Member Info for strictlybricks

Terrace, In the world of relative value, which is the one I aim to live in (because I reckon it's safer, and somewhat more straightforward, to look to value builders' shares against other builders' shares rather than against cash... they're nearly all nearly always cheap when measured against cash, so it ain't very helpful even if you could come up with a good way of making that calculation - which I've never achieved thus far....), Telford's P/E, based on scribblers' next forecast earnings, is pretty much bang on against Bellway, Redrow and Crest. The trickier bit is where they all go from there....? And I don't trust the scribblers and my numbers diverge from their figures going forwards.... I've still got Telford currently in front by a nose in terms of overall assessment of value, but with not a lot in it... And I suppose that all of the above is of about as much use to you as a chocolate teapot seeing as you are a true Telford musketeer...!

Sain, Thanks for posting the link... I read the article, and it made a few reasonable points, but some of the numbers in the table are total tosh.... I'm surprised they didn't do a bit more research on the specifics seeing as how they presumably have an influence on investors' decisions? (otherwise - what would be the point of Investors Chronicle? Perhaps it should be renamed Chronic Investors...?) And I'm surprised that at least some of the readers' comments at the end of the article, while mostly critical, didn't buttonhole IC on this..? Perhaps they don't do their own research, either..? After all, it's all in the numbers - as ever... And recommending Galliford - the only dog that barks louder than Bovis - what was THAT all about..???!!!!

Cyber, Careful what you wish for.... Telford were too expensive to hold from the middle of 2012 to late 2016 for anyone taking an objective view across the whole sector as opposed to focusing on just this company, good long term prospect though it may be... The share price began slipping away by more than the others late 2015 but it wasn't until after the Brexit vote last year, when Telford's share price was slower to recover, that it moved into being good relative value and which was when I bought back in after a lengthy absence. That market adjustment was likely more to do with the significant fall in return on equity for 2017, after two previous years of gently falling ROE which was against the market trend. Just for a change, the market over-compensated... What I'm saying is that it is likely that TEF's seemingly low share price most likely has almost everything to do with its own performance and almost nothing to do with being on AIM. After all, and you have the figures & graphs since last weekend, when did any builder ever hit a PBV of 4.0 apart from TEF briefly a decade ago...? For us, and for any long term buy & hold investor here, a 4.0 PBV is an absolute waste of time.... the likes of you and me would have been long gone and into better value elsewhere and, for the musketeers, riding it out all the way through, they'd probably have been weeping themselves to sleep all the way down from the spike... You've seen the graph - it looks like what I imagine the price graph for Bitcoin will look like at some point...! So let's not hope for anything that takes TEF out of the value zone - especially seeing as you're now, like me, looking across the sector as a whole and with all the numbers in front of you. Don't stop posting on the blog, though...!

Cyber, "I haven't read your post yet but if you are holding a share, surely the sooner it becomes overvalued (relatively speaking) the better? Switch into TEF while undervalued and then wait for the market to catch up and get ahead of itself and then sell and switch into a share with better value." Exactly, as I've just done this afternoon - moving from Redrow to Crest....!

Cyber, You may have picked up my blog post just now - I mean, about five minutes ago..? I reckon that Telford are bang on the money in terms of value against Crest right now, and a tad ahead of Redrow... So, in the game of trading between them that you've recently joined, we really don't want them to stray too far from that or they become as much use to us, for that purpose, as a chocolate fireguard....

Terrace, I haven't watched the clip yet, but I can tell you that I have EPS for Telford penciled in for 2022 at 78.65p as things stand so if they only double over that time I reckon I'd be a tad disappointed... The whole point of trading between builders' shares is that I'm looking to achieve an average 26% a year gain compared to my estimate of a long term average 16% a year (I appreciate builders are doing better than that right now but we are in a sweet spot of the housing cycle and, historically, 16% has been a reasonable average for the prudent builders... I am well on target this year, the first year I've been monitoring it precisely, to more than make the 10% difference on trading) I acknowledge that we do not look at this the same way, but it is worth considering the actual numbers comparing 16% long term average annual gain to 26% (you read my blog - so you know I'm always labouring the point..!) 10 years @ 16% gives an overall 341% gain compared to 10 years @ 26% giving 909% 20 years (Steph's suggested timescale to his pension on here....) @ 16% gives 1,846% overall gain compared to 20 years @ 26% giving 10,072% Personally, I reckon the difference is well worth the extra effort involved... I still hope to persuade you to come for an investor weekend down here in the Shire at some point, maybe next year, and we can look at all this and discuss it in detail... At the end of the day, I have no axe to grind here... :-)

Terrace - doesn't it make you nervous when they can't even spell focused..?

Steph, I have some really useful graphs I've put together on this..... only problem is I can't get them into this share chat to show you. I don't know if you signed up on the blog? (Sain, Cyber & Terrace have). That way, I could show you these - you might find them illuminating, I certainly did.

Cyber, Yes, great EPS growth, but price growth was around 22% a year average - much lower - yet it still ran well ahead of book value, which went from around 1.1 to nearly 1.9 PBV currently. Which is why it's much safer to look at PBV as a guide to whether a builder's share is cheap or expensive, allowing for the cycle as a whole. P/E is really going to mess you up on builders' shares because of the cycle... As a very rough guide, PBV less than 1.5 is moderate, becoming cheap, and above 1.8 or 1.9 is getting a tad warm for the market - especially for Bellway as the last three times it's touched or gone near 2.0 it's soon steamed away back downwards. Maybe soon to do this again..? And, if it does, does this matter if you're clear about what you're doing here..? I don't think so.... Of course, the market rarely if ever reaches fair value for builders' shares, as we discussed on the weekend!

Steph, Ah, Robert Shiller - yes, his book "Irrational Exuberance" was a very valid read when I got into this investing-in-house builders malarkey some fifteen years ago... and I thoroughly recommend it to anyone in this game who hasn't read it yet... the introduction and chapter 1 is about as far as you need to go for the main bits - he is an academic, after all, and it can get a tad turgid... :-) https://www.amazon.co.uk/Irrational-Exuberance-Robert-J-Shiller/dp/0691089159/ref=sr_1_2?s=books&ie=UTF8&qid=1512650099&sr=1-2&keywords=irrational+exuberance+by+robert+shiller You did get me all excited there for a moment but US builders are in a very different world from UK builders... I've got figures for individual UK builders going back, in some cases, to the early '80's - but 100 years' numbers if they were available, wow, that would be really good! The point I would keep re-iterating is that anyone buying any more shares from here wants cheap prices not expensive ones and even if you'd like them to double when you sell, that's still small beer over the long term (and you've always talked long term on here, Steph, to the thousands of extra percent gain to be had (if you're talking fifteen to twenty years), over and above buying & holding, if you can successfully move between shares as is very do-able and, I'm sure, for many of the folk here seeing as they're paying a whole lot attention to what is going on than Warren Buffett's mate, Mr Market. So, what's important, really important, for this is that different builders' shares stay in touch with each other value-wise overall and, therefore, a nice shiny PBV at any time is very much a secondary consideration. I appreciate that some readers here may not see eye-to-eye with this - but there you go..!!!

Cyber, Safer to start your figures from the start of 2012 or 2013.... during 2011, the builders were still very coming back out of a black hole so not a typical period...

Steph, If you have access to 100 year historical data on builder P/Es, could you put a link up here for that..?

Cyber, If you're asking here for us to consider this from our narrow, selfish interest as private investors who can easily move between different companies' shares if we so choose due to the modesty of the size of our investment pots (and I recognise that not everyone on this share chat subscribes to this way of maximising gains), then what surely matters is that Telford remains in the zone value-wise, wherever that happens to be at the time, with the other builders regardless of what the sector average PBV is (and because this is the building sector, as we all know, it does move around a bit..!). If you recall the numbers we looked at on the weekend -which others on this chat haven't seen so I'll repeat them here - sitting in one builder making 16% a year gives a gain of 341% after ten years, whereas moving between builders' shares such as to increase that 16% to an overall annual 26% gives a gain of 909% after ten years... In other words - quite a difference..! And, of course, being an AIM company, the HMRC ain't nicking a half percent off you every time you go back into Telford - so I'm happy with that particular feature. And if you are a buy-and-hold-for-the-long-term investor, remember that, in the same way as the reward from an employer for labour is wages, the only reward from a company for holding its shares is dividend - capital gains coming from the market, not the company. And whether the share price is a penny or a pound doesn't change the number of pennies dividend you receive in your pocket for each share you hold. And my impression is that some people here do see themselves as being fractional owners - which is exactly what we all are for as long as we hold the shares - and if they intend to buy any more shares in Telford in the future, then it is in their rational self-interest for the share price to be low when they do so to obtain more shares than if the price was high and so more dividend income.. no matter how warm the glow might be from the thought of a big share price gain. So, my take on this is that what matters to us, in our narrow self-interest, far more than a big, sexy PBV is that the relative values of builders continue to cross over each other frequently, and experience says that that is generally ably assisted by volatility - so, share prices going up and down like a bride's nightie, bring it on!

Dako, I also rate Crest as being good value up there with Redrow and Telford - and I've shifted my holdings to 30% Crest, 30% Redrow and 40% Telford currently whereas just over a week ago I was only spread across Redrow and Telford. Crest's return on equity last year would have been superb at around 26% if it hadn't been for a pension value adjustment - I had the beginnings of a discussion on this with Josh earlier in the month on this share chat but I don't think he sees eye-to-eye with me on this! If Crest achieve the scribblers' EPS forecast, that would put their ROE at almost 25% which probably puts them a nose ahead of both Bellway and Redrow and then also taking into account that, but my reckoning, current PBV (as at end November, using EPS estimates) for Crest is 1.63 against Redrow 1.69 and Bellway 1.90, then, providing no balance sheet adjustments required this year, that puts them top of the pile right now value-wise by a small margin... What the market will do with this in the short term, I have no idea - but given that the share prices for both Bellway and Redrow are up about 40% for the year to date compared to Crest's measly 12% share price gain, one might anticipate that to show through before too long, always barring mishap?

"EPS likely to be above 80p for the current year IMO." I'm allowing for a gently declining return on equity over coming years on all the builders barring Telford (due to their being in a process of change with medium to long term outcome uncertain..).. Redrow's ROE last year, by my reckoning, was 25.7%. An EPS this year of 82p would give an ROE of 24%, and is the figure I have pencilled in. So - I agree with you on this, 2227. Of course, events may now make monkeys of us both!

It's a pity that this share chat now occasionally slips into being a tad adversarial as, for the most part here, IMO, the discussion is of a good calibre and particularly when held up against some of the other house builder share chats on LSE... It's fair to say that anyone who has held Redrow continuously since the start of 2013 has done a lot better than someone who has held Telford continuously over that time - an overall gain of around 290% including dividends compared to an overall gain of around 160%, by my calculations. I think the difference reflects that, at the start of that period, Telford's PBV was around 10% more than Redrow's and that, during the period, Redrow's ROE came from behind to accelerate past Telford's. So, we now have a situation in which the PBV positions have reversed, and justifiably so given Redrow's great performance. That, plus the additional profit made, account for the far superior share price gain. But none of us can go back in time and change where we were invested at an earlier point, and so have to take a view from here. And I have set out on a spreadsheet what I see as a reasonable scenario for ROEs on both companies going forwards to 2025 based on a combination of where they each are now, where we might be in the property cycle, and how they each did last time round. If one is prepared to give some credence to the scribblers' forecasts, the do show Telford's ROE moving up towards that of Redrow's. Probably too early to say whether they will fully catch up or not? The conclusion for me of the above two paragraphs is that what those numbers melt down to is that Redrow and Telford right now are surprisingly closely priced to each other in terms of relative value. I appreciate that there seems to be some polarised, almost partisan, opinion on each of these companies expressed here, though personally I am a fan of both - so one might argue I'm sitting on the fence, but I don't see it that way. My investment is spread across both companies currently, and I really wouldn't want to make the call about which prove to be the better bet from here. I'm imagining that the relative value will continue to do what it has always done and cross over between the two shares from time to time in terms of best value, and the challenge is to be able to recognise that when it happens and to then take advantage of it. But, coming back to this share chat, it's not a zero sum game between the posters here as far as investment gain is concerned and hopefully the debate can recover its former wholly positive character for the benefit of all?

Josh, for the � signs in the previous post, read apostrophes or inverted commas - I typed this out on a Word document to start, and the copying & pasting seemed to naff this up in the process...

Josh, �You aren�t calculating EPS which is a fully audited figure and factual, your methodology is highly floored (sic) for a number of reasons.� You and I had a discussion about this on this share chat a while back. I respect the comments you post here and I took seriously what you said previously, and so took a look at ROCE as being a possible supplementary approach to how I take a view on companies� track records and value. However, having done this, I remained of the view that ROE is the most appropriate and that ROCE was of limited use to me. While I appreciate that ROE doesn�t take leverage into account, that�s something I�m happy to look at on a current basis at any time. And especially now as, in that respect, builders� balance sheets are, on the whole, somewhat different to how they were pre crunch. Taking starting BVPS, from however many years ago, and finishing BVPS, and taking into account all dividends paid in between (and providing there has been no complication of rights issues in the interim), it is possible to calculate average ROE using just those numbers. As far as I�m concerned, it is the movement of BVPS from year to year that matters, including taking dividends into account. Because, at any point, it is BVPS that is the figure used to calculate PBV and ROE. ROCE doesn�t come into that anywhere. With regards to an actuarial loss being outside the control of the company, yes, I accept that. But it was the company�s decision in the first place to engage in the folly of salary based pensions, and it was clear decades ago that this would end in tears at some point, as is now more widely recognised. In the meantime, like the Euro, it�s just another can being kicked down the road. So, in my view, here it was an original poor business decision, ending up in a price being paid that for me is appropriate to sweep up into the overall ROE. I appreciate that, from what I�ve understood, you have been trained in accountancy whereas I have come to this from an entrepreneurial background, and I guess our differing approaches reflect that. But my methodology, orthodox or otherwise, has led over time to a multiple of gains against those to have been had over the period by buying and holding, and I�m more than happy with that.

"Josh is promoting Crest as offering the best value at the moment He is very much at the cliff face as he audits housebuilders Doesn't of course apply the weighting which you carefully apply but seems to accord with your view" Sain, I would say... yes, up to a point. My issue with Crest is that if you took their declared 62p EPS for last year at face value then great, they made a return on equity of nearly 26%. However, I don't take any notice of declared EPS figures as I've done the legwork to see for myself how much this has deceived investors in the FTSE100 as a whole over the long term (since I analysed it all, company by company, about fifteen years ago) Instead, I go from balance sheet to balance sheet, taking the book value per share each time, and adjust for dividends paid - this in my view gives the real EPS and everything else is just a sales pitch. And for Crest, for 2016, the real EPS figure by my calculations is 54.52p - which is somewhat different to 62p and only gives an ROE of 22.8% which is lower than for Bellway and Redrow. So, I'm fairly comfortable with the figure the scribblers have for increase in earnings as that seems pretty much in accord with the latest trading statement. What I don't know is - should that be added to the 54.52p or the 62p for a 2017 figure? And Crest do have previous on this - the dodgy EPS figure for 2016 isn't their first offence... So, all things considered and taking a view, I do see Crest as currently good value just not quite so good (since they bounced back a tad) as Redrow or Telford (and I'm imagining you agree in respect of Telford?).

Strictlybricks, how do you come to the conclusion that RDW and CRST are now the same in valve and that BVS is sitting on a PE of 12 with an EPS falling this year due to reduction of targets. Dako, having been in this investing malarkey for about seventeen years, around four years ago I came up with a weighting system for builders shares as a way of evaluating them against each other (I only invest in builders - as the name implies!). Four years is still a relatively short time and I'm still refining what I do with this, but it works off a baseline that is Bovis, which I regard as a dog of a share based on its long term track record (and the recent revelations about them came as no surprise because, as with a lot of things in life, it is all there in the numbers). For me, Crest, Redrow and Telford are all way better companies than Bovis, but they also have different weightings to each other..... whether I've got the weighting process down as fine as is possible, well, I guess time will tell?