Member Info for strictlybricks

Sain, I don't want to be peeing on any bonfires here, but I'm not sure I entirely agree with your summary...? However, before going further, let me say that, over the past week or so, Telford has become, by some margin, my largest holding - so clearly it's the share I see as being best value right now. However, a 30% increase in earnings would be pretty much only achieving what it said on the tin in terms of scribblers' forecasts, rather than something over and above... And if by "shoulder to shoulder" you mean equal profitability, and if by "peer group" you mean the other builders, then, even if the 30% profit increase is fully achieved, Telford are still significantly behind the likes of Redrow, Bellway, Crest, et al in terms of ROE and so reasonably warrant the lower price to book value given by its share price IMO. So I don't think whether it's on the AIM or the full market is particularly relevant - though it is fair to say that the pricing of Persimmon, Barratt and Taylor Wimps is such that it implies a premium for being a FTSE100 company - but Telford are some way off that regardless of what listing they have. And remember that, in early 2007, Telford briefly hit a price to book value of 4. In all my records, I've never seen any other house builder achieve that either before or since - so being on AIM clearly wasn't holding them back then...! To put some numbers on it, achieving the 30% growth in EPS would still mean Telford's ROE was just under 18%, which is 6% to 7% below Redrow, Bellway and Crest - which is a bloody big difference! And If I thought that gap between them was going to endure then I probably wouldn't be holding any Telford at all at the current price. However, based on several decades of past records, I don't think the other house builders' profitability is sustainable at those levels long term, whereas I'm imagining that Telford's is - and that plus the de-risking very much puts Telford in the frame right now for me. Finally, as an aside, I don't think the greed displayed by Persimmon with its big directors' bonus trough has helped the sector at all, given that it was perceived by the public at large as having been achieved largely due to taxpayer subsidy for first time buyers... Let's all hope it doesn't provoke government, of either the local or national flavour, to do something stupid in terms of trying to restrict the sector in some way and harm everyone and everything in the process..? Strictly

Steph, In eighteen years in this investing in house builders malarkey, I've never had the cojones to call the market (by which I mean going to cash) but I AM happy to call the value (by which I mean moving between the various builders' shares to pursue value). And I think the market does get it wrong over the shorter term here but not in the end in the longer term. n the overall point I was making to Stokest which sparked your response, taking Telford, Redrow and Bellway as a group, I reckon the market has just done what it said on the tin over the past three years. So, anyway, in not calling the market, I necessarily have to ride it out... for me, that meant effectively a forced house move ten years ago because I was unprepared for the credit crunch but, hey ho, I've had a great investment recovery since and with the benefit of hindsight I'm very happy I relocated to Dartmoor (the place not the prison). I've had much debate with you and the other Musketeers since I joined this share chat about the merits of moving around (I mean shares, not homes, here). The Telford faithful not only have to ride out the market, they have to ride it out in just the one share - however good they consider the underlying business to be. And, IMO, while Telford has NEVER been overpriced as a business since the credit crunch, it has at times been relatively overpriced against the other builders - again IMO, of course. You say you are lazier... I don't know whether or not to buy that...? And I also don't know how long your investment plan extends into the future..? As you know, I have a separate blog about all this stuff and the prime purpose of that is to help people of the next generation within my circle to hopefully achieve a decent pension in due course. That's typically a 30 years or so plan... My target is to beat my benchmark share, which is Bellway, by 10% a year. Over the eighteen years in this game, I've beaten it by around five percent and over the past five years, for which my record keeping is more accurate, I'm beating it by 8.9%. So, I'm not there yet but also not far off.. The thing is, if you're an old scrote like me, the 10%'s a year aren't so cumulatively significant because of the shorter time frame, but, over 30 years, they amount to increasing the size of the final pot by a factor of sixteen! So, as I say, I'm not so sure about the laziness - I mean, come on, look at all the work you put into helping & informing people on this share chat (and thanks for that by the way) and you do seem to know what you're talking about :-) ! Perhaps it's more a case of a lack of belief that letting go of the commitment to just one company can reap so much gain..? Strictly

Cyber, We've got a weekend investment workshop running here this weekend and my intention is to put out a post on the blog about that next week when everyone's left with all the relevant details including the points you've referred to - I just put out the previous comment after staggering back up the hill from the Rock last night (which you're familiar with...). However, to answer the questions, after trading Friday I'm now sitting on Bellway 15%, Crest 9%, Inland 22%, Redrow 23% and Telford 31%. It was Crest & Bellway that were thinned to buy Telford, and these were "return trip" trades having sold Telford to buy those in the middle of last month. This gave a worthwhile round trip gain of itself but I'm also mindful that not only is Telford currently edging the others by a few percent but also that Telford has a trading update due very soon... and, as part of that, I have taken on board Sain's recent upbeat comments in that direction (no pressure, mind, Sain..!). As you know, I've shifted my trading strategy slightly, and have spent a fair bit of the weekend getting that across to the folks here with what is now the mark 4 spreadsheet (hopefully that's it in terms of upgrades..? :-) ). It's something we could no doubt chat about further on the blog once I've put the post out there. Yes, my Inland holding, now it's down from a third to just under a quarter, I think I'm now happy at that level for that to potentially be a longer term hold, depending on how things pan out there and elsewhere... But it's good to have had a bit of trading activity last week in what's been a somewhat dull year so far in terms of market performance, and especially after such a brilliant 2017. Strictly

Stokest, To respond to your comment, I think you could look to the broad numbers to find comfort... Three years ago, taking end of year 2014 figures, Telford's ROE was 18.9% against Bellway's 14.2% and Redrow's 14.9%, so they were top of that particular class at the time and the price, in PBV terms, reasonably reflected that, in that Telford's PBV was 1.82 at the end of 2014 against Bellway's 1.58 and Redrow's 1.40. So, give or take a bit, that seems fair enough..? Scroll on three years, and the positions have reversed... Telford's 2017 ROE was only 14.6% against Bellway's 24.7% and Redrow's 25.7%. So they've fallen from top of the class to bottom in that respect (ignoring any de-risking aspects, which obviously are important but don't tend to figure in any quick one line assessments..) The PBV reflected this new reality - Telford now 1.37 against Bellway 1.57 and Redrow 1.53. The combined upshot of all the above is a big difference in share price performance which has been to the detriment of the Telford faithful here. Bellway's share price has grown 65% since end 2014, Redrow's 105% and Telford's only a pedestrian 16%. So where are we now? For what it's worth, my own view is that Telford currently edges all the other main builders in value and, in acknowledgement of that, I've now traded between builders' shares during this past week such that Telford is now my largest holding (and I only invest in house builders' shares - hence the name...). Of course, DYOR - I'm just looking to add a positive note to this from a different angle to the regular considerations on this share chat. Strictly

Terrace, I was taking my lead from your heading.....? But, in any event, no worries... all only in jest...! Strictly

Khyber, I think that was Terrace having a pop at me because he's picked up from my blog that I've been moving some of my Telford shares out and going into other house builders - and he doesn't approve..! :-) Strictly

Terrace - well, they are in the FTSE100, which probably helps, as with B\arratt... Though Barratt, although similarly relatively overpriced (by a tad) based on performance, isn't as expensive as it's currently sitting at a PBV of 1.5

Sain, Interesting to read it all summarised in this way in the article, so thanks for putting the link here.... to me, presented like that makes it seem likely that the serious squeezing the small BTL landlords by government in recent times isn't so much about the intention to help first time buyers as about opening up the market opportunity more for the build-to-renters.... Apart from the added professionalism one imagines they're expected to bring to this (which may or may not be borne out in practice?), there's also the prospect of increasing availability of long term security of tenure for tenants (other than those for social housing who already have this) which I imagine will all be built into the planning consent for these properties as we go on...? I guess that the proof of the pudding will be the degree to which the build to rent sector expands from here..? Maybe we can expect to see the folks from across the pond owning more of the Uk's housing stock in the future..? Possibly we are looking at the early stages of a sea change here in the direction of the structure of the UK's future housing market..? I don't consider myself qualified to venture a firm opinion on this, rather than just a tentative one, so I would be interested to to read more informed views about this here... Regards, Strictly

Terrace, the interesting number in the article from the link you've just posted is that 85% of Persimmon's share holders voted in favour of the incentive plan in the first place back in 2012...! I haven't noticed any mention of that fact in all the recent media fuss about the size of these bonuses...? But anyway, I suppose the question that remains is - have the team now done enough in mitigation to head trouble off at the pass..?

Londoner, If you buy into the scribblers' forecasts for Galliford for the next three years, and furthermore that it's onward and upward from there, then, yes, I would say that that would make Galliford good value based on the current price. However, to buy into that would also mean buying into the notion that, from here, Galliford are going to be making a return on equity of over 30%, i.e., more than twice the 13.5% average that they've actually achieved over the past six years... Maybe the scribblers are right......? But I'm not holding my breath.... Strictly

Londoner, If you buy into the scribblers' forecasts for Galliford for the next three years, and furthermore that it's onward and upward from there, then, yes, I would say that that would make Galliford good value based on the current price. However, to buy into that would also mean buying into the notion that, from here, Galliford are going to be making a return on equity of over 30%, i.e., more than twice the 13.5% average that they've actually achieved over the past six years... Maybe the scribblers are right......? But I'm not holding my breath.... Strictly

Pakka, This is their third share issuance in the last decade or so - a placing in 2007 followed by a rights issue in 2010... As I implied in my earlier post today, big dividends can come with their dark side..... And who would wager that the Carillion situation is now fully costed in..? Strictly

Firstly, let me say own up that I do not hold any Galliford shares, but am commenting here as a neutral observer who never-the-less tracks Galliford's progress fairly closely as I only invest in house builder shares... It was ironic to me that Galliford's half time score was somewhat better than I'd imagined it would be (so hush my mouth on that one!), yet the price has taken a serious haircut - so either the market hadn't been paying enough attention to underlying progress up to now, or perhaps it was seriously freaked by the share issue announced today? (which I'm imagining will be a rights issue, rather than a placing, seeing as it says "raising new equity from its shareholders.." But I could of course be misinterpreting that...?) For the past three years, Galliford has overall paid out more than 100% of real earnings as dividend ("real earnings" defined by taking BVPS net of intangibles 2014 of 493p against BVPS 2017 481p), yet they have actually managed to push the BVPS up a couple of pennies to 483p after paying the div this time. So they've now decided to pay just half earnings as div from here......? Well, someone at the top at Galliford clearly must have had some sort of damascene moment recently...? What a nightmare it's surely been from a long term shareholder's point of view? Pay out way beyond what you can safely afford in div, which, as with so many big companies in other sectors, helps to keep the price higher than it otherwise deserves to be (as there are obviously plenty of people around investing and not really looking much beyond the resultant impressive dividend yield). Three problems with that, of course. 1) the actual yield is lower than it would otherwise be if the share was more reasonably priced 2) if you believed in Galliford and wanted to re-invest in your divs, when it's priced at 2.0 x BV you only get half the underlying asset value you would have had anyway if they'd not paid the div in the first place and 3) Galliford ran down their margin of safety and, when the latest mishap came along (because, judging by the last five years' purported EPS against real EPS based on balance sheet movement, there have been many mishaps...), they now have to do a seriously diluting share issue to get everything square & safe. And have we heard the last of Carillion's effect on Galliford's balance sheet..? Maybe there's a clever, long term strategy hidden in this that a simple soul like me doesn't get - so I'd be interested to read anyone else's more enlightened thoughts here... Strictly

Terrace, As an afterthought on Galliford, I thought it was ironic that their results were a lot better than I'd imagined - they even managed to move their book value per share forwards a couple of pence after paying the dividend - yet the share price plummeted today. Maybe due to the share placing also announced today...? Haven't looked into that yet, mind... Strictly

Terrace, Apart from RDW & BDEV as below, of the ones that are close, I have BVS 1.30, TEF 1.32 & CRST 1.48. The scariest one of the remainder is GFRD, weighing in at a corpulent 2.07. And this for a company whose BVPS has gone backwards over the past three years..!! I await,with a certain curiosity, their half time score tomorrow morning... Talking of scores - what's yours so far? Regards, Strictly

Terrace, I appreciate that you're a Telford man through & through, but careful with that axe, Eugene, when it comes to PBVs... Those that you have given clearly aren't based on current estimated BVPS values and, in the case of Barratt, include a shed-load of goodwill... My current best estimate for Barratt's PBV is 1.52. This puts it above Telford, Bovis and Crest and bang on par with Redrow - which I also have as 1.52 as of close of play tonight. Just a pity that Barratt doesn't perform on a par with Redrow....! Completely separately, you & Sain didn't post your figures for the curry competition, but no doubt you are both well in front of the rest of us - as things stand... :-( Regards, Strictly

Londoner, Just to acknowledge your response, thanks.... good luck with finding an investing sector with anything like the the long term returns that the house builders have given - I've searched long & hard over the years to see if there's anything else, but to no avail... In the meantime, I'm looking forward with curiosity, as a bystander, to seeing Galliford's half year figures on the 14th.... Strictly

Londoner, I'm acknowledging that you're broadening out the discussion here to house building sector issues in general rather than Galliford specific... As I've mentioned before, all that stuff gets discussed in depth on our blog so I don't really want to go into it too heavily here - but I am happy to give you a flavour of the generally held views in an attempt to encourage you to follow up on our blog... :-) Firstly, yes, we always ignore all intangibles in calculating BVPS. If a house builder buys another house builder it isn't buying the brand name of Coca Cola, or whatever. On the whole, taking a shortcut to growth by buying companies (which almost always creates a figure for intangibles merely to make the balance sheet balance), rather than growing organically, is good for directors (who tend to get paid relative to the size of the business rather than relative to the size of their ability) and bad for share holders, as it evaporate book value. Galliford isn't out of the pool completely for us just that it's at over twice the price we would currently be prepared to pay for it. Re potentially exiting the sector, I have never had the cojones to do so and it has taken fifteen years of soul searching and many hours of thought & reflection to come up with a philosophy for this, contained in a single sentence - which is "I fear being in cash when I should be in shares more than I fear being in shares when I should be in cash". One does very much require a contingency fund, or an alternative source of income, to get through credit crunch type situations though - as I learned expensively in 2008 when, of necessity, I sold my house to survive to fight another day. It was the right move, though, and had a happy outcome! Bellway might have lost 80% of their price in the crunch but they only lost 10% of their value. For the blog, we have graphs of share prices overlaid with tramlines of book values per share at 0.2 internvals, which really highlight the degree to which, when a builder's BVPS sneezes, its share price tends to catch double pneumonia. The graphs are very illuminating. With regard to any future black swans, my view is very much that I'm never going to be the person who wasn't on the bridge of the Titanic, saying "I think we should ease off a couple of knots". So I don't even try. If you're looking at the possibility, likelihood even, that the house building industry may be encouraged, or forced, to move more towards social housing etc., why not take a look at a company that is ahead of the curve on that - Telford. You could probably do worse than looking at the Telford share chat here. It has some very well informed regular posters there and overall is, IMO, a very prolific & interesting share chat for the modest size of the company. Telford is also currently my biggest holding. I'm not ramping, honest, guv - but DYOR anyway. Strictly

Londoner, I think that there's a risk of us being adrift on a sea of numbers here, with the tide taking us in a different direction to that which I'd intended....? I'd started out, as someone on the sidelines having no shares in Galliford, with the intention of giving my take on perhaps why Galliford's market performance has been so poor against the other house builders over the past five years... And I don't think the previous sentence is contentious - with dividends reinvested on the day paid, Galliford's last five years, back to the start of 2013, have returned a total of 78% against Bellway's 267% and Redrow's 364% - and yet Galliford are still significantly more expensive on a straightforward price to book value basis. So that's the past five years. Coming up for the next three years, we have analysts' forecast earnings of 163p, 183p and 200p respectively, which, if proved correct, would give an overall return on equity of over 30% each year. However, we obviously have to wait and see on that and, during the meantime, make decisions on where to place our investment capital. But coming up much sooner, in less than two weeks so in time to perhaps add to this thread, we have the first half year figures due.... But there are the numbers and then there is the interpretation of those numbers and what they might mean for the future for Galliford - and my take is that our differing interpretations have left us with very differing views of Galliford's prospects. Because of how I see their track record, I and the others who are in the same way of investing as me are all wary of Galliford as an investment prospect and, in the weighting process I and the others use for evaluating the builders' shares against each other, Galliford are at the bottom of the pile along with Bovis. And that means it would require a substantial relative price drop for Galliford's shares against the other house builders for them to be anywhere near being in the running for any of us. All that kind of thing gets discussed in some length and in detail on the blog we have, and my other intention here had been (as you seem to be another spreadsheet & numbers man like me?) to encourage you to take a look at the blog and maybe also join with that discussion - which has always been very civilised, but perhaps could use a bit more contention from time to time...? Strictly

Londoner, Ran out of character space again just now - halfway through signing off, it seems..! Regarding earnings, I look at all the builders this way, i.e. via balance sheet movement... I consider a number of years' balance sheets for any company to be much more of a reality check than P&L accounts, which I virtually ignore apart from picking up the turnover figure. Perhaps surprisingly, there's not a lot of mythology in the house building sector - most of the house builders have boringly straightforward accounts, which is what I like to see, even if, like everyone, they do put excess guff in their financial reports (which you can largely dodge if you read the preliminary report on the regulatory news instead), and the earnings usually do what it says on the tin. And if they don't, well, straight away, cause to hesitate I reckon... Standing on the sidelines, as I don't have any Galliford shares, I am very mindful that the scribblers have Galliford down for making a total of around 546p earnings over the next three years..... Wow! That's more than their total book value today and also implies a return on equity of around 34%, i.e. a full 6% to 7% more than the current star performer of the house building sector, Persimmon. So - are they suggesting that Galliford has suddenly morphed from Jabba the Hutt into Usain Bolt...? I don't know - but I'm certainly not holding my breath...! Kind regards, Strictly