Member Info for strictlybricks

Terrace, if you put current share prices aside for a moment, Telford are due to return 161p on starting assets of 271.3p. That's a total return on equity of 59% for the three years... Redrow, with a combination of scribblers' numbers for 2018 and 2019 and mine for 2020 to have a matching three years as far as possible, are due to return 275p on starting assets of 341.5p. That's a total return on equity of 80% for the three years.... So, in my way of looking at this and based solely on the above, a pound of asset in Redrow is worth more than a pound of asset in Telford, other things being equal. The most challenging part of it all, the thing that taxes my simple brain ad nauseam, is how much more is it worth...? For me, right now, the market uncharacteristically has got it just about spot on in the different PBVs between the two. Which is boring, but there you go.... History say it's unlikely to stay that way for too long...

Sain, yes - but you are talking about EPS, not ROE, which is an entirely different matter... At some point, it is possible that Bovis, whom we don't talk about, may show some impressive increases in EPS... However, Bovis, is at the bottom of the builders' ROE pile by a country mile, and so there's only one way for them to go.... their shares may currently seem cheap - but that ain't my view of them... If you take the scribblers' figures, next ROEs in full year's figures are: BVS 9.7%, TEF 17.3% and RDW 21.5% As I've commented here before, Telford is hard to call but I'm imagining they may well do a bit better than that based on their superb long term track record, and I'm budgeting for Redrow to do significantly better than analysts' forecasts... But we'll no doubt see - and maybe you'll be posting me some humble pie here next year! And I'm hoping the LSE Share chat Telford musketeers are right about them - just that I am betting on that but not too heavily as things stand until there's more clarity...

Higher..... But it needed to be - it still leaves Telford's profitability severely lagging... The only builder they're ahead of for forecast 2018 ROE is Bovis... And we don't talk about them...!

Possibly the triumph of hope over experience...?

Terrace, this is one of the reasons I'm not a fan of Berkeley..... ony Pidgley, as I recall, set himself up for one of these big bonuses in the earlier 2000's, but then the Credit Crunch put paid to that. Looks like he's pulled it off this time, though... I don't really think shareholders could complain too much, as Mr Pidgley has a good track record for calling the cycle which, by itself, is probably worth way more than this payout. But it's still in sharp contrast to Steve Morgan of Redrow, who controls 40% of the company and doesn't take a salary - so his interests seem pretty perfectly aligned with those of the share holders..? I like and respect that.

Cyber, I reckon Telford are somewhat tougher to try to call than Redrow - as I've commented here before.... But I have to go with something for how I do my numbers, and therefore have to try to estimate a sensible figure, and the figure I have penciled in at the moment for TEF for 2020 EPS which is hopefully sensible but still cautious is 63p. That EPS figure would at least lessen the gap between Telford's ROE and that which I have penciled in for Redrow and Bellway. So I would say that less than that being achieved (all other things being equal and assuming the other builders made my estimates, etc.,) would be a tad disappointing IMO. You were recently hinting at Sain, the Sage of Waltham Cross, to come up with a forecast EPS for Telford for 2020... How about it, Sain..? Heads and parapets, and all that..?

Cyber, as I put on my own blog just now, which you may have seen if you've had the alert, I reckon Steve Morgan is just being Steve Morgan and has probably significantly understated what he really thinks... I would have thought the 96p EPS guidance for 2020 is more likely to be fairly close to what they are really looking for for 2019. But, of course, we shall all just have to wait and see!!

James, yes, I did notice that... it was the only bit of bad news in the results, IMO.... I'm just in the process of putting a comment about that in my own blog - which is separate to this share chat (but also only about builders' shares).

Got there just before me, Cyber - while I was typing!

Redrow did exactly what it said on the tin with today's results.... They've been talking 25% ROE for a long time, and that implied EPS of around 70p for this year. In the event, they made 70.2p - so who could grumble at that..? A pity that, with this sort of high profitability, they've felt pressured to up the dividend by 70% to 17p due to the general apparent lack of investor clarity about such things (because that what it seems to be caused by given CEO comments in the past) and who don't seem to understand that that money would be far better off for them if it was retained in the business - but you can't have everything and I for one certainly ain't complaining! So, well done Redrow.

Terrace, I do wonder what reputation Bovis are talking about in the article you've given the link for below....? I've got the numbers for them going back to 1997, and they've always been a pile of p..p

So said the wise man Warren - and who could disagree?

Terrace, please don't take this as investment advice as it's very much a case of DYOR, but for three years I'd probably be happy to sit tight as it stands - roughly 60% RDW, 30% TEF and 10% CRST.... Maybe I'd move just the CRST to BWY..? If you were asking about 10 years then, just off the top of my head, I'd probably lose the CRST and half the RDW into BWY. But, as I said in my comment earlier today, I can't find a lot to choose between the four right now (when I play the numbers forward to 2025.... obviously I'm almost certainly going to be well out by then, but you can only work with what you have to work with). Start of 2013, there were some big juicy value gaps between the builders to be found.... now, in my view, the gap is between the above four on the one and the motley assortment which is the rest of them on the other... And I'm not currently interested in the motley assortment...

My five bob tour of the builders is that Persimmon, Barratt and Taylor Wimps are all FTSE100 and therefore all overpriced – that particular market being where the pension industry scoops up its ill-gotten gains from investors who can’t be arsed to do it for themselves – i.e. nearly everyone with a pension. So, for me, they’re out. Historically, Tony Pidgley’s interests haven’t necessarily been fully aligned with those of investors and also the numbers there are too convoluted (perhaps because of the former point?) for a simple soul like me. Galliford came out of the post crunch chocks early and the market still seems to love them for that so, again, IMO, are overpriced now. Bovis are, well, Bovis – and we don’t talk about them. So that leaves Bellway, Crest, Redrow and Telford – all of which, in my view, are pretty much in the zone with each other at current pricing levels. Crest and Telford have well underperformed the other two since the start of 2013. In Crest’s case, because they were expensive back then and in Telford’s case, there’s both that they were expensive and also that their business model is changing - so there’s uncertainty plus looking like they may be in a lower margin game albeit possibly a safer one? I’ve argued on here before about considering profitability and I think the true picture is possibly masked for some by the impressive forecast increases in earnings for 2018 and 2019. Telford need some big EPS increases to even get their ROE heading towards the other builders’ margins – and the damp forecast figure for 2020 for me is a disappointment even though I don’t pay too much attention to the scribblers. Track records suggest that Telford’s ROE should be coming up longer term and the other builders reducing, but if that article that Terrace posted a link for on Monday, about long term high house prices (which I’ve considered at length and written about on my own blog) is valid, the builders might remain in a sweet spot, and might retain their margin advantage over Telford, for some years yet? Telford’s big current USP for me would, in normal cycles, be the de-risking factor but, until memories of the crunch fade and builders start borrowing again, it’s not so stand out. In summary, IMO, forget the disappointing past few years, Telford are now priced to be in the zone with the other three – but this is not any sort of prediction for the future!

As a footnote to my previous post, I just scrolled down the page a bit on the link I included, and there is indeed a graph there that, by coincidence, starts from 1998 which was when I first did the donkey work for mine. I didn't think to scroll down before I wrote my previous comment - that's what having just slept off a lunchtime pint does for you - but the current spike is ther in all its glory as is the previous one I referred to which is a Crocodile Dundee job by comparison ("That's not a knife!") I suppose the good news is we're back off the recent top - which was 36. And we didn't previously have Quantitative Easing or virtually zero interest rates - which no doubt makes a big difference - so there's a whole topic to take someone off on a tangent if it's their particular schtick...?

Cyber, I'm imagining you've now read that bit on my blog as old microfiche was indeed the order of the day back in 1998 when I undertook the task? Unless this was a coincidence? Whereas now, with good old Google, the link below came up straight away. http://siblisresearch.com/data/ftse-100-cape-pe-yield/ I had no idea what the figure was currently as I haven't really paid attention to this for some years now I'm only interested in the house building sector and not the market as a whole (I guess this complete ignoring of the big picture would make Steph shudder?).. In normal P/E terms it's currently around 30, and in Shiller Cape terms it's around 14. I don't want to scare you but, at the time of my graph, I had never heard of Robert Shiller - probably quite understandable as he didn't get to write his big book until 2000 - but in terms of ordinary P/E, the only time between 1979 and 2007 when the P/E touched 30 (well, almost touched it - on my graph it got to 29.8) was on the eve of the millennium... And we all know what happened after that...! Read Shiller's book, Irrational Exuberance, if you find this stuff interesting, it certainly opened my eyes and, because he's American, because he's an academic with access to all sorts of research, and because he's smarter than me, never mind 1979, his figures figures and graphs go right back to 1860 for the US market. If you're reading the original edition, you only need to get through the preface and to the end of chapter 1, and you've read all the useful stuff - you could then just bin the rest (he's an academic.... if like me, your education fell somewhat short of going to university, you might find it a bit stuffy!). Talking of Steph, perhaps he has a view on all this?

Cyber, re your comment at 9.04 today about the P/E for the FTSE100, I wrote about that in my blog, you may recall, in an early page "Learning the ropes". Many moons ago, I spent about 10 hours in all down the library pulling together the information from old FTs for a long term FTSE100 overall P/E graph... This was either pre-internet, remember - or at least, pre my awareness of the internet... now, probably a few minutes on Google would do the job..... but I wouldn't mind betting that, even now, not many people have bothered to put that all together? The result was illuminating, the US S&P even more so - just that I didn't have the skills to put the resultant graphs on the blog... It was the start of my realisation of what a great big pile of p..p the FTSE100 is - taken as an entity overall...

Cyber, as a follow up to my comment at 09.08 today - in the intervening time I've been out for a walk, a pub lunch and beer so I might make a typo or two? - it's obviously not as simple & straightforward as simply "10" as though that's the answer to the universe... And it's probably only relevant anyway if you're looking to play between shares and cash, whereas to date I've only played between different house builders' shares. My target in doing this is to beat the underlying sector performance by 10% a year on average. That's a tough target and, from the start 17 years ago to now overall, I haven't achieved that, but I reckon I'm doing better in recent years so I live in hope - the credit crunch was a helluver learning experience the hard way and I definitely feel I've upped my game in the past few years... I've been a slow learner, so it's taken some time. And 10% percent a year may not sound that big, but it is if you're in your '30's working towards a pension (which, sadly, ain't me... I'm already at that point!). A 30 year plan that produced an additional 10% a year would generate roughly 16 times the end result compared to just buying and holding. And that is really the core message on my house builders investment blog, as I'm aiming it mostly at the next generation, which is that with a decent enough rate of return and a long enough time scale, you really don't need to start with a big sum of money. Einstein had this well figured - and he didn't even have Excel... But then - he was smarter than me!

Perhaps because the market for builders' shares is so volatile that not enough investors look at it calmly & rationally enough..? Whatever, the volatility offers opportunity - and I'm grateful for that...

Cyber, I would say that, very roughly, with an overall long term average PBV of 1.5 for house builders and an overall long term average ROE of 15%, the ball park figure is 10