole - but I don't pick up any comment allowing for the possibility that, apart from being the brave & dogged soul that she surely unquestionably is and for which alone I am in full admiration of her, maybe, just maybe, Theresa May actually means, and has always meant, exactly what she has been saying all along...?

Which is that "No deal is better than a bad deal" and "Brexit means Brexit" and "It's my deal or no deal".

The Tory Brexiteers have now seemingly given it their best shot to bring her down - and failed - and now as far as the party is concerned, she's there, for better or for worse, for at least another year barring mishap.

And, given that turkeys don't traditionally vote for Christmas, providing the government can keep the DUP on board, I don't see how Jezza & crew can force an election...?

Therefore (and I think I require Steph's three halfpenceworth here as he is clearly much more savvy on this stuff than me...), as far as I understand, if Theresa tells the EU she has no intention of giving Parliament more options than either her deal or no deal to vote on, then that is now in her gift whereas this time yesterday that wasn't necessarily so...?

And that might help to focus their minds, given they have a nice juicy trade surplus and a £39 billion bung at stake...?

Everyone seems to assume that the PM is a Remainer.... for anyone who has a Telegraph online subscription and reads the "Have your say" comments, pretty much all the regulars there are constantly spitting blood at Theresa and calling her far worse things..

But, if she's always been a good & loyal girl toeing the party line and falling in behind Dave (remember him?), maybe that wasn't necessarily what she really felt when he was calling the shots?

I find it hard to imagine any of the other characters in government coping with what she's been through since becoming PM and to still be standing, defiant to the world (the personification of the character description in Rudyard Kipling's "If", it seems to me), without a powerful sense of duty and maybe even of destiny.

And maybe, just maybe, she really is prepared to deliver a proper Brexit - hard, if necessary - just as she's consistently been promising to do if it came down to it.

And, if so, she's been playing that card impressively close to her chest....

The next day or two may well prove me completely and embarrassingly wrong, of course, and this is in no way a prediction... :-)

Probably more like wishful thinking on my part - seeing as I much prefer my Brexits hard as opposed to soft, boiled or scrambled or, worst of all, poached.

So, Steph - over to you to completely shoot me down in flames now...

I don't mind - I'm not proud..!

Strictly

Terrace,

My figure of 360p BVPS for Telford is to the end of 2019 not just up to March.

So, 540p is 1.5 x that.

I'm not saying it's going to happen, only that, based on the track record of every builder that I have detailed files on (makes me sound like the Terminator, doesn't it..?) the price will most likely puncture to 1.5 PBV line at some point...

Because it always has done...

Last time it happened was late April 2017...

But, of course, the BVPS wasn't so high then - it was only 278p - so nor was the price required to achieve the 1.5 PBV.

Strictly

...At the end of the day, does wherever the share price get to by December 2019 really matter...?

After all, the Musketeers, as I understand, are all buy and hold for the long term anyway...?

And more important to the value tarts - among whom I would consider myself and Cyber to be along with any other followers of the blog - is volatility.

That's much more what I'm hoping for - a bumpy, erratic and uneven recovery, as and when it does come, across the different house builders' share prices at different points.

Just put on your incontinence underpants for the ride..!

Strictly

Sain,

Okay, serious response then....

If you put aside the credit crunch and it's aftermath through the recovery period, house builders shares haven't in the past generally spent that long, usually not more than a few years, before they pass through the price to book value of 1.5 line - that's going in either direction.

This is something that Cyber and myself have been considering separately, and I imagine you'll have seen the graphs to this end that I've put on the blog...?

Using my benchmark share Bellway - because over 30 years it's been in a class of its own for consistency - it is apparent, and this is perhaps not what one might expect, that although the long term average price to book value is around 1.5, the price may pass through the 1.4 to 1.6 PBV band frequently, but never seems to linger long in it.

Of course, thisis not an issue for anyone who is wishing to buy or sell and who is paying attention, as they only need the price to be right for at the time they trade.

Another aspect that is apparent from the graphs is that the PBV does not necessarily correlate with the profitability at any time - and therefore is probably being influenced to a great extent by matters not immediately to do with the company's current performance.

For example,Bellway's PBV was mostly below 1.4 for about six years from 1999, even though Bellway was making over 20% ROE throughout that time.

So, the point of this preamble is to lead me to say that I am more comfortable about the likelihood of share prices for Bellway, et al, passing through, or at least touching a PBV of 1.5 by the end of 2019, but would not want to venture a forecast to any degree on where the PBV and therefore the share price will be at any particular point in time.

Of course, barring mishap, whether the builders fare better or worse than expected over the next year and a bit doesn't really have much impact on their book value per share during that time as it's a relatively short period.

So, taking rough BVPS's for end 2019, being Bellway 2,500p, Crest 350p, Inland 78p, Redrow 490p and Telford 360p, that gives a reasonable likelihood (barring mishap and, let's face it, there's always plenty that can go wrong but especially now!) of the following share prices being reached at some point between now and the end of 2019:

Bellway 3,750p
Crest 525p
Inland 117p
Redrow 735p
Telford 540p

So, builders' track records trump both Sain and Steph's predictions for Telford...!

But perhaps we should not get too far ahead of ourselves here...? :-)

Strictly

Sain,

You head is well and truly above the parapet now.... you can't just duck down again...!

Strictly