Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Tichtich - " . . . You claimed or implied that the price of LGEN was falling over the long term . . . " - You're going to have to copy and paste my comment around the above statement
" . . . your approach ignores the fundamental value of companies . . . " Far from it. My largest holding by far is with Fundsmith. Take a look at their investment strategy and how they define a good company
" . . . I think you've said you're planning to sell your dividend payers . . . " No I haven't. I've been very clear. Dividend payers used to make up around 30% of my portfolio by value. That was too high and a drag on performance. I've reduced this to around 17% currently. Ideally, I'm aiming for 15%
TheTrotsky - Well spotted! : - )
It just goes to show that financial metrics are simply a guide and no guarantee of share price movement. On a PE ratio basis LGEN is a bargain. It's a pity that sentiment is not shared by the market.
I've been steadily moving away from single shares for a number of years now. I've reduced my exposure to around 5% of my portfolio value. 30% in one share is too much of a risk in my view. It's fine . . . until it isn't! But that's only my view.
TheTrotsky - my 18.5x figure was based on a published annualised growth rate for the S&P500 over a 30 year period with dividends re-invested.
My statement regarding 'mind boggling' returns was a bit of a throw away comment. It was based on Microsoft's latest quarterly earnings. Revenue $61.9bn +17%, Operating Income $27.6bn +23%, Nett Income $21.9bn +20%. Growth figures are in comparison to the corresponding quarter 12 months ago. I don't know about you but the level of revenue, income and growth rate are, to me, somewhat 'mind boggling'!!
Tichtich - " . . . Your idea of long term seems to be the last 10 years . . . " - I only use this preiod as most of the analysis from Morningstar / Trustnet only goes back 10 years for analysis purposes
" . . . Over the last 30 years LGEN has gone up 6x . . . " - the US stockmarket, which you keep refering to, has gone up 18.5x over the same period
" . . . US stocks on the whole are significantly overpriced . . . " - maybe, maybe not. Some of the so called tech stocks are producing mind boggling returns
" . . . I'm curious to know what your reaction would be if there's a crash . . . " - probably do what I've always done. Sit tight. One of the reasons I maintain a (at present) 17% exposure to dividend payers is to have some income coming in in the event of a market correction.
For your information my portfolio is split as follows geographically: USA 52.5%, UK 18.0%, RoW 25.6% & cash 3.9%
Tomglan - you'll be pleased to know I've taken your advise and created a simple spreadsheet. However, you won't be as pleased to hear my findings!!
I've taken the mid-point in each year between the high/low share prices as the entry point for dividend reinvestment.
So, my simple spreadsheet reveals the following findings. With dividends reinvested over the last 10 years your initial capital would now be worth approximately 79% higher than it was when you started. That's an annualised growth rate of 6.05%. Well short of your 10% pa
I've cross checked my figure with the published annualised return from Morningstar. They state 6.7% over 10 years. I assume the difference is simply because they will have used actual sp figures for reinvestment purposes rather than an average that I've used.
Tichtich - see comments below. I love a good debate! It's good to have to justify your position and test your theories. So long as we're both comfortable with our investment strategy that's ok by me.
" . . . the market price doesn't matter . . . " - it doesn't in isolation but total return is my key measure
" . . . The stock price only matters when you sell . . . " - agree. However, if a stock price shows a continuous decline over the long term it would be foolish to ignore
" . . . you don't need real growth to get good returns, as long as you have a good enough dividend . . . " - that's assuming your capital is not decining and eating into your overall total return
" . . . Are you sure it's not you who sees the US stock market through rose tinted spectacles? . . . " - absolutely not. It was you that brought it into the equation, not me! I'm more of a global equity tracker fund merchant which, accepted, includes a 65% exposure to listed US businesses
Good luck with your investing
Tichtich - don't forget, with a static share price, the inflation adjusted value of your capital is in decline by about 2.5% pa.
So, your "8.6% p.a. real (inflation adjusted) return" is nearer 6.0% taking the capital inflation adjusted value into consideration. That's assuming the share price doesn't continue to fall year on year, of course!
I might add that I hold LGEN but don't view my investment here through rose tinted spectacles!!
Tichtich - " . . . Current yield is about 8.6%. In principle, if you hold forever and the dividend rises with inflation forever, that's an 8.6% p.a. real (inflation adjusted) return. That's better than the long term average from UK or US stock markets (and probably any other stock market) . . . "
No it's not. The US stock market has an annualised average return of 15.45% over the last 10 years (probably longer!)
Tomglan - how do you get to an averaged annualised return of "just under 10% per year" when (i) you state the average yield has been 6.5% pa, and (ii) the share price is only up 17% over the 10 year period, so an average annualised growth rate of 1.6%?
AbjectPerformer
" . . . this wasn’t a great investment for 5 years . . . " is a statement of fact
" . . . At this price, going forward for top ups or new investors, it is a good investment . . . " is an opinion and we'll have to wait and see! Good luck.
Johnoxxx - the point I was making was simply that in return for a dividend of 14.62p you've seen the value of your investment capital decline by 16.00p since the start of the year. So, to date, a negative total return.
And although LGEN pays a healthy looking dividend, that masks what has been a pretty unremarkable return over the last 5 years. During that time period with dividends reinvested your total return today would be 23.75%. An annualised average return of 4.35%
A simple global equity tracker fund would have returned 73.87%. That's around 11.70% pa.
That's just 1 reason why I've been selling down my dividend holdings over the last 3 years or so. I have other reasons.
From holding around 30% of my portfolio by value in dividend paying stocks 3 years ago I've now reduced the figure to around 17% as of today. The reason? Well, this share is a prime example of why. As of today I've locked in a dividend payment of 14.62p, unfortunately it's cost me 16.00p in lost capital!!
I sold 33% of my holding here last month, 18% earlier this week and the balance (50% of my original holding) I'll continue to hold for the time being.
My investment in a simple global equity tracker fund has delivered a positive return ytd of 7.5%; my holding here (including future dividend) a negative 0.7%. An outperformance of 8.2%.
Total return is the key measure for me.
Cardinal3 - yes, there is a concentration based on market cap of so called tech stocks. The major players (Microsoft, Nividia, Meta etc) account for around 18% of the value of the L&G International Index Trust. So, a 20% correction would drive the unit price down by 3.6%. I'm ok with that.
You are also correct that there is a fair amount of overlap in my holdings. That's inevitable if you invest in succesfull leading businesses.
I'm happy with the level of diversification across sectors and countries. My alternative, historically, was to just invest in a small(ish) number of UK listed companies. That's not diversification and I would argue carries more risk.
Aangus1 - I can't say I give much thought to the question you've posed. I don't invest in funds for the short-term, so a percentage point either way is of little concern.
My largest holding, in a global equity tracker fund, is in L&G International Index Trust Acc. If you want instant trading they offer an ETF (LGGG) which has an almost identical make-up and performance.