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I wouldn't rely too much on The Oak Bloke. I think he takes a very optimistic view. Being a pessimist myself, perhaps he's just optimistic relative to me. But in investing I think it's pays to have a healthy dose of pessimism, or at least scepticism. He has made mistakes that I've noticed, though so do we all.
He makes some mistakes (as we all do) but his mistakes always seem to be on the postive side.
Suggestion: make liberal use of the filter button. (It took me a while to spot it, above the message list.) I filter out all the troublemakers, timewasters, abusive people, and those who keep on responding to them. It makes the board a lot more useable.
P.S. I just checked the last half-yearly report (30 June 2023), and I see that the cash balance was DOWN from 6 months earlier, from $60m to $50m. That was partly due to one-off costs, but I think it was mostly due to lower metal prices. So I suppose my thesis is dependent on metal prices recovering.
Bear in mind that CAML is debt-free and building a cash pile of surplus profits to spend on buying or developing a new project. If they don't find anything to invest that cash in, they could instead pay it out to shareholders as extra dividends. So, either we get a new project that prolongs the life of the company, or we get extra dividends. The question is whether those extra dividends would be adequate compensation for the lack of longer term dividends after the 2 current projects end. When I bought into CAML I decided the answer was probably yes, though of course it depends on profits continuing at a reasonable level until then.
In short, you need to take into account the surplus profits that are not being paid out in current dividends.
To me, the two biggest risks to the investment are (1) the geopolitical risks associated with Kazakhstan, and (2) a prolonged global recession supressing the price of industrial metals.
@coolbeans
DEC owns the most wells, but I don't think it's the largest producer. It has a huge number of old, low-production wells. As I see it, the question for shareholders is not so much whether it will fail. If it pays out so much in dividends that eventually it cannot afford to plug all its wells, that's bad for US taxpayers, who would have to pick up the tab, not for shareholders (though it may weigh on the conscience of shareholders). The financial risk for shareholders is that DEC may be required to set aside a lot of money for well-plugging, and pay much less in dividends. dividends.
P.S. The fact that GSF is selling at a discount gives some margin of safety, which helps offset the risks. So I'm prepared to buy at a low enough price. GSF is currently about 4% of my portfolio, which is between small and medium size in comparison to my other holdings.
@Mkx007 I'm not very knowledgeable about this business (which is a source of risk for me in itself), but FWIW...
1. There doesn't seem to be much barrier to entry... anyone can come along and build more batteries.
2. We've already seen revenue fall in the UK, which I believe is due to a supply surplus. This could happen in other countries too.
3. New battery technologies could out out-compete the current lithium ion batteries.
4. As far as I know, GSF's contracts don't give it any long term protection from competition.
To some extent I'm comparing with wind and solar energy producers, which have long term guaranteed prices for part of their output (though their other ouput could also suffer from a surplus of renewable energy).
The share price rose almost 50% (from its low to its recent peak) in under 2 months. After such a rapid rise it's not surprising to see a pullback, whatever the fundamentals, especially as the FTSE-250 has pulled back a bit.
I may add some more, but I consider GSF more risky than most of my shares (I'm mostly very defensive), so I think I'll wait and see if it falls any further.
@zac0_4
My comment was primarily about the need to consider fundamental value. A company that was never going to return any money to shareholders would be worth nothing. There's certainly a valuable place for reinvesting profits for growth, so the company can pay higher dividends in the future instead of dividends today.
Given my circumstances and current market view I personally prefer dividends today. But I'm certainly not saying that dividends today is always the best strategy. However, I am saying that it's wise to consider the fundamental value of the shares you're buying.
Hi Moneybox. Unless I missed something, all your arguments are based on past total returns, which mostly means share price movements in the case of the S&P500. You haven't taken the fundamental value of the shares into account at all. Shares are not like art works, collectables, bitcoin, etc, which are just worth whatever people are willing to pay for them. Companies (and therefore their shares) have a fundamental value, based on the fact that ultimately they make profits which they pay out to shareholders in the form of dividends. If a company grew to the size of Apple and then went bust without ever paying out any dividends, it would have been a complete loss to its shareholders in aggregate. Some shareholders might have made money by buying low and selling high. But those gains would have been at the expense of other shareholders who lost money in the bust. Anyone who bought low and held until the bust would have seen massive paper gains over the years, but those paper gains would all have disappeared in the bust.
When a stock market is overpriced relative to the fundamental value of the stocks, there will eventually be a correction back to the fundamental value (also known as 'reversion to the mean'). In fact usually markets overshoot in the other direction, and become undervalued for a while. This can result in a 'lost decade' (or longer), over which the market produces zero total return. No one knows when the correction will come. But it has always come eventually, and it would be unwise to assume that this time will be different.
I've just been reading this article, which you might find interesting:
https://www.hussmanfunds.com/comment/mc240101/
When there's a correction in the S&P500, there will probably be one in the FTSE too, but it will likely be less severe, because the FTSE is much less overpriced. It will likely be even less severe if you're invested in under-priced shares that pay a good sustainable dividend, and those shares will probably not have a 'lost decade' because they should make a significant return from dividends even if there's no gain in share price.
"It just proves that there’s more than one way of doing things."
Quite right. I prefer a relatively steady dividend income to the wild ride of stock market prices, especially as I'm close to retirement. Thought it's satisfying to see the value of my portfolio go up, I would rather see stock prices come down (as long as I'm still investing) so I can buy cheaper. So I don't measure my portfolio's progress by total return over the last year. I'm more interested in the growth of my dividend income.
As they say, past performance can be a poor guide to future performance. Stock prices (especially in the US) have done unusually well in the last 10 years, and in my view the US market is now overpriced. Starting from a high price means that total returns over the next 10 years could be a lot poorer. This is not a prediction, just a possibility, but it's a risk that I'm trying to limit my exposure to.
No real (inflation-adjusted) growth is OK with me. If the LGEN dividend just keeps up with inflation, that'll be an 8% real return (based on 8% current yield). That's better than the long term market average. I'm just targeting a 5% real return from my investments overall. My current average yield is over 7%, so that leaves a decent margin of safety.
I'm close to retirement too. Well, I'll be getting my state pension in 3 months time, unless I decide to defer it, but I'll continue freelancing part time for as long as I can. I don't expect to start taking money out of my pot for another 3 or 4 years.
I'm already invested almost entirely for dividends rather than growth, and when I do start taking out, I aim to take out the dividends only. That way I can be indifferent to what happens to share prices. Just keep the dividends coming! (And hopefully at least rising with inflation.)
I was surprised by this announcement. Unless I missed something previously, it came out of the blue. I believe the last (interim) report said that they had all the money they needed for their current programme of investments, so I wasn't expecting new share issuance. At least the shares were issued at NAV, which is significantly above the current share price (and even further above the price I bought in at), so I guess it should be accretive to shareholder value.
Yes, LNG is normally shipped to Asia from Gulf/East coast ports via Panama Canal. I believe I've read that some has already been rerouted via Suez. That doesn't add too much to the distance. But if it has to go via the Cape, that's a lot further. Hopefully this will be good for my LNG shipping shares (and other shipping shares).
I'm not convinced that an absence of new projects is much of a drawback. I'm happy for UKW to invest its surpluses in share buybacks or paying off debt. Over the near future I suspect the price will probably just move together with the UK stock market and/or interest rates, although the share buybacks should exert some upwards pressure. I added some shares recently at 145p, as markets seem pretty bullish at the moment, and maybe there'll be a Santa rally. Maybe I should have waited for another dip, but it seems like good value at that price, so I thought why risk missing the opportunity.