Member Info for TakingMyTime

Sorry, Johnson36, don't know what happened with the link. TomE linked it just down below.

'Just a small point have a look at Barchart, PSN as a Strong sell.

https://www.barchart.com/stocks/quotes/PSN.LN/overview'
Not that familiar with Barchart but aren't they basing on trends and 'technical analysis' rather than fundamentals? That can be useful for someone who wants to try to chase the bottom of a downtrend or top of an uptrend, but for someone looking at fundamental/financial strength of a longer term investment it really isn't the way to go.

What I think is happening right now is there's significant political risk around PSN, primarily because of stupidly over the top bonuses, and because that made the press mad so they are making the most they can out of every bit of bad news. Well, PSN is getting out in front of that, and it affected the trading update.

I view a trading update with revenue marginally lower as a good thing, the result of taking action to counteract the political risk. But clearly much of the market is viewing it as just more bad news around PSN, the politicians and press don't like them and now trading is hurting, too. I think that's short-sighted.

Once Brexit is over, or doesn't happen at all, either one, and the bottom doesn't fall out for the builders, they'll all surge. And PSN is likely to surge more than the others once the press / politicians get tired of bashing them. May take two years but we'll see prices well over 3000. Until then, dividend yields in excess of 10% are nice.

Hi, Nige. I saw it, thanks. Seems optimistic to me. There has to be some discounting for the political hazards. And I do think HTB has increased profitability, and its next iteration is perhaps not going to help builder profitability that much. I still think, even with all that, we are way, way undervalued today.

'You are 100% wronmg on most dont need attention,'

How could you possibly know this?

PSN has inspected 2700 homes and carried out repairs on about 1/4 of them. That's not 'most'. If you have proof that PSN has lied about those numbers, then you should go to the authorities, they've provided a false trading update and there are some executives and directors who are going to be guests of Her Majesty for a while.

They've also said they've only found problems on two sites. Again, if you have evidence they've lied, this should go to the authorities. I have bought more shares since the beginning of May and I've been defrauded by these people if they are lying, so I would fully support you -- if there's any proof to what you say.

Thanks, that's interesting. Did you happen to notice what other housebuilders were doing? In other words, was all the move due to the dividend or were others moving, too? PSN this year dropped almost exactly the dividend amount when it went exdiv.

Thanks, Nige, I am sure you are right that many smaller investors aren't factoring what I'm calling 'dividend accruals' into their decisions. But I certainly am and I'm sure many other smaller investors are as well.

I suppose I should do some research on share prices as dividend day approaches. The problem is there are so many other factors that affect prices. But if the small investors are skewing things, you'd expect surges in share prices in the few weeks up to dividend day, relevant to other shares in the sector. And you'd expect drops on ex-div day greater than the dividend amount (again, after adjusting for other shares in the sector). If this is real the strategy should be to buy a little while before a dividend and sell out the day before it.

If this is a significant factor in share price movements, you can bet the big boys have found it and are taking advantage of it. And since they would be bucking the pattern to do so they will be dampening the effect of the phenomenon somewhat.

I'm sure someone somewhere has studied this. It won't matter on a lot of shares, of course, but it will on high dividend shares.

As to valuations returning to pre-Brexit levels, the other thing that could hold that back is if HTB really does end. Even so, I think the market is over-discounting substantially, I expect this to be a really good investment for me.

Hi, johnson, you said: 'The 35p dividend is over 3 months away, I don't think it is built in yet, 580p today, I think 600 to 620p by ex-dividend day. I sometimes do sell a day or 2 before the ex day.'

Well, I guarantee you aren't the only one that has said, 'Hey, look Barratt's dividend is only in October, you'd have to wait until March and June for PSN.' If you are smart enough to think that, the institutional investors, who have software to do it for them, are thinking that, too.

When I say 'core value' I mean 'core value as perceived by the market, after stripping off anticipated dividend accruals.' It isn't even trying to say what the company is worth, it is assessing what the market is saying today that it is worth. The market might be right or might be wrong but it is saying something. Right now the market is certainly building the dividend into its consideration. Institutional investors are looking at Barratt and counting that dividend and saying, 'What is it worth today?' It's worth marginally more today than it was last week, and it will be worth a little bit more next week, and so on. If they sell, they want to be compensated not only for what they think the company is worth but also what they think the right to the dividend is worth right now -- if they sell, they are selling both of those things.

As to PSN share price recovering, it will partly recover by next Spring. By that time, either Brexit won't happen (and those discounting builders because of Brexit will come back in), or it will be Brexit with a deal (same people will come back in), or there will be a no-deal that isn't as bad as the politicians and businessmen opposed to Brexit are saying (they always overstate these things, that's the way politicians work). So once Brexit does or doesn't happen, either way, PSN will see some recovery, but so will other builders.

The other thing that will happen is at some point some newspaper is going to run an article about how 'things have changed at Persimmon.' I've talked about that down lower. You may have to wait a while for that, maybe even 2-3 years. In the meantime the dividends will be nice.

https://www.standard.co.uk/business/primark-beats-high-street-slump-and-steps-up-its-us-invasion-a4182311.html

I've seen this for some time as a nice hedge against Brexit. If we do get a no-deal Brexit, and if it does turn out to be damaging (I'm not persuaded it will happen or be that damaging if it does), I think ABF is likely to do relatively well anyway.

@johnson, you said: 'But isn't Barratt a better buy ? with ex-dividend for Final and a special dividend coming in October totaling about 35p, current share price has been rising this last week from 557p and is now 589p.
Next ex-dividend day for PSN isns't till 5th March next year, 8 months away.'

Always remember the market isn't stupid. The timing of dividends is built into the price you have to pay for the shares.
Shares don't have 'accrued dividend' as such, but there's an implied dividend accrual in the quoted price. When a share goes ex-div, the price drops by the amount of the dividend, more or less. If there is a single dividend every year, after six months the price includes roughly half the amount of the expected dividend. The day before the share goes ex-div, the price includes the entire amount of the dividend.

You are best viewing the share price as consisting of two parts, the market's perceived core value of the share, and the market's perceived value of coming dividends. The timing of the dividend is built into the share price.

Right now the market is probably valuing the Barratt October dividend at about 27p (about 3/4 of 35p), give or take a little, and the core value at near 550p. So you can chase the dividend but you are paying for most of it when you buy the share.

If you are a dividend-focused investor you are better off focusing on dividend yield than the actual timing of dividends, because the market knows when those dividends are likely to come and how much they are likely to be, and it is built into the price. PSN may not pay dividends until next spring and summer, but if you buy PSN now and sell it in December, a share of those dividends will be built into the price at which you sell it. The only difference will be the difference in tax treatment between gains and dividends, which won't matter if it is in a SIPP or ISA.

But as Nige mentioned, you really need to look at financials, too. PSN is, in my view, in a substantively stronger financial position than Barratt, despite having some things (mentioned below) to clean up. It would be sad to buy a share based on its dividend and lose the entire value of the dividend, and more, because the company wasn't strong and so the share price dropped. In my view, Barratt is strong and that won't happen, but PSN pays a higher dividend yield and is even stronger, so is likely to increase in value much more than Barratt. The only real risk I see to PSN is political and, as I've noted earlier, I think they are being proactive on that front.

Better than expected. I'm in this for the long term but nice to see it do reasonably well short term, too.

Hi, Nige. You are correct on what is the critical point.

My view is that the rent-or-buy decision is a close-run thing for some people, and for those people HTB is the tipping point to the buy decision. That may not be most people but the number is more than zero -- and that means more buyers.

If I'm wrong on that then the only impact of HTB is providing more funds to would-be buyers. That would move those buyers into a higher-price segment of the market. That would increase the demand at higher levels in the market and reduce demand at lower price levels. I don't see that happening -- so I'm assuming that as some buyers get kicked to marginally higher-price segments of the market by HTB, others are brought into the market by it at those lower levels.

Of course, there are so many factors in what drives demand that I could be reading this wrong.

I know builders are flat out, but if you boost the incentives to build, there will be greater incentives for them to find ways to increase capacity, and greater resources for them to spend to do so. If builders have money but not electricians, and they double what they pay electricians, some electricians will come out of retirement and more people will train as electricians. Not saying they should double what they pay, but rather saying that incentives do over time work.

Hi, Nige. Re: HTB resulting in more homes: It's a pretty well-established rule that whatever you subsidise there will be more of.

HTB does help some people buy homes who wouldn't otherwise do so. More frequently, it appears, it helps people who would buy homes buy a larger/more expensive/nicer one than they otherwise would.

I'd say the first factor increases demand, even if only marginally, and therefore increases the incentive to builders to build, thus increasing supply. The second factor only shifts demand, but it shifts demand into a part of the market that is more profitable for the builders.

So yes, I do think HTB increases the incentives for builders to build, and thus increases supply.

Whether it is an efficient subsidy is quite another matter. If you wanted to be efficient and maximise the supply increase for the subsidy given, you'd subsidise builders directly. That's not politically palatable given the current climate so it won't happen, and it does run the risk of giving builders an incentive to cut corners and drop quality. But any buyer-focused incentive is going to be inefficient in increasing supply. If you subsidise buyers you increase demand but the incentive to the builders to build is then only indirect.

Alternatively, instead of incentives, you could work to remove some of the planning bottlenecks.

Personally I'm of the view that if you want to increase housing supply the best thing would be to expedite planning, provide some kind of buyer incentive (though probably not on the scale of HTB), and also some kind of moderate tax incentive for builders. Incentivise buyers to buy, builders to build, and remove any regulatory roadblocks you feasibly can. Planners need to stop viewing builders as enemies who want to destroy the community and see them instead as allies in solving a significant national problem.

Hi, courtier. I'd say ignore exstatex. You can filter his comments out, just click the Filters tab above and type 'exstatex' in the box. He's not coherent on this stuff, and for some reason he has a thing about Persimmon.

I'll give my view on the ethics questions.
1. High bonuses. I don't think there's anything unethical with very high bonuses. It's just envy. The company made a very high profit under the previous administration, he didn't set his own compensation. I think it was a bad move politically to have such high compensation and a bad move for Fairburn to be unprepared to answer the questions. But I don't see it as unethical. It did make a lot of envious people angry, and made PSN a target for the media.

2. Leasehold. I'm of the view that some of the stuff that has been done in the past is borderline, ethics-wise. They have always notified what they are doing, and they can certainly prove that people signed documents showing they were buying a leasehold, and the ramifications of that. But enough people were surprised that I suspect disclosure was made without fully emphasising the ramifications, and a lot of buyers are stupid. I also think this is largely a problem of the past, though they still get bad press for it.

3. Aftercare/snagging. This has been a weakness. As I've written before, I believe they've put themselves out front on this with their retention policy, which no one else is doing.

In short, I think there have been some problems in the past, but as far as I can tell the current administration is determined to not only correct the problems but get out in front of them, to act before the pressure builds. The fire safety issue is hardly mentioned in the press now because they could honestly say, 'Yes, we've already been addressing this for months, we're well on the way to getting it sorted.' That one could have torpedoed the company entirely if they were seen to be dragging their feet or only responding when forced to respond.

The company has positioned itself well to take advantage of Help to Buy. If HTB goes away, something will take its place, because there is still a shortage of homes. Persimmon is well positioned to continue to be very profitable. The retention policy will hit profitability some but it is money well-spent. I'm happy with my investment both from a financial and ethical perspective. If there were something more substantive than BBC hit jobs, politicians trying to curry favour with the media, and the ravings of people like exstatex, I'd reevaluate, but I'm not aware of any ongoing ethical concerns. That's my view, FWIW.

I think Nick Price knows what he's doing, the discount is over 10%, the exchange rate isn't bad. Been watching this one a while and I made my move today.

Well, no huge drop after the dividend, it seems to have just dropped the amount of the dividend and retained the core value. Still seems like a great buying opportunity to me.

'So how come anyone trust's America then? Fed has debt of $8 Trillion and the US government debt is now $21 Trillion. People are taking an awful lot on trust when they deal with America when it has those levels of debts.'
1. BP is not, as a general rule, selling to the US government, they are selling to US companies. The US government may be buying some for their strategic reserve but it is a pittance compared to what BP sells in the US.
2. Neither the US government nor the US companies to which BP is selling have defaulted on their payments to BP or, probably, to anyone else. The US is still AAA rated by Fitch, Aaa by Moody's, AA+ by S&P. If the US has to increase taxes or cut spending to reduce their debt they can.
3. If BP did ask for cash up front, the US could pay it.

There is no equivalence between Zimbabwe's failure to pay for oil it has bought and the US debt. The latter is a contractual agreement with willing buyers of government bonds, not a default.

'Anyone who really cared about making the world a better place would spend at least part of their time focusing on reducing fuel poverty in Africa.'

Or clean water, or food poverty, or AIDS, or a million other things. Yes, they have to pay cash up front for fuel, they also have to pay cash in USD for prostitutes. Should we solve that one, too.

You aren't going to solve these problems without decent governments. Most African governments have been more focused on skimming foreign aid for enriching the dictator and his cronies than on things like food and water. They use resentment and racism and religious bigotry to foster wars to obscure their own ethical misdeeds, and if any of their neighbours do happen to be governed well, they suffer from the conflicts caused by their bad neighbours.

Quit pouring aid into sinkholes and sort out the governance problems, and African people are just as capable of building a reasonable economy as anyone else, with maybe a helping hand here and there, but just dumping aid is counterproductive.

And it's not the job of BP to sort out every problem everywhere in the world. It's their job to produce oil, sell it for a reasonable price, and generate profits for their shareholders. They should do so in a responsible and ethical manner but they aren't an international welfare body. If shareholders want to give money to a charity which buys fuel for Zimbabweans, shareholders have the right to do so, but BP shouldn't be making that decision for every shareholder.

If Zimbabwe wants to buy oil and will actually create a structure where BP would actually know they are going to be paid, I'm sure BP would be willing to sell oil to them. The problem with fuel in Zimbabwe is that oil companies have not been paid so they demand payment up-front. That's not the fault of those oil companies, nor is it the fault of BP. And that's true whether one agrees with your view of America or not.

Odd. I was responding to a question about how much profit the cannabis operations was generating. That question has disappeared....

I don't have any hard facts on that. This article (https://www.verdict.co.uk/british-sugar-cannabis-uk-medical-marijuana/) says the CBD industry in the UK is worth £200 million. I'm not sure that is helpful.

The Telegraph had an article on this when they began this business that gives a reasonable description of what they are doing. https://www.telegraph.co.uk/business/2016/10/25/british-sugar-to-cultivate-cannabis-plants-in-norfolk-for-gw-pha/

The tatest interim results, for 24 weeks, showed the sugar division with £769 million in revenue and £1 million in profit. Cannabis is part of the sugar division, I believe. I don't think it is yet a significant factor, though it has the potential to become so.

Looks like there won't be US/Mexico tariffs. That will also give the markets hope that there will be a US/China deal as well. None of that directly affects PSN. The key drivers here will be Brexit (won't affect real value but will affect market sentiment) and whether or not we get a housing minister in the new government that has more sense than Brokenshire.

It does reduce the chance we'll get buying opportunities much better than what we have now. Anyone who wants to get in before this share price heads up might want to do so quickly. As Nige_W keeps saying, this is really priced low by any normal measure.