Member Info for strictlybricks

Terrace, as long as they move after I've traded, I'm not complaining..!

Sain, to add a personal note of confidence here, I've just moved shares from Bellway to Telford such that Telford is, by a whisker, now my largest holding once more (a tad larger than my Redrow holding). But please don't take this as any indication that I am somehow able to call the top of the current price shift between Bellway and Telford - it's just that the value gap, as I perceived it, as worth while taking... I would still really like to persuade you, and the other TEF musketeers between you, to put your estimates of long term earnings growth for TEF out there...! As things stand, I'm provisionally budgeting at 10% a year EPS growth from 2021 onwards... though that may, and is likely to, change as we go and as more up to date figures are forthcoming... I appreciate that TEF sales are anticipated to grow by more than that but, as I've said on this share chat before, the ROE is tricky to call and I'm allowing that it will likely be a trade off to some extent in return for perceived faster and safer growth...? That's about as far above the parapet as I want to stick my loaf right now...! :-)

Terrace, well, that should keep Steve Morgan's overall holding up near 37% and also, one imagines, make it easier moving the 7% of the company's shares that he recently notified for placing? And the share price is hardly expensive at present....

Nige, Nige, if you follow the value rather than the price, and if you can afford to leave your money in place for up to five years if it comes to it. then it won't really matter what the price does on Monday other than to perhaps give you an opportunity for better value elsewhere...? So, price volatility - bring it on!!!

I can't argue with that, Sain....

Nige & Sain, To follow up on what Nige has just said about builders being undervalued, why not simply apply Jim Slater's rule of thumb (of a PEG ratio of 1 being fair value) to Bellway's long term performance? (Telford's looks every bit as good, but doesn't have a long term enough perfomance, and Steve Morgan was AWOL from Redrow through an extended period and, while he was away, they clearly screwed up, so let's not use either of these companies' figures - you only need one as a benchmark, after all?). If we use return on equity for the G bit of the PEG ratio, i.e. the growth, as dividends paid complicate this otherwise, then Bellway's long term average ROE of around 16 means the PE bit also needs to be 16 to make the ratio 1 as per the now deceased Mr Slater. And a PE ratio of 16, on the long term average ROE of 16, gives a price to book value of around 2.5. And how often do you see that level of PBV for house builders? Okay, we've got it currently with Persimmon, which is at a PBV of around 2.8 - but that came about due, IMO, from a brilliant bit of marketing in selling the notion to investors of a long term (nine year) capital repayment plan. This was actually complete bo....cks, as all they were doing was looking at what they were likely to be paying anyway in dividends over that time - as could be seen at the time by anyone who crunched the numbers at the time (and who do you know who does that? :-) ) as it just looked good at the time because builders' share prices and EPS were so low then but that was all to do with the point they were at in the recovery process. But I digress, the point I want to make is that Bellway's PBV is currently 1.62 so it is nowhere near the fair value of 2.5 indicated by the above. If you overlay a set of price to book value gridlines onto a share price chart (as I've referred to and included at least one example of in my blog - to which you both have access) you can see that with sensible companies like Bellway and Telford the huge share price volatility is 10% changing underlying circumstances and 90% market over-reaction - just look at the few months following the brexit vote for a good example of that. And thank goodness for that volatility because, otherwise, the market would surely price builders more appropriately and take away much of the opportunity for investors who are actually paying attention to underlying performance rather than hype? But to join the ride safely, you do need to take a fairly long term perspective (at least five years because a recovery can take that long on occasion), you do need to avoid the risky builders (the ones that get carried away and take on too much debt) and above all, you have to avoid being flaky. And on that last one, just look at all the seasoned investors writing on these share chats, but it still doesn't take much to cause a wobble, and an ensuing whiff of panic, does it?

Sain, if you're referring to the point i notified in the blog that I closed down the fund and repaid the investors last month due to my Plan B team retiring then, yes, timing was good - and all without the Captain being present...! It's what they all do from here, of course.... But that's up to them - they still have the blog to refer to, of course... :-)

Cyber, all the worthwhile builders are pretty much doing a Lindisfarne at the moment - I mean, all swinging together - so one just has to sit there in one's bunker, helmet on, and watch for the value gaps to open up... and why shouldn't they do that...? They always have done to date.... Long term, overall average, ball park price to book value for builders at large has been around 1.5. Right now, Redrow on my figures are 1.54 PBV, so pretty much on the money for the market average but IMO still well cheap as an investment option. I've got Telford at 1.33 PBV, and, in terms of value as an investment, are probably around the same as Redrow. But, as discussed on my blog (and I'm aware you've read all that as you've commented there on this particular aspect), I'm finding Telford much harder to call in terms of relative value.... I'd like that slippery bugger Captain Hindsight to turn up and tell me what's in store for Telford for 2021 and 2022 and beyond but, as ever, he's never there what you want him! But, to keep all this in perspective, including dividends, Redrow's up nearly 30% this year and Telford's up nearly 22% and you could have done even better if you've been tracking the blog's trades... (which I think you have lately?) So what's not to like with it all - compared to investing in the FTSE100 or the Abbey National (mind you, don't think that's around any more?)

Cyber, just updated your email address from the old one and re-sent the figures.... so please let me know when received...

Cyber, I just sent you some numbers on that email address you gave me which should assist in your task...

Terrace, Steve Morgan hasn't said he's buggering off and he still owns more shares in his own company maybe than anyone else in the FTSE350? (the question mark is because I don't know whether that actually is the case...?). I don't have a speculative view on what's going on, or what it might mean, though, if that's what you were asking...? So, today for me was an opportunity to partially reverse some of the very recent trades I made out of Redrow after their recent superior share price climb and back into the shares I was in a couple of weeks previously... But a bit of share price volatility is good, IMO - keeps you on your toes and helps prevent becoming complacent... :-)

Terrace, just had a swift butcher's at the link of your post just now..... target P/E of over 16 then.... rather everyone else than me, Gunga Din, better wait till the froth blows off! And separately, on the "Old farts" issue, I, and most of the crew on my builders' shares blog, are drawing their OAPs... And if Steph has a 20 year plan and is also at the OAP stage, well, that's bl..dy optimistic isn't it..? :-)

Terrace, but does the immortality come with a crystal ball..?

Yes, an over simplification because, right now, the Redrow and Bellway trees are growing faster than the Telford tree. As, if and when that changes - that's a different matter. And part of that different matter is the price you're prepared to pay.

Cyber, taking out the term de-risking and anything else that distracts, the fact is that TEF have done about as well as PSN, but not as well as BWY, in terms of increasing BVPS since the pre crunch previous BVPS high. That is the bottom line. Thing is, for that, you pay around just under 1.4 PBV for TEF and just over 3.0 PBV for PSN, so which seems the more risky? And you pay around 1.7 PBV for BWY which, all things considered, seems about right to me against TEF. But of course that's only my opinion. I've put my money where my mouth is, and no doubt time will tell.

Cyber, I pressed the go button too quickly on my last post.... As a further point, to pick up fully on what you've said, there's underlying value risk that I talked about just now and then there's market risk. And market risk is about the risk of taking a pasting on the share price regardless of the underlying value and performance... and Telford at 420p back around July 2005 was at a PBV of around 4 at a time when Bellway could have been bought for a PBV of less than 2. That was a crazy gap.... those sort of value gaps are still there in the house building sector IMO, but not currently between BWY, RDW, TEF and CRST (or i wouldn't be holding some of all of these). But the bottom line is, if you're going to hold a particular share through thick and thin, and if that share for whatever reason goes right up to a PBV of 4, well, just hang onto your hat regardless of any big market nasties. So, my way of seeing this is - don't be there in the first place!

Cyber, as you're on my blog, I could send you the specific numbers going back on this for both companies if you like but, ballpark figures here, TEF's BVPS went up from 75p to 110p for the period you mention while RDW's went down from 340p to 250p. So TEF's underlying performance was way better, and that is what gives the comfort that is discussed here on an ongoing basis. The share prices and the seeming superior performance by RDW, well, that's just that bipolar fellow Mr Market doing his thing... Which is why he's best taken advantage of rather than taken any notice of..! And which is why moving between shares when the market gets it wrong is so worthwhile - but I think you already get that?

Steph, with Redrow's latest guidance in their results issued last week, that now makes Redrow, Bellway and Telford all looking to pay one third of earnings in dividends, regardless of what the FTSE100 boys are doing. So, if dividend rates are the same, that leaves return on equity actually achieved (as opposed to return on capital employed, price earnings ratios, or anything else) as the straightforward and clean indicator of growth achieved - assuming by growth you mean growth in book value per share over time. Looking forward, if one believes that TEF's de-risking strategy is valid - and personally I reckon it is just that it hasn't proved superior to Bellway's thus far - then one would looking for that de-risking to mean that the company didn't get too badly knocked off course in the event of a big nasty like the credit crunch coming down the pike at some point. But that is to complicate the debate because, if (or probably when) that happens, it reflects in the return on equity and can even turn it the other way as was seen last time round for most companies. Because with the way I invest, I want to have numbers penciled in for further into the future than the scribblers provide, and I have to put something that seems valid... For 2020, my figure for TEF is more generous than the analysts, and it then carries forward at that level. You may be correct that, like the Duracell battery advert, TEF is the bunny that carries on while the others fade, but thus far I'm not seeing any indication of that either in recent results or guidance given by companies. So you have to be looking at 2021 and beyond because the superior growth you are looking for isn't there between now and 2020, quite the opposite in fact...? I've not been successful in nudging any of the TEF musketeers here into venturing any numbers for this, I mean 2021 and beyond, so for me this discussion comes down to what I see as being my different way of investing to the rest of you.. For all of you, it seems to be a matter of faith in the management, which is fair enough. For me, it is a matter of faith in the numbers. Probably good to always bear in mind that neither of us has a requirement here to convince the other, and always interesting to hear the other side of the argument... :-)

Terrace, operational efficiency very much IS a part of SP value... If you don't agree, why not indulge me for a few minutes by checking out the example in that link I gave here yesterday... If you're still not convinced, say so - and I'll just shut up about this! :-)

Terrace, I'm not looking to be contentious here on what is mostly a discussion board for committed TEF investors and I recognize that although I like TEF as a share that's not quite the same thing and so I'm halfway to being a heretic here... :-) But I do not agree with your point about earnings over assets being the same thing as earnings over price. I have no disagreement with your view that you see TEF as the best place for you and others here to be invested giving all the reasons given over time here. But I am arguing the numbers issue here because whether you're looking at earnings against assets or earnings against price does make an increasingly bigger difference in the longer term.... and the longer the term the more difference it makes... It's not my place to try to convince you on this, but, if you do want to give it a few minutes to consider, take TEF out of the thought process and just look at the situation as being any two companies with the same P/Es but different ROEs and play with the numbers on a spreadsheet for a few years going forwards using the actual numbers for Telford and Redrow and assuming one third paid in dividends each year for both... I wrote a whole post about this last year on my blog... given that I have a rubbish memory, I think you've got access to this but I'm not sure..? If you do, you should be able to click on this link and see the post I'm referring to if you're interested in this line of thought enough to do so.... https://strictlybricks.wordpress.com/return-on-equity/ I appreciate it doesn't make any difference to anyone who is happy to stay put in one share, and, as I say, I'm not trying to argue against Telford being the best place to be for investors for the long term, I'm just discussing the factual process of how numbers pan out - irrespective of what companies are involved.