Member Info for TakingMyTime

I suspect no-deal is even closer today. Seems clear that Tory Remainers want to tie BoJo's hands so he has nothing to negotiate with. If he can't threaten no-deal there's no reason for the EU to move on anything, so there won't be a deal.

That means no deal unless they revoke A50. But if they try to pass something revoking Article 50 he'll call an election, agree an informal pact with Farage, and we'll get a pro-Brexit Parliament and an even harder Brexit than we would have had.

Whatever happens, I expect PSN has the cash and land bank to ride it out, and there will still be a housing shortage. Supply/demand will still mean homes sell for good prices.

' He probably is of the same view as me, it will pass'
Based on today's SP movement, it passed quickly. :)

Not sure I have any 'words of wisdom' but I'll comment.

If you think a share is going to go, a downswing in price is good, you can buy cheap. I jumped in a little too soon, but I think in the long run I'm going to be happy anyway.

So, what's holding it down? Well, first, it was overpriced for what it IS. There's premium built into the price based on what people think it will, or might, be. If Primark goes big in America, it will be extremely valuable. So maybe some sentiment is now less positive about that. Even at today's SP, the price to earnings ratio is still at 17, and divi around 2%, hardly attention grabbing, especially with UK shares perhaps undervalued generally. I wouldn't touch it if I didn't see significant potential for growth here. I didn't buy for what it is but for what I anticipate it to be.

So, it's a growth stock. I suspect general market sentiment over Brexit and recession fears is hurting growth stocks more than others. I think that's a factor.

I also am sure like-for-like sales at Primark being down is not helping. You can only open so many stores, and once you hit that limit if like-for-like sales stay down, then revenue will drop. I'm not persuaded they will stay down.

I think another factor is concern about whether Primark will be as successful in America as here. Walmart has some cheap clothes. The American clothing market already has some inexpensive options. Is it really going to work phenomenally, or will it be good but not great, or will it flop? I don't think it will flop but no one really knows.

The pound's weakness may not be helping that much either. I suspect ABF imports more than it exports, so a low pound hurts. If that's the case, part of the price may be due to no-deal Brexit pessimism and the anticipated hit on the pound. It's anyone's guess what happens with Brexit, of course. I'm expecting no-deal, and expecting it to affect the pound but not disastrously, but within a year or two to see a recovery.

My opinion only, which may not be worth anything -- I'd say if you aren't prepared to ignore the share price for 1-3 years it may not be the investment for you. Likewise, if your risk tolerance is low. I think there's significant upside but I'm not in very heavily here, because I do see some risk that the upside never materialises. I don't think the downside is as high as a lot of 'growth' companies, either. They'll keep producing food and it's one thing people have to keep buying. So I doubt you'd lose a lot of your money, but if the upside doesn't come, you might lose a little bit of it, and you might have lost the opportunity to buy something better.

For me, the risk is worth it. In fact, I think I'm likely to wish I'd bought more. But that will be hindsight.

'Exetrchief, Are you saying PSN are not insured?'
Doesn't matter what he's SAYING, what matters is the facts. Trying to pin him and his mate down (if they aren't one and the same) on any actual facts is impossible. Assertions all over the place, nothing verifiable.

Anyway, regarding FT, I'm glad it was mentioned, I forgot to post the link to this. https://www.ft.com/content/a8098858-9e39-11e9-9c06-a4640c9feebb

It's basically what I've been saying all along, the company is going to be positioning itself as refocused on quality control and customer satisfaction. Everything since Jenkinson took over is going that way. Whether he will truly succeed in not only changing the culture but also the public perception of that culture remains to be seen, but there's no doubt that he 'gets' it. He knows what needs to be done and how to go about it in turning that around.

The response to the program was, I think, excellent. They could have talked about how 'this isn't fair to the efforts we have been making to change this.' That is for another day, because changes they are making for future sales don't help the people on the program, do they? The only thing you can really do for those people is apologise and set them right. An unreserved apology is exactly the right response to that situation when you are trying to remake yourself.

Looking at the SP right now, it looks like the market has basically shrugged and said, 'Yes, we knew all that.'

I still say sometime in the next year, maybe two, Jenkinson is going to start to appear in puff pieces in the press about how he's turned PSN into a beacon of corporate responsibility after the bad old days. The SP may get a boost depending on what happens with Brexit, but it probably won't really go until the optics improve.

'At SP 1932p and EPS 280p the P/E is even cheaper at 6.9. I am not worried at all about holding these.'
Agreed. I don't care what this publicity does to the SP.

What I do care about is three things:
1. Does it further drive home the point to management that they really do need to improve build quality and customer satisfaction? If so, then this has been beneficial.
2. Does it result in PSN getting kicked out of HTB? That would be a bad effect, but probably not that significant. HTB is still helping to inflate demand/house prices, and PSN will benefit from that even if only indirectly. And it isn't as if the company's financials are bad, or as if HTB is going to be there forever.
3. Does it result in people not buying their homes? That would be the killer, obviously, but I can't see it, with the housing shortage. There will always be house buyers, and there aren't enough houses.

It may suppress profit/earnings a little due to costs of sorting out the build quality issues. So if Price/Earnings Ratio goes from 6.8 to 7.5 due to a little bit lower earnings, it's still looking like a pretty good investment -- as long as PSN keeps buying land and making houses, and people keep buying them.

'Unfortunately, these issues are ongoing, as such I think you'll find the program highlights customers and developments where these issues are prevalent and ongoing.'

We shall see. The Mirror article, and Liam Halligan's op-ed in the Telegraph, both lead with a home built in 2017. Both spend time talking about Fairburn's bonus, even though he's gone and the pay plan has been changed. Neither mention the new retention policy.

These kinds of problems don't go away overnight. Nothing I read in those articles makes me think things aren't going in the right direction.

@johnson36
So next time I listen to you instead of you listen to me, eh? Too bad we didn't all sell out of everything and jump into BDEV.

PSN is going in the right direction, too, so at least there's that.

@Dunale
It's kind of you to try. I tried to talk to him, too, but I filter him out now. Prepare to be called a masonic royalist, or something.

'According to a friend who works at Barclays, very little has changed.'

I wouldn't put too much stock in that assessment.

Banks now have higher liquidity and reserves so are better able to withstand shocks.

Ratings agencies got badly burned and are not so quick to slap high ratings on mortgage-backed debt. Junk is much more likely to be seen as junk and such investments mostly bought by those who choose and can afford the risk.

Securitisation issuers are using much greater transparency and much less complex structures.

A lot more could be said. There are always risks and some of the risks could be disastrous. Wars can destroy a lot of wealth very rapidly, administering a deadly shock to the system. Trade wars will destroy some wealth and build others -- in the long run, bringing some upheaval but unlikely to damage the system the way we saw in 2008-9.

Perhaps the greatest risk is sovereign debt. Governments everywhere keep spending more than they bring in, when a government defaults some banks might go to the wall, too, and bank failures can trigger other bank failures. So the risks are out there but I really don't think you could safely say that 'very little has changed.' Maybe in the department he works in little has changed but on a macro scale a lot has changed.

So, no answer to this: 'Which insurers are refusing to cover PSN homes? Where can I read about that?' What a surprise.

Somebody must be short on PSN. Maybe the FCA should investigate. See the nice message below the 'Post Message' button from them? 'Posting... information that is false or misleading, may constitute market abuse. This could lead to an unlimited fine and up to seven years in prison.'

Opinions are free, anyone can have them. People can be negative or positive about PSN, it's fair play. Making statements of fact which in fact aren't true is not fair play.

I asked below why the price was so low. So here's my assessment.
1. Concern about Trump / tariffs / sanctions means some people won't want to buy a Russian steel producer. Fair enough, but given the North American operations I doubt this company in particular will be targeted.
2. High debt ratio. Yes, this is a concern. Would rather see dividend slightly lower and cut the debt.
3. Vulnerable to recession. In a recession, building projects stop and iron ore and steel prices drop, which would significantly hit profitability.

In my view, all these are valid concerns but do not justify a price/earnings ratio near three or a dividend yield of 13%. The price is much lower than the fundamentals and these concerns would suggest.

The thing that has spooked markets and kept this price so low is that the principals are selling. Three times in the last 8 months executives and directors have sold large numbers of shares.

In my view, this makes it less likely that there is hidden bad news. If they sold at the level they have without disclosing hidden bad news they would be subject to prosecution for insider trading, but they aren't selling enough to make it worth the risk of that. So, they are just profit-taking when prices are high.

I suspect this will go on for some time. The dividend is appealing, so prices will bounce up and down, and when they bounce up, you'll see more share sales. That means there is probably a temporary upside limit to this share while the profit-taking goes on, and a lot of market participants will stay away as a result. But no one knows how long it will go on. In my view, the 13% dividend is a nice compensation for a temporary limit to the upside, and when insiders stop their profit taking for 6-12 months, I'd guess the price/earnings ratio will move to more normal levels.

That's my view, and why I went ahead and bought in. I think at some point this share is going to go. I suspect it is capped at around 700p until the principals decide they've taken enough profits, but that after that it could double in price or better. That might take a few years, though. Every dividend that rolls in takes a wedge out of the risk.

If looking for a quick profit, you might have made a mistake. If willing to ride out the lows, collect the dividends, and wait for sentiment to change, the fundamentals are good. Lots of cash, large land bank, etc.

The reasons for the lows are negative sentiment. Causes:
1. Huge bonus to former CEO. Compensation structure has now been changed.
2. Some home buyers stuck with bad leasehold provisions. They've changed what they are doing.
3. Build quality / snagging issues. They've changed procedures to reduce this problem and came out with a policy that buyer solicitors can retain 1.5% of cost until snagging is done -- nobody else is doing that.
4. Fire safety problems. Again, they seem to have got in front of this one and it does seem to be limited to a couple of sites.
5. Traditionally it's been a cyclical industry so some in the market are discounting PSN because they think a down cycle is coming before too long.

I'm of the view that #1-4 have been addressed, that they really are working to sort out their reputation, and #5 is dubious because of the housing shortage, but that it takes time for negative sentiment from these things to go away. That keeps the price very low right now, and IMO this is a great time to be buying. I just added to my holding. But I have enough time for the ride, especially since the dividends keep rolling in at very high levels. If you want something stable, PSN probably isn't for you. If you want something with a really low Price Earnings Ratio, great dividends, and can stand to ride it out until sentiment changes as they rebuild their reputation, seems like a great place to invest.

'Article by Johnson is back, or never deleted and my specs aren't working again.'

You can't fool me. The police or the FCA or Komrade Korbyn's Krew made you admit it was there. LOL.

@exetrchief 'insurers are refusing to cover PSN home on buildings insurance '
Thanks for the warning. I didn't know that, that would concern me. One would be a concern, two even more so. Which insurers are refusing to cover PSN homes? Where can I read about that?

@johnson36
That article makes some good points, and that's part of the reason why I won't go completely into housebuilders like Nige does. Despite all that, I'm staying in for now because:
1. In a housing shortage, demand is unlikely to be cyclical.
2. PSN is far better positioned, both in cash reserves and land bank, for the next downturn.
3. PSN is top five in FTSE-100 in both Price/Earnings Ratio and Dividend Yield. I'm also in Evraz for the same reason, though the risks are higher there for multiple reasons, IMO.
4. I don't accept the article's view that the PSN discounted price is primarily because of the view that it is cyclical. I think the market is discounting PSN primarily because of political concerns / historical bonus stupidity / historical build quality issues, and I hope and think those are being addressed. If they aren't, I should have got out a while ago. We will find out.
5. If there is a downturn, because of the housing shortage I do not expect it to be a deep or long downturn, and even if it is, I expect PSN due to strong financials and existing land bank to come through just fine, and I can afford to hold it for 10 years even if it takes that long. I'm not in PSN for a quick profit, though if we get a big price bounce in the next year or two I'd probably take profits.

' Persimmon have benefitted because their historic cheap land bank enables them to make better margins.'

That should continue. Another reason they've done so well is because they are less exposed to the London market, which isn't doing as well as other places right now.

(Alliance News) - Moody's Investors Service upgraded the outlook on its Ba1 credit rating for Evraz PLC to Positive from Stable amid confidence it would maintain "strong" financial metrics despite a tough market.

The credit analyst explained steelmaker Evraz is now expected to "maintain its strong financial metrics despite the volatility in steel and coking coal prices."

https://www.lse.co.uk/news/EVR/moodys-upgrades-evraz-credit-outlook-amid-strong-financial-position-6l318n6mjakj631.html

@Nige 'You think a Per of 30 is unreasonable, and you could be right.' I said 'optimistic', not unreasonable, FWIW. Would love to see it and wouldn't be shocked, might take some years. But I think it would be a mistake to expect it.

@Taversham 'Perversley , once brexit is sorted , SPs for builders will rise but their trading could worsen as interest rates rise and htb is scaled back- funny this thing we call sentiment!' What an interesting thought! Of course, there are other things like trade wars and Iran that might keep rates low even once Brexit is done. But yes, sentiment could improve even as earnings fall. Ha!

@TonyF 'Shareholders must be prepared to sacrifice some profits in the interests of Customer Service and Satisfaction .' Absolutely. I'd been watching PSN for a while but didn't buy in until this year when they convinced me they had made that decision.

I always worry about people who think a Guardian article is a good source for what a Conservative government is going to do (kick PSN out of HTB). Serious disconnect from reality. All the article lets you know is that the Guardian and some activists (Vince Cable is currently little more than another activist) WANT them to be kicked out.

Johnson, PER is often displayed as P/E. You can see current values for the FTSE 100 here: https://moneyweek.com/prices-news-charts/performance-tables/

Average historically probably runs in the 10-15 range, but if there is a reason it can go quite a bit higher, as you can see in the chart. Some of that is stupid IMO. I think Nige is optimistic to be talking about 30 but I can't see any reason PSN can't at least move up to 15, which would be around double today's price, and I won't be surprised to see PER of 20-25. That's going to be phenomenal for those who bought in near today's levels even if the recent focus on customer satisfaction dampens earnings marginally.