The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Alfista, We'll have to compare notes in 12-18 months time. The economy has been in the tank for the last 12 months and Topps Tiles has a mature store portfolio (so can't offset falling LfL sales with new store openings sales). These figures were already pencilled in. Where we go from here depends on how quickly the economy starts to recover. Whilst money remains tight people will continue to put off big ticket spending and the construction industry will remain subdued. Now is not the time for Topp Tiles to be trying to boost its top line by discounting. H2 is always better than H1 cost-wise and EPS may still surprise once the acquisition of ProTiler has been completed. You think bricks and mortar is dead; I disagree (and so does Amazon). ProTiler continues to perform well, in part, because its not so reliant on big ticket spending; it's more reliant on small ticket spending (repairs rather than wholesale replacement).
Dessertstar, Unlike B&Q, TPT does not sell potted plants & grow bags! TPT is far more reliant on big ticket spending than B&Q; small ticket spending always tends to be less affected in recessions as people opt to repair rather than replace and extend the life of what they've already got. So, unless B&Q gives a breakdown of its tile business, a direct comparison is like comparing chalk and cheese.
As regards, having sold laminate in the past and subsequently exiting the market, I would suggest that the environment has changed (some of its previous bricks and mortar competitors have gone under) and it may prove easier to grab some of that bricks and mortar market this time round. One would also hope that they've learnt from their past mistakes. Whether or not you like their current tile range, over 60% of their tile range is unique to Topps; so, if people do like their tiles, they have no option but to buy from Topps. It remains to be seen whether they can do something similar with laminates. I'm somewhat doubtful, uniqueness wise, but if selling laminate doesn't increase their fixed running costs, making greater utilisation of existing store space is never a bad thing if that space cannot be put to more profitable use.
Finally, as regards Parkside, it has always struck me as being a rather niche business and I'm not sure what its addressable market size is. It is therefore either a question of the addressable market not being that big to start with or failing to make the break through (yet). If the latter, they've recently restructured the Parkside business and it needs to be given time to see if the changes start to bear fruit. If the former, you have to consider whether there's any potential cross-selling benefit to the wider business (at the end of the day, a sale is a sale, whether it's made directly by Parkside or indirectly by Topps Tiles as a result of buisness relationships fostered by Parkside). Regardless, at the moment I don't see a reason for TPT to jetison profitable sales.
Also, I do believe that the NAVs of projects tend to be discounted whilst in the construction stage and get re-evaluated once in commerical production (have seen something similar at NESF recently). So there is quite likely some upside revaluation as GSF's existing projects under construction commence commercial production
Krusty, I would imagine the recent travails in the UK BESS market haven't helped the NAV and although GSF has a diverse portfolio I would expect increases in the UK BESS price to start feeding through to increases in the NAV going forward.
"... a scenario in their mind ..."
If, as rumoured, HMG give you one free share for every 10 you buy then only a dunce wouldn't recognise the opportunity to sell and get 11 shares for the price of 10 and think that the share price won't fall as PIs offload to generate cash to buy into the share offer. But each to their own.
I don't expect the price fall just because I've sold. I think if HMG does proceed with this daft plan then the share price will fall in the interim. If I'm wrong, I'm wrong. My money isn't sitting on the sidelines waiting for the sp to fall. It's been reinvested in higher yielding shares. If the share price does fall I might consider buying back in but I won't lose any sleep. Whilst NWG has been falling back in recent days LLOY has been trundling forward. If nothing else, HMG's (as yet) undisclosed proposals create uncertainty and shares don't tend to thrive on uncertainty. If this was the only way that HMG could offload its shares then I might be more sympathetic but I have no sympathy for an ideologically driven publicity stunt that's unlikely to have any impact on the outcome of the next election.
It's my view that NWG's current shareholders would be better served by the shares being sold to NWG for cancellation (it would increase the EPS and dividend yield, even if NWG didn't increase the dividend cash pool). Introducing a middleman is (i.e. "Sid") rarely, if ever, more financially efficient. My long term view of NWG hasn't changed but by short term view has; I think "Sid" will be bad news for the share price in the short term.
Dessertstar, Have you looked at the economy lately? The top line isn't the be all and end all. TPT has managed to improve its gross margins in H1 and preserve cash (that's no mean feat). I'm sure that TPT and other tile retailers could grab higher sales if they were willing to discount but any increase in sales would likely be insufficient to offet the falls in gross margins and operating profits. Going "large" in a recession (technical or not) is usually a one-way ticket to insolvency.
Some feel good factor may at last be returning to the economy (early shoots perhaps) but that probably only extends as far as a few more latte in the local coffee shop or a meal out at the moment. We need to see interest/mortgage rates starting to fall before people will start to think the worst is over and start considering spending again. People have been trading up to 35 year mortgages just to keep their mortgage costs in check; hardly a good indicator that they'd be willing to add another £5-£10k to their mortgage loan to undertake some DIY!
Alfista, There's no surprise here. Given the current economic backdrop a fall in sales at Topps Tiles was fully expected (and had already been pre-warned in previous trading updates). The share price is still trading within the same range it has been for the last 3 months, albeit a bit to the lower side of the range today. The "proof of the pudding" will be whether or not that decline in sales can be recovered as when the economy starts to pick up and/or Mission 365 kicks in. I think TPT will recover from here whereas you think this is the start of the end; only time will tell but I think it's far too early to be claiming victory (one swallow does not make a summer).
My gut instinct at the moment is that when money is tight and mortgage costs are still rising people will continue to defer big ticket spending (new kitchens, bathrooms and flooring generally can all wait) and I doubt that any large tile retailers, whether bricks and mortar or online, will be increasing sales and/or profits in this economic environment.
I've have banked a nice profit and will watch what develops. I originally bought back in Feb 2021 but sold before the special dividend and subsequent share consolidation in August 2022 and then bought back afterwards (making a c5% profit on the turn in the process) and have now banked a 28% profit.
I may be wrong but I can see NWG falling by c5%-10% if HMG proceeds in mid-June as has been rumoured; markets have a habit of overreacting to such news (in part because the MMs will look to milk it) and repenting at their leisure. I think there's the possibility of a good arbitrage opportunity if HMG does proceed on the rumoured terms, even if you don't participate in the offer. Whether I'll buy back in remains to be seen; I've taken my profits and pivoted to (currently) better yielding shares. Also, June is not usually a good month (the old adage, sell in May and come back in September) and, if the NWG price does fall, it could flounder around for a few months before recovering (depending on how much of the free float is hoovered up by institutions and/or NWG purchasing in the market).
As I say, I think it's a publicity stunt by the Conservatives before the next election and the short term interests of existing shareholders would, I think, have been better served by HMG selling the shares direct to NWG for cancellation. Not only that, I think the publicity stunt will fall flat and have little, or no, influence on how people vote at the next election. If HMG sees sense and does not proceed as rumoured then "my bet" will have, at least in part, failed (as I say I've pivoted into better yielding shares so its not a complete loss but I might miss out on some further capital growth here).
Based on the number of posts in recent days, it would appear that I'm not the only one who has sold out in the expectation that any HMG sell-off in mid-June is likely to dent the share price, at least in the short term.
I'd imagine a number of existing private investors in NWG will be looking at this and thinking why continue to hold 10 shares when in the not too distant future I might be able to effectively get 11 shares for the price of 10. Selling shares to Sid is just a publicity stunt by the Conservatives and NWG's existing shareholders are likely to bear the cost. It will also increase the free float, which will probably result in the share price will meandering until its been absorbed by longer term investors. If NWG intervenes to try and bolster the share price by making on-market purchases, it will just make it all the more ludicrous. Cut out the middleman and just sell direct FFS!
The next dividend announcement is due on 22 May, together with latest trading update and outlook announcement.
Sean, I'm primarily investing for income and these days (capital growth, at least in the short/medium term, is of secondary importance), with mixed results. I'm a contrarian. I believe that the UK market is fundamentally undervalued and that, by the normal rules of arbitrage, at some point investors will be forced (ny logic) to return but for the moment they seem to be firmly wedded to buying an asset for 100p elsewhere even though a comparable asset can be bought here for 80p!
I'm quite heavily invested in the pension/insurance market (about 20% of my portfolio by cost), e.g. AV, LGEN, MNG and PHNX, as I believe that this market will continue to thrive as the UK's population ages. Income has been good thus far but capital returns less so (about breakeven) ;-(
I'm also a bit of sucker for infrastructure and property (again about 20% of my portfolio by cost), e.g. AEWU, BBGI, GCP, GSF, RGL and SAFE. Again income has (generally) been good thus far but capital returns not so (RGL has been particularly badly affected by the rise in interest rates). However, I think these will start to improve if interest rates start to fall as expected in the forthcoming year or so.
The rest of my portfolio is a bit of mixed bag. I do currently hold one equity investment trust (AEI) which I hold for income and a bit more diversification, and am looking at other possibles. AEI has quite a good dividend at present but I'm not sure whether it'll be able to sustain it (I believe so but am not certain) because a few of its investments have cut or stopped their dividends recently. That said, it's NAV has been buoyed of late by a few takeover offers, so it's not all doom and gloom.
I do hold a few outliers that I think could become multibaggers (doesn't everybody) and I rather fancy FTC, SOS and ZTF at present. SOS is, I believe, well managed and a bit of a slow burner but I think it will come good given time. FTC and ZTF are already on the march and I think that both could still double from here over the next 12-18 months.
ZTF might actually do better than that if its new beverage packaging material really starts to gain momentum; look out for some further positive news in its AGM statement next week (it could be the next TetraPak i.e. it could be the next market disruptor). In a nutshell, it's a mono-recyclable material which uses less energy to produce than comparable packaging, offers longer life when opened and is also microwavable. Not only that, existing production facilities, with minor upgrades, can be used to produce the new packaging! This article might better explain: https://www.packworld.com/sustainable-packaging/recycling/article/22910049/disruptive-monomaterial-aseptic-hdpe-carton-tech-takes-aim-at-lpb. Also, ZTF's other businesses are good too.
PW66, I'm not saying that Japan isn't a potential market for GSF but as it currently stands GSF is a separate entity from Gore Street Japan (GSJ) and has no investment in GSJ or any involvement in any of its proposed projects.
Down the road that might change, e.g. GSF could enter into a JV with GSJ perhaps or acquire its own assets, but it would require additional capital and, at this juncture, GSF is not about to do another equity issue (given the discount to NAV) or raise additional debt.
Unless Monkswood would care to contradict me, I would say that there is certainly a higher risk than some stocks because of the nature of the securities TFIF owns. But the management team has a very good track record and, to date, none of the securities its owned have ever left them out of the money i.e. insufficient collateral to repay the debt at maturity.
It should be recognised from the outset that TFIF does not just deal in bonds issued by European governments which, under normal conditions, are generally considered 100% secure from default. It also holds residential mortgage backed securities (RMBS), asset backed securities (ABS, income-generating debts such as credit card debts, home equity loans, student loans, and car loans) and collateralised loan obligations (CLO). CLO are classed as derivative instruments. As you will appreciate, general economic conditions can have an impact on the assets underlying all of these securities but TFIF tends to manage this risk by trading off investment return against recoverability i.e. by tending to buy higher rated securities/tranches which offer lower returns for greater investment security rather than junk bonds (there's a tiered order in which investors are paid should the underlying assets be insufficient to repay the debt at maturity, e.g. AAA are repaid before AAB etc, and the return on each tier recognises the greater risk of non-payment at maturity). Also, if this is of additional comfort, TFIF limits itself to just the European market (it doesn't own any US or RoW securities).
It sounds as if ii might be classifying TFIF as a complex instrument. The definition of complex instrument appears to vary from one broker to the next; I was asked to renew my complex instrument credentials by AJ Bell recently and decided to ring them (because their definition of a ncomplex instrument was, in my view, a bit "wooly" and could have conceviably included all and any investment trusts) to go through my current shareholdings line by line (including TFIF) and was able to confirm that none of my current investments were flagged as complex instruments by AJ Bell.
Personally, I do not consider TFIF to be a complex instrument because, importantly, unlike (say) unit trusts there should always be a market for its shares (you are not reliant on TFIF being able to sell its underlying investments to be able to sell your shares). Certainly there is, perhaps, a higher risk attached to TFIF's shares in the event that there was a repeat of the 2008 financial crisis and you could make signficant losses if you were forced to sell at the bottom but it has to be recognised that no shares are likley to perform particularly well in a general market meltdown and you are a forced seller. However, due to TFIF's diversified portfolio, the risk to TFIF should one of its investments go pear-shaped ought to be fairly negligible.
Hope that helps. As always, only invest what you can afford to lose.
Gore Street Capital is the fund manager e.g. like Fidelity. The only thing GSF and Gore Street Japan have in common is that they have the same fund manager.
Over on ADVFN one of the posters drew attention to this post on ZTF's LinkedIn page yesterday: https://www.linkedin.com/posts/zotefoams-plc_rezorce-circularpackaging-righthererightnow-activity-7196518326561316864-XKj9
It would appear that ZTF have also entered into a production partnership with SÜDPACK Group, enabling ZTF to produce a potential 100 million ReZorce cartons annually in addition to their own in-house capacity.
Have to say that the "media event" wasn't quite what I was expecting if the picture' anything to go by. Very informal; only Polman appears to be wearing a suit. Quite subdued undertones. I thought it would be "glitzy".
I wouldn't be too surprised if ZTF was to announce a signfiicnt strategic investment (perhaps by Refresco) in either its MEL subsidiary or a new ReZorce subsidiary as the next step forward (perhaps even a 50:50 joint venture). ZTF does not have the financial resources to bring this to fruition on its own. At this juncture, I'd be looking for an equity injection of at least £50m (sufficient to pay down ZTF's existing bank debt) plus an additional (say) £50-£100m of new loan financing to fund the next step. May not sound a lot but 50% of a business that might, over time, become worth several £bn would be very lucrative.
Gore Street Capital (GSF's fund manager) was appointed co-manager of a Japanese storgae fund in December (https://www.gsenergystoragefund.com/content/news/archive/2019/041223) but that does not mean that GSF is itself expanding into Japan (at this juncture).
Warthog, Are you suggesting that politicians and/or their chums didn't take every opportunity to profiteer from WWI and/or WWII? I suspect that the inflation-adjusted figures would certainly dwarf Covid.
WWII was actually the making of IBM; it had no problem providing tabulators to the Nazi concentration camps during WWII via its Swiss subsidiary and, apparently, Watson (its CEO) was on the first commercial flight into Switzerland after the war to collect the proceeds in person! I appreciate that IBM was a US company but profiteering was universal. German companies were at it too and, when the Reichsmark was exchanged for the Deutsche Mark in 1948, German companies were allowed to exchange on 1:1 basis, unlike everybody else who had to exchnage on a 10:1 basis!
Finley, Berkshire Hathaway is a completely different company from what it used to be and $189bn is lot of money to try and invest "covertly". I appreciate that BH holds a large stake in Apple and that at the end of December its investment amounted to c5.8% of Apple's issued shares and c50% of BH's listed holdings and that, despite reducing its holding since December, its investment still amounts for c4.6% of Apple's outstanding shares and c40% of BH's listed holdings. BH's holding in Apple is currently valued at c$135bn (this is in addition to the $189bn in cash).
That's a lot of money to tie up in just one investment (especially when you don't have any management control) and is not the size of stake that you can generally offload quickly at a push. I also appreciate that BH does a lot of due diligence before it invests but, even so, you can never be 100% certain of what's going to happen in the future (especially with Cook's habit of being economical with the truth at times).
I would suggest that BH's invetsment in Apple is a departure from Buffet's (and the recently departed Munger's) historical investment approach and is, in part, driven by the mound of cash that BH has accumulated. I would also suggest that BH is likely to continue to sell down its Apple holding because it doesn't fit with Buffet's long-term investment ethos.
Historically, Buffet would never have considered tying up such a large amount of money in one company without at least having seats on the BoD, if not outright control. BH now finds itself no-man's land; heavily invested in one company (Apple accounts for c15% of BH's current market value), with no say in its management or control and having every buy/sell open to public scrutiny. I'm not suggesting that BH will necessarily dispose of its entire stake in Apple but I would be surprised if it didn't (want to) significantly reduce it, which only increases it's current cash "problem".
ASP, If you actually bothered to read the Guardian article it says that Capital Group (CG) bought the shares following HMG reducing its stake below 30% in late March. The article didn't say that CG bought them from HMG; it actually says that CG spent more than £110m acquiring c33m shares at the end of March day's after HMG reduced its stake below 30%. Nothing whatsoever to do with yesterday's RNS saying that HMG had reduced its interest by a further c1%.
Also, from what I've read, it does not appear to be HMG's intention to offload its entire holding to "Sid" and/or institutions. It would appear that HMG is planning to reduce its holding from c27% to c10%. At the end of the day, its seems to be more driven by Conservative ideology (and the thought that it might influence voters at the next election) than financial common sense.
Obviously there's no absolute guarantee that the share price should continue to improve from here, and a bird in the hand is often better than two in the bush, but one would have thought that if HMG wanted to maximise its return (lets not forget that the government will still have lost a packet) it would be better off continuing to sell down its holding piecemeal; either into the market if there is a large buyer or, preferably, direct to NatWest for cancellation (NatWest could probably afford to spend c£1bn per annum on share buy backs).
Warthog, All I can say is that Chris Bryant should know because he seems to have used every wheeze himself! He seems to have been quite content to snuffle at the trough (the expenses scandal), "mislead" Parliament (claiming that Farage, who I detest, was being paid by the Russian state without any evidence) and filibuster during the Gaza ceasfire vote.
To suggest that politicians are engaging in cronyism, nepotism, conflicts of interest, misconduct and lying more frequently and more publicly than ever before is, in my view, highly questionable (politicians got away with a lot, lot more in the past). Honesty and integrity have always been in short supply. As regards the Private Sector, they are hardly beacons of virtue on any of those issues (they may be held to account more frequently but I'd suggest that simple maths might have something to do with that).
I like Bryant and, indeed, it was sad to hear that his skin cancer has spread to his lung but at the end of the day he is, or has become, as "corrupt" as the rest of them and is definitely no "saint".
Being a contrarian's contrarian, there's your problem in a nutshell. You're looking at historic data (e.g. Starbucks results) as evidence that the downturn is continuing to build strength when in fact all historic data generally tends to prove is what we already suspected and/or subsequently knew. Markets historically have always tended to buck the trend and tended to move up/down ahead of the economic data.
Joblessness in the UK is still relatively low by historical standards and should start to curb wage inflation whilst increases in the economically inactive might, pehaps, start to boost our productivity (if businesses are becoming fitter and leaner). You also have to recognise that there's quite a lot of bad news already built in that is only now starting to filter through into the published figures e.g. joblessness will probably peak 6-12 months after the economy starts to recover. Nothing ever changes overnight.
From my own limited, personal experience of late, there do seem to be some green shoots appearing, e.g. local businesses seem to be doing brisker business, but it'll probably take a further 6-12 months before we really start to see that appearing on any economic radar.
I don't disagree with your view of financial commentators in general. As regards, Berkshire Hathaway, you've got to start to ask yourself whether it's become too large for it's own good. It's currently got $189bn sitting in cash! To make a meaningful dent in that cash pile, it's got to be looking at investing in c20-40 listed companies valued north of $100bn (unless it plans to take a significant managing interest or exceed the 3% disclosure limit). Buffet says that he currently struggles to find value but, in reality, it's difficult for BH's investments to fly under the radar and if BH takes a stake in excess of 3% then it's quite likely that it'll have to pay a premium to acquire and accept a discount to exit (which means that BH's investments have to work that much harder than some others). Also, investing in c20-40 listed companies isn't Buffet's historic style (he's tended to invest for the long term in a relatively small number of listed companies). BH could look to invest in unlisted companies of course but it will have its work cut out to invest $189bn. Personally, I think BH is now at risk of chasing (any) investments simply because it has cash buring a hole in its pocket and/or underperforming the market because it's got too much in cash. It strikes me that BH ought to now be looking to distribute at least $100bn of that cash pile via share buy back (being the US preference to dividends) which is no doubt anathema to Buffet after a lifetime of investing.