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Thanks again, Gavster. Very useful.

I'm guessing the volatility to which they refer is probably due to uncertainty as to how Brexit and trade wars are going to affect the world economy, as well as questions as to how economies are going to react to recent central bank action and other government actions.

All of that is really significant for demand, and thus for steel prices.

As to longer term and 'steelmaggedon' in that article, it seems to me we're just talking about market forces. Prices have been high, so companies are ramping up production. An equilibrium will be reached. If we see steelmaggedon it is likely to be relatively short term, some capacity will be taken off line, and steel production will become profitable again. It's the way the world works unless there is government intervention. Evraz may be forced to compete harder but the company's history suggests they will be able to.

I didn't think the company would always be able to maintain its recent earnings. It's a cyclical share, after all.

Hi, Wilfie. My weekend went pear-shaped, and this week isn't better, but a few thoughts.

I think on pure economics this share is badly under-priced. All builders are, but this one especially. The earnings are high, the company is flush with cash, and has a really good land-bank. It is a cash generating machine right now, and a down-turn in the market will not seriously impact that. It might let them turn some of that cash into more land at a lower price, which would be better in the long run. In a downturn, cash is king. On all financial metrics, this is buy, buy, buy.

It's held back by Brexit-economic fears, political risks, and negative publicity (the last two related). Brexit first. The market thinks Brexit will hit housebuilders because it will hit the economy and fewer people will be buying houses. Nige argues that housebuilding is no longer cyclical, that even in an economic slump, people still need houses.

He's at least mostly right. I do think a bad slump will reduce the people who can afford to buy, and so hurt builders some, especially in London. But PSN isn't very exposed to London, and he's right that people will still need houses, so it won't be that bad for builders anyway.

I also don't think Brexit will be as bad for the economy as many think. Our new PM is willing to go big, and if Brexit happens, his only chance of winning an election and having a legacy is to juice the economy so Brexit 'succeeds'. So, stamp duty cuts, income tax cuts, maybe even VAT and Corp Tax cuts, are coming if we Brexit. The deficit will climb but the economy will go -- and house-builders will go, too. Especially if stamp duty is cut.

So, I don't think Brexit-economic damage is likely to be significant to house-builders. Now, I'm not talking about share price, I'm talking about how the business will do. I do not think Brexit or a slowing economy is likely to do any significant damage to PSN's ability to make and sell houses, and keep churning out the profits. I don't even know that we'll have a slowing economy, but if we do, I don't think it will be significant enough to do any real damage to PSN. They will continue profitable.

I don't have a clue what the share price will do while all that is going on, though. It's driven by sentiment and speculation, in the short term. It could bounce all over the place. But I am quite sure that if the company continues to generate profits, even if only 80% of the current profits, that this is going to be a good medium to long term investment. The dividends will keep coming, even if at a lower level. The share price will eventually rise if the profits keep coming.

This posts's bottom line: Brexit/economic fears are holding back the share price. I don't buy it, so I bought the share. Next post I'll talk about other fears.

I don't know about the Goldman thing. Doesn't affect me, I'm neither increasing my holdings nor selling them. I expect the price to be a wild ride with this share.

As far as dividend being higher than earnings, I'd guess part of the justification is that earnings were depressed by currency losses which is not necessarily indicative of company performance.

For a little insight into Evraz dividend policy relative to Russian peers, this was interesting: https://www.morningstar.co.uk/uk/news/AN_1562339100928541200/moodys-upgrades-evraz-credit-outlook-amid-strong-financial-position.aspx.

@Loggy, Evraz debt is high, no doubt about it. Read that article I just linked, it says Moody's is getting more comfortable with them. But a Ba1 rating on their debt is still below investment grade, what used to be called 'junk' bonds when we were less politically correct than we are now. I'd rather see the dividend a little lower and the debt come down more but this is an unconventional company, and I've gone into it for that reason -- they have unconventionally made a lot of money for their investors over the years.

OK, next, there's been some discussion of 'margin.' It's basically the percentage of a company's income that is profit, or revenue minus costs.

Taylor Wimpey just reported that their margin had dropped by 2%, and all the builders' shares dropped. It was seen as confirmation that costs are increasing for builders and they aren't going to be as profitable as they have been. PSN said in their trading update that they expected margin to be roughly what it has been. If that holds true in their interim results, the price will go up. If it drops by more than 2%, Nige thinks the share price will drop significantly. I'm not as sure.

On to 'dividend yield'. This is the percentage return on your share price if the dividend continues as it has. You can see it on that table I linked to below. PSN is over 12%. That means that not only is the company making a lot of money, given its share price, it is shoveling a lot of money out the door to shareholders. If that actually continues you'd have all your money back in 8 years even if the share price drops to zero. It's not necessarily likely to continue at that rate, they had some excess cash that they are paying out to shareholders, and it probably won't continue. But this is a share that generates cash for its shareholders, so dividend yield is very high, one of the highest in the FTSE100.

That gives you a little background on some of the things you'll see talked about in discussions of share prices. Out of time today but will try to get back tomorrow and give you my guesses as to what is going to happen with this share.

LOL, that got cut off, but anyway, I hope it's a start.

Persimmon has a lot of cash, which would justify a higher PER for an investor. But it also has a really low PER. You can see the FTSE-100 PERs here: https://moneyweek.com/prices-news-charts/performance-tables/.

The companies with really low PERs are making money way to fast for their share price. In most cases, that is because the market simply doesn't believe they will continue to make so much money, or because they think something else bad is coming. The miners all have really low PERs because the market is assuming economic slowdowns will hit the demand for iron ore/steel, etc., so earnings will drop. The house builders are low because people think Brexit will reduce demand for houses and increase the price of any materials they import. They are also low because of the possibility that the coming end of Help To Buy will hit their profits.

Other companies have really high PERs. This would be because people think they are going to grow and increase in value. Maybe they have a product that people believe in. Maybe their management team is well-respected. Maybe they just made a good acquisition, or maybe they took a bad loss in their last reporting period that zapped their earnings but it was a one-off, so PER isn't really meaningful.

Generally you should assume the market is not stupid and that there is a reason for the price. So PER is a useful quick-snap view but you really need to look deeper.

Hi, Wilfie. I'll take a shot at explaining some terms. Part 1, I'll explain PER.

We discuss PER or alternatively P/E Ratio. This is the Price/Earnings Ratio. Earnings per share tells you how much money a company made, per share, in its last report. PER is just the current share price divided by that value.

If you have a PER of 10, it means that the price it ten times the earnings. That means that over the course of 10 years, the company would have earned enough to justify the share price. In theory, but never in practice, you will have received back the value of your purchase over ten years, in that scenario, either because the company paid out all that profit in dividends, or because it retained it all, which should mean the company has loads of cash (or reduced its debt) and so is worth more, or because it invested it all wisely and so increased in value.

In practice, the company will typically pay out some in dividends and use some to reduce debt, build a reserve, or invest in plant/materials/human resources/etc. You aren't going to get exactly that return, you might get more and you might get less, and that's even if earnings stayed level -- and earnings never do. So it is far from perfect, but it gives you a nice rule of thumb.

A higher P/E Ratio means it takes longer for a company to earn the money to justify your investment, a lower ratio means it takes a shorter time. So a lower ratio, all other things being equal, means a better investment. In practice, all other things are never equal.

Things that make PER not a great predictor -- if a company has a lot of debt, there's risk of trouble around, even if they are making good earnings. Some of those earnings are likely to have to go to paying off the debt rather than coming back to the investor. But worse, it could create a situation where a company fails, or has to pay a higher interest rate to borrow, because they are a credit risk. You may see things about gearing -- the higher the gearing percentage is, the worse the debt situation is. There's talk about BP's gearing being a little high (it's over 30% right now I believe), and that they are intending to bring it down into the 20s by the end of the year, at which point they can justify a dividend increase. The higher the gearing, the lower the PER you want to see in deciding what to buy.

Or, a company might have loads of cash (this is where Persimmon is). That means there is less risk of high financing costs, having to sell assets, or company failure. If a company has loads of cash, and especially if they are distributing it to shareholders, you can afford to get a little worse PER, because you are getting back more than the earnings, you are also getting back some of that cash.

Another factor is if the market thinks the current earnings situation is going to change for better or worse. If you see a PER of 10 but you think the company is in trouble, you might not buy.

I'm out of characte

Nice, Gavster, appreciate that. Because EVR is vertically integrated it is going to hopefully do better than steel/iron ore prices would dictate but seems like you are making the case it really isn't that strong of an indicator for the Share Price.

You're tracking the Share Price, of course. I was focused more on profits and likely dividends. I don't actually care what the share price does as long as the dividends keep rolling, but obviously that has to help the share price as well. But SP is driven by many other factors -- market sentiment, fear or actuality of sanctions, large share sales by principals, anticipated economic growth, etc. I guess we could include broker recommendations, which seems to be a huge factor today.

Oops, got that backwards. It goes ex-div before the record date, not after. Duh. Schoolboy mistake.

Ex-div is usually a day before the record date, maybe two days. If you are buying in to get the dividend you want to be sure your purchase clears the books so you should buy at least two days before the record date and maybe three just to be safe, so that would be Wednesday or maybe Tuesday next week.

"The record date is 16 August 2019 and payment date is 5 September 2019. " https://www.evraz.com/upload/iblock/b8d/b8d49b8348748252e6f417e6cb32a821.pdf

16 August is a Friday. So you'll see the ex-div price drop on Monday 19 August.

Bamps, I'm in BP. It's at 500 today, the dividend is $.105, which works out to about 8.5p a quarter. You but at these levels, that's over 6%. I'd call it definitely worth holding and relatively safe over the long term at today's SP -- you will definitely have a chance to sell it for more than today's price sometime in the next 2-3 years, and in the meantime you'll be making 6%+ dividends.

BP isn't a big money play that is likely to give you a 30-40% return but it's a pretty safe investment at these levels, IMO.

Reasonably good results, nice dividend coming. Hit by currency losses but that's just the price of investing in a company like this, sometimes the currency will go for you, sometimes against.

Here's what you want to watch on this share: https://markets.businessinsider.com/commodities/iron-ore-price

Check the 1 year chart and it looks like we're dropping off of a massive high. Check five years and it looks like we're still probably at an unsustainable height. Check the ten year history, though, and the story looks better -- we aren't really at huge historical highs. And if the iron ore price stays high then Evraz is still going to be churning out big profits, big dividends, and is way under-priced.

I guess I should add that I'm holding a chunk of cash right now so in effect I'm doing the same as you propose -- assuming that a later buying opportunity is going to be better than the current price. So I'm trying to time the market, too. How silly of me, everyone tells you not to do that. But I can read the news headlines.

Hi, Nige. I can't really fault your logic but it takes a braver man than me to try to time the market that way.

Sentiment is hard to predict. My view is that the SP is not driven at all by financials but almost entirely by sentiment, and sentiment over things that aren't going to be changed by financials. A substantive drop in margin will have an effect, but how much of a drop will it take? A 2% drop in margin won't change my view of this company at all. It would probably take a drop to 20% to make me think twice, but even that might not convince me to bail out. The sentiment around this share is largely on quality issues and Brexit fears, not interim financials.

Obviously I can't speak for the market but I'm one guy who won't be affected by the scenario you describe. There's a reasonable chance it happens in which case you'd do very well by it.

There's also a chance the margin comes in right at 30 as they said, the price bumps up above 2000, somebody on either side blinks and they start to talk about a Brexit deal and the price bumps up again, and they actually do a deal. If all that happens we might see PSN about 2500 by the end of October and you might be selling on a real low, and regret it.

I don't think it will go like that. I think we are going to see a lower price than today's, either in the lead-in to Brexit or immediately after, if there's a no-deal. So I think the chances are good your plan would be profitable for you. But my crystal ball isn't working very well -- it it were, I'd have bought in at 1900 instead of at 2100.

The results will tell us what the dividend will be, but the share price is being driven by the iron ore price, which has plummeted. Trade wars mean slower growth and even recession, slower growth means less demand for iron ore, less demand means lower price, lower price means less profit for Evraz.

Chances are the trade wars don't last that long, but if anyone has a short-term horizon this is not a share for the faint of heart. In the long run, I really like the prospects but expect the price to bounce all over the place on this one.

TW down 15%
BDEV down 5%
PSN down 9%

Market as a whole down about 7%.

So relative to the market, TW down about 8%, BDEV up 2%, PSN down 2%. Clearly TW being hit for results. My guess is PSN won't be hit as hard as TW even if the results are comparable, it's sentiment driven by poor press that is hitting PSN, and that is already built in. If interim results aren't great, I personally don't expect a big hit on PSN. BDEV, however, might get hit hard if results are bad.

Thanks for that. Fits my view as well. I'm not at all convinced that BoJo is going to be a good PM, or even that he'll be in position long. But I certainly think he is right that targeted tax cuts can be very profitable both to the economy and to the Exchequer, and stamp duty is one that is screaming to be cut and/or reformed.

And obviously, if it is, those of us invested in builders will benefit by it. Even if the study is wrong and it is only a 10-15% increase in transactions that would obviously be extremely beneficial to the housing market as a whole, and help shield builders from any drop in demand due to other economic factors.

@Nige. 'Lower limits ?'
The dividend yield is simply being ignored by the market right now. The assumption built into the SP is that the dividend can't last. It's all being driven by fear.

Fear of Brexit, fear of trade wars, fear that housing is cyclical and we're on the verge of being plunged into a downward cycle. Add to that with PSN but not with TW, fear about negative media and/or the costs of implementing a cultural change. With TW but not PSN, fear that the latest report shows margins dropping and that TW is already being hit.

If those fears are real, the dividend is just using past success to paper over the cracks.

But as we've discussed, the huge housing demand is unlikely to go away even if the economy does suffer. People still need a place to live. If they don't have money then it may reduce demand which will pressure prices and builders' margins, but barring a total collapse beyond anything anyone is predicting, it's not going to shut down the market. PSN and TW and BDEV will still make money.

I still think October is going to bring deeper lows than we are seeing right now, but my finger is getting twitchy. Because I think even if the dividend isn't sustainable at 13%, it might be at 10%, and that's pretty attractive, especially with the serious potential for gains in the SP as well. I could wait for a deeper low but I wouldn't want to miss the opportunity....

Don't know how far this is going but glad I've got some cash! Hard to know when to start hunting bargains, though....

In that case, it was a good move, whatever the net position ends up being financially. You don't want to be going through life worried about your investments, if you feel relieved you made a good choice.

I see the risks here and chose to go with them so I'm not worried at all. This was a risk/reward investment and I see nothing yet to convince me there's not still a substantial chance at that reward. But if I was worried about losing this money I'd have bailed out before now. I just wish you had done so Monday instead of today. Too bad, but peace of mind is worth it.

Seems like a bad day to sell, unfortunately.