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Gunga - what is your view on M&G. I have taken a relatively small holding. Not the kind of business that you could hold and forget for a decade, but very cheap and the cash generation over the next 3 years looks like it will be considerable. Tangible surplus, i.e. yield plus annual build in tangible balance sheet equity, expressed as a percentage of market cap, looks like being 12% or more relative to the current share price. It may be just a case of hold for a year as the market comes to its senses, your thoughs?
Henry Boot - doing okay, the tangible equity build up has been steady over recent years, when the divi comes back fully, the tangible surplus will be around 10%, not bad you know not bad at all.
DT decided to verify and write up, comes out Monday I believe, no idea what they will say, but they did not question the extensive verification data that I submitted so presumably they agree, we shall see.
Hi Vlad, M&G is always top of the yield list...I just thought was a value trap however I did start reading up and it’s actually spun out of Prudential which I thought was a well run company so did think may be worth looking into. Will this not be a very cyclical company depending on the wind of the economy ie at the moment people are pouring money into ISA’s, pensions etc so funds under management will continue to grow for the moment. Maybe in a year or 2 the sugar rush of the Biden bounce, furlough money etc will wear off and interest rates will climb and share prices will retrench funds under management will reduce...?
Johncut - are you John..... on the DT who mentioned M&G a weeks or so ago? I agree that M&G may not be a very long term hold, although my typical holding period is 1 to 2 years and M&G is set to throw off so much genuine profit in that time period. One area where I disagree with the BH phase Buffett is the punch card of 20 businesses in a lifetime. So vast was the BH capital and so many the controlled businesses that this made sense. Key to BH Buffett was the control of insurers so that he could get his mitts on the float, the capital pool that insurers must hold, Buffett then would directly invest the float with devastating effect. The possibility of M&G's share price doubling over the next year or two seems very real, double the price and the price would only be about fair, not over priced. The Biden spend bonanza and business tax hikes is going to end in an awful mess in time. But possibly more time than some expect. The signs will be there to see, we could well have a pretty strong year or two before things begins to hit the fan. Clearly it is better to be in companies with great tangible surplus relative to market cap that are highly likely to be performing just as strongly in a decade - BWY, LGEN, RDW, but the medium term case of M&G is pretty strong and M&G is only a 10% holding for me presently and probably won't be much more.
"Gunga - what is your view on M&G..?"
Vlad, I'm afraid I'm likely to let you down here as a company like M&G is so far out of the zone for me that I don't have a view to express on it in any event let alone on a forum like this....
It's back to this sheep & goats issue we've discussed elsewhere previously....
As I've said before, I found my flock back in 2003 and they can be easily identified as Strictly Bricks sheep by the fact that in place of warm woolly coats they have nice comfortable land banks upon which they build houses.
Nothing else will do for me.
Only four are in the frame right now, they are Redrow, Crest, Inland and our mutual old pal Bellway.
Crest have, IMO, currently become rather seriously over-priced right now - and I blame Sid & Doris for that, as I reckon they don't pay anywhere near enough attention to that cheeky little word "adjusted" that tends to appear prominently in trading updates issued by Crest in recent years.
And even being spread across the other three right now has proved unwise thus far this year.... I have a fair amount of Inland at the moment whereas my pal, wisely with the benefit of hindsight, has zilch.
Within the Strictly Bricks blog we have an annual investing competition called "Strictly Wacky Races" (and, before you ask, I'm Prof Pat Pending).
My pal, who followed me into this game about twenty years ago (and in SWR, he's represented by the Ant Hill Mob.... and there are others who read LSE BWY who are also engaged in this friendly but fiercely fought fixture) is ahead of everyone by a fair margin right now, and all he's done that I haven't been so successful at thus far this year (though the Fat Lady has been known to come to my rescue in the past) is essentially bob around between just Bellway and Redrow pursuing perceived best value.
And that has been sufficient to put him on 17.7% for the year to date, against my humble 8.5%, which is not only half his it's also a tad embarrassing.
I'm telling you this seemingly pointless & irrelevant story to try to make the point that the few house builders we have to play with are enough.
As we've previously discussed, it's been sufficient for us to return just over an average of 20% a year these past 21 years and, for such a seemingly sound game, I'm not looking for more than that and just to be able to continue at that sort of rate ~ if that proves possible ~ is nothing short of splendid.
You might have picked up on a recent extended conversation with your pal Mr Clyde in a Telegraph chat recently....?
He strikes me as being pretty switched on, but perhaps it's a pity ~ for him at any rate ~ that he's so dismissive of what you bring to the discussion.
By which I mean, after some pushing from me, he estimated his return over the past 20 years at around 12% a year.
Which only gives a fifth of the gains of 20% a year...
None so blind, and all that...
Strictly
MR Clyde is not quite what you think. He has a degree of knowledge and claims to have generated a a sizeable pile in his lifetime, which I believe, although not primarily through investing, as he would state, although he does stick his accumulated cash in decent-ish divi payers, but even then does not assess the divi cover correctly. But when you press him on detailed points and ratios etc, it often breaks down into a load of bluster. Whatever his capacity once was it is not fully there now, which I think in part accounts for his excessive abrasion.
Vlad,
You may well be right, though I was surprised that, during a process of several back & forth comments, he did come forth with some numbers and seemed to temporarily forget that his job is to blow holes in our shared investing perspective ~ largely, probably, for the amusement of others.
But I do feel it's mostly a bit of a lost opportunity that he enjoys sniping at you and that seems to get in the way his taking an engaged viewpoint.
While typing this it's just occurred to me.... he seems like the investing world equivalent of your local builder whom you've mentioned who doesn't think much of your DIY skills...
It's all very well taking the p.ss, but a jaundiced view can obscure objectivity, and the sum is often greater than the parts, or sheeps' heads might be a more appropriate metaphor..?
Strictly
Hi Vlad - yes same from the DT. Can’t remember mentioning M&G out loud but I have looked at it but I just dismissed as a value trap. However as you said you’d probably get a year or 2 SP growth before it starts sliding back.
Strictly - I can imagine the 20% plus return for your friend. I think Bellway has returned that in around the last 6 weeks. I picked up at £28 and is now 20% up on that. Lucky hit that one. Redrow has returned around 16% over that period so maybe will catch up?
Johncut, sorry I was thinking you were another John. I think that it was John Fallon who mentioned M&G. What else are you holding and/or interested in at the moment?
Gunga
Investing seems to have been your primary income for longer than it has for me. Investing is all I do now, although I say that I am retired for simplicity, as I am 55 now. It has surprised me how many loaded comments we tend to get from a lot of directions. Let's just say, although we play it down, we don't work conventionally and we clearly are not broke. Our circumstances tend to be a lot less respected than someone who is seen to go out and do an honest days work in the conventional sense. It does not bother us unduly, needing wide approval by as many people as possible is a poor objective in life in my view, but is this something that you have come across yourself.
Also, looking closer at Henry Boot, part builder so just about in your zone. Market cap, £350m, land bank over 16,000 acres, assume very conservatively, 5 plots and acre, some may be lower value commercial, but the 5 plot per acre assumption allows for this somewhat. That land is on the books very cheaply indeed. Tangible equity has been building up at around £25M pa for some years while the price stays range bound, looks very under valued. Your thoughts?
Gunga - Boot seems to have c25% more plots than Persimmon, although Persimmon has a market cap c30x larger. If Boot's market cap was based on plots alone, which it is not, each plot is on the books for c£4k. Just get's more interesting!
Vlad, you'll end up giving me an identity crisis seeing as I'm Strictly on here... :-)
I have held Henry Boot shares in the past, but not for around ten years...
It's a hybrid, half sheep, half goat (like Galliford used to be..... I'm embarrassed to own up that I've held their shares in the past too, but fortunately came out of them at a profit back in 2013 when they looked like they actually knew what they were doing and were priced highly accordingly.... so I got away with that one...) and, as such, I haven't really paid attention to them for years.
As it's you, I just took a very quick butcher's and the number that jumped out at me was only 36% BVPS progress in four years compared to Bellway 59% and Redrow 64% and so isn't much better than Inland at 30% which I can buy for 0.7 PBV.
At this time of night I haven't worked out an accurate BVPS for Boot and their progress seems to have stalled for the past couple of years but they might be worth a bit more time spent..?
BTW, I did also reply to you on the DT Questor Double your Money article thread.
Strictly (not Gunga here!)
PS.
Vlad, I didn't respond to your other paragraph...
At 55, you're a mere youngster - I'm 69 next month and, yes, this game has been putting bread on the table for me for the past twenty years and apart from a bit of dividend income as a residue of past involvement in business counselling work after I sold my business and before I got into this game, it's been my sole income.
This is a more civilised place to hold an investing conversation than the DT online IMO as my impression is that whatever you think of the calibre of some of the comments here, most people here are investing in the companies they talk about and there's a fair amount of keenness to learn and also to help & inform others and, apart from the odd idiot, everyone's on the same side more or less even if there does seem to be a predominantly day trader mindset on some of the share chats.
But it's also fair to say that it has been through one or two purple patches for the calibre of discussion and right now it seems rather thin so I've got far more going on in terms of dialogue with our blog and one or two of your DT fan club have joined it recently, having firstly sidled over to here to the LSE BWY chat since you and I started exchanging views there and between us perhaps digging into it all in a bit more detail than the DT readership was maybe used to given a common penchant there for throw-away one liners, petty rivalries, put downs, etc...
And also, you're right.... operating with an inner compass is the way to go.... allowing yourself to be affected by put downs on the one hand or smoke being blown up your posterior on the other ain't exactly a recipe for an equanimous life...
Strictly
Strictly, you see I told you that MR Clyde was 'barking mad', 'mad as a march hare', 'the lift goes up, but it never reaches the top floor'.
Re Henry Boot, the average annual growth in tangible balance sheet equity since 2014, is about 6.7% of the current market cap. Add that the likely forward divi of around 3% and you have a tangible shareholder surplus of about 10%.
But the price that the land bank is on the books for is astonishing. Obviously land stays on the books for the purchase cost until it is developed and sold. How they got the land so cheaply I will never know. The average plot value if you divide the whole market cap by the plot number is just over £4k. I know that Harworth Group had similar plot values on the books but Harworth's land tended to need major remediation and Harworth seemed to struggle to grow their tangible equity with any consistency.
Compelling is it not?
Vlad
Vlad, the post I'm currently writing for the Strictly Bricks blog is about opportunity being like beauty in that it is in the eye of the beholder...
And, within that, I have referenced you, and your very similar investing song sheet to mine, and also that, as I see it, apart from being up for the challenge ~ both in respect of the new analysis opportunities and also fielding the naysayers ~ what you're also doing is looking to share the opportunity which, I imagine, you feel the same way about as me.
By which I mean, you probably feel blessed to have come across it.
But many of the naysayers, rather than either simply accepting you have a different investing strategy to them, or even taking on board your performance percentages, weighing them against their own, and pausing to consider that you might actually have something worthwhile to offer, just throw such negativity at you.
In one case, I recall that one commenter suggested you were an "eastern European sociopath", which made me chuckle, but the comment was quickly taken down so I don't know if you got to see it..?
In Mr Clyde's case, given that he's already suggested he's averaged around 12% a year for the past twenty years ~ which would be less than what you've done, I believe ~ and seeing as he seems quite a high status sort of chap who probably views the likes of you and me as a couple of peasants who just happened to get lucky with investing, perhaps he's more angry than mad (well, mad in another sense, then, perhaps..?) and stuck in a paradigm that's threatening to shift...?
Which is a pity, because if he got off his high horse and calmly & objectively engaged with us, I imagine he'd have some worthwhile thoughts and experience to share and also gain a few takeaway notions in return.
But, as I said, it's in the eye of the beholder, and that's my theme at the moment...
Separately, you're pushing me on this Henry Boot issue, aren't you...?
Let me get this blog post done, then I've got the local feeding of the five thousand to sort for tomorrow (a once a fortnight lockdown contribution for the Vale on my part) and then I'll hopefully get to look at the numbers more.
But don't hold your breath though, as most likely the four year balance sheet progress has already killed it for me as there are easier questions on the investing exam paper... :-)
Strictly
So, this blog, would I be able to join it and would my real identify be withheld?
Vlad
Vlad, yes you are most welcome to join...
I've given you a nudge about that before but I took it that you weren't interested as you hadn't responded about it....?
If you go onto the Inland share chat (INL) you should see a comment there today by Seagullsfan (Brighton supporter.... I suppose someone has to be....?).
If you click on his moniker to go to his posts, and scroll back to 16th Feb, he's kindly put up an old email address to facilitate Oi Oi joining the blog recently without disclosing his own details...
He and I have previously discussed making that open for you to do too (see what a centre of conversation you are :-) ) and I'm sure he'll still be fine about that.
If you want to do that, please confirm once you have then I can let him know to go onto his old email and check for it and then we can take it from there....
As far as your real identity goes, I'm not sure whether you mean just disclosing that here ~ which, based on the above, is not an issue ~ or on the blog itself...
That would be up to you, but it's very much a private blog, by invite only, and is in large part originally composed of my family, friends and acquaintances and, as we've gone on, many of their connections too along with a scattering of people from here including a few of your followers who were motivated to contact me due to our conversations on the Telegraph - so there are already a few people on the blog who've probably been aware of your existence for longer than I have.
Everyone on the blog is who they are, albeit many often refer to themselves by their Strictly Wacky Races character names, but whether you want to remain incognito or not is up to you, and I can assure you that the readership isn't composed of stroppy cantankerous naysayers and, beyond a bit of friendly banter from time to time, mainly emanating from my direction, I like to consider that it is a friendly & supportive discussion environment.
So, over to you and just let me know here once you've sorted it, but I think I'll give Seagullsfan a heads-up in the meantime... they lost on Sunday, but I suppose he's well used to that...?
Strictly
Hmm, just seen the 'abuse' about the Seagulls Strictly. It's not nice to kick a man when he's down.
Vlad - by all means email me on my old email address. Once I receive that, I'll just forward your details to Strictly and he will deal with the invite. Hopefully you'll be joining the 'club' soon - and I'm sure strictly won't mind me saying, but different views/opinions on there are very welcome.
Seagulls, if you'd been unfortunate enough to have been watching Arsenal's truly dismal effort against Liverpool on the weekend, you'd have surely understood that I'm very much in a glass house throwing stones...
Once I saw the stupid, stick on, pig tails that Auba had adorning his loaf, I just knew we were sunk.... :-(
Strictly
Strictly, I have a suitable email, based on a bloke called Bogdan, I am tech pretty useless you will find, where do I go from here.
Hold on I get it, I will email Seagulls...
"Hold on I get it, I will email Seagulls..."
.............................................
Yes, as with many things in life, when all else fails, read the instructions... :-)
Strictly
Strictly - the DT got in touch, they are looking for another write up victim for the Trolls to maul, they are hungry again for their next feed. Asked if I had any thoughts, I told them to talk to you, hope you don't mind, you can always say no.
"....you can always say no."
..........
Absolutely right...!
No it certainly is...!
You can let them know if you like.... :-)
Separately, I've seen you've made contact with our man in Brighton and I'm just having a five minute break from prepping my fortnightly feeding of the five thousand locally, and intend to email you later....
Strictly
Vlad, I have now sent you that email in case you haven't seen it.
Strictly
You should see if Mr Clyde fancies it. I’d do it but think would get absolutely flamed as a buy to let investor by the DT audience.
Enjoyed the article write up. Always good to see previous trades