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LLOYDS is going to FLY

lse:lloy

#2338

Hi @Eadwig, Yes I took a look at their trading update earlier this morning. They have a new CEO who has come in and done the inevitable review (plus some kitchen sinking probably ?) anyway predictably he cited brexit as a negative, reduced their profit forecast, says that they need to start using better materials (grenfell implication ?) took an impairment due to this, dividend held though. Shares fell 8.5% on the day…

Re the housebuilders list, yes I could’ve included BKG and BVS. But I didnt as I wouldnt plan invest in either of those…BKG too expensive, BVS not FTSE 100 (ditto Bellway & Redrow).

ATB

Pref


#2339

Mmmm. New CEO at PSN too, after the previous one was basically too successful and ended up with a massive bonuses. I’m not sure how much that is dragging on PSN (his loss) and I hadn’t thought that the new CEO might do a kitchen sink job when their full year results are due in Feb. Something to keep in mind. (I don’t think he was in place in Feb this year).

What’s wrong with the FTSE 250 house builders? I didn’t know we were limited to FTSE 100. None of them were in the 100 index 10 years ago!

As you know, housebuilders have been my favourite and most successful sector for 20 years. In fact if I’d been regardless and stuck all my cash in that sector I’d be a lot better off today.

When I built my housebuilder position in 2010/11 I had Redrow along with BDEV and PSN but exited Redrow early when someone swooped in to take them over. I took the premium immediately and haven’t paid much attention to them after that, other than to note they are still trading under the same name.

I have invested in BKG and BVS myself, traded in and out really. Bovis have always been the worst of the pack for some reason and used to get knocked back on good results because they weren’t as good as other builders. Was always good for a quick (2-3 month) trade for 10% or so.

I’ve also had late cycle positions In TW, but for some reason they’ve never really come good for me and I’ve tended to get frustrated and sell out for small profits or even at break even when cash was short in the account and needed elsewhere.

Your magic chart tool can’t pull up which builders have the most long-term debt, can it?


#2340

Hi @Eadwig, Well as you know Im not keen on single stocks anyway, but if I’m going to invest I prefer to stick with the FTSE 100 players.

No the charting tool wasnt meant for that. Its the only charting facility I know that lets you compare Total Return, which is what I consider to be critically important along with an acceptable yield. And its a pain the backside getting all of the dividend data to be able to do the comparison yourself.

Dare I say that simply wall street DOES have information on company debt, eg some extracts below for what is says about PSN:-

image

But given your views on that site I guess you wont be interested in that !.

ATB

Pref


#2341

And now, a selection of funds/etfs for the US area… again ordered by Total Return performance over different periods of time:

image

I note that some of the funds lower down the list use derivative trading, selling options on some of their holdings ie. covered call options. This is why some of those funds lose some of their capital growth potential as that is then dished out as divis.
However, Total Return doesn’t lie… and neither does Cost.

Interestingly again… the best performers at Total Return are also some of the cheapest and simple ETF trackers.


#2342

Hi Again @J_Westlock, Well the US is not exactly my main area of interest (or competence). I do hold BRNA an obvious IT choice I think, I watch VUSA but the yield is too low to interest me and the S&P just too high for me to risk investing. The Schroder US Fund with a 5% yield might be a goer even with HLs 0.45% charge…?

ATB

Pref


#2343

As I said I haven’t examined it lately but I can tell you what it says about PSN and debt is NOT correct.

PSN hasn’t had any long term debt for any period during this cycle, however it does take on short term debt each year to help fund the yearly cash flow.

I think some of the bigger builders do have quite a lot of long term debt which is why I was asking the question, although I could be wrong on that as I haven’t checked in a while. Its obvious importance is the safety of the dividend if any larger debt is coming due at some future point.

I seem to remember BDEV having £1Bn outstanding a number of years ago, but that may very well be paid off and forgotten by now.


#2344

The above table is extracted from Telegraph Markets. There are a number of interesting features:

  • Seven buy and four hold recommendations against one sell (Goldman Sachs).
  • All forecast prices are falling.
  • 4th November forecasts vary across 62 - 68 - 76. Odd that the methodologies differ so much.
  • Assuming that these forecasts are for one year away they are forecasting about 65p by October 2020.

All for what its worth.


#2345

Hi @Eadwig, I’m sure you are right, without getting the accounts and looking through them I wouldn’t know if it was right or wrong, and maybe not even then. I did think that it was pretty well known that PSN doesn’t have any debt, so when it came up and said that, I thought it might be correct - but other than that I really can’t comment.

If you really want access to this sort of company info and want to be sure that it’s correct I think you probably need to use some paid service. TBH with my decreasing interest in single stocks these days it’s not something that I need.

ATB

Pref


#2346

Competence? Well, it’s just a market like any other around the world. What do you think you need to know that’s any different for the US given you aren’t investing in individual stocks?

Ultimately, my reasons for investing in (main) markets around the world and different sectors is for diversification… no other reason. I couldn’t care too much whether the US markets pay much yield or not.
A segment of my wad will be in US markets because should UK, Europe or Asia (or all or any subset) have large falls then I will have as much protection as possible from a destructive loss.

It’s OK saying that because the S&P500 is at historically high levels that it might go backwards but I challenge anyone to accurately predict that. I’ve been hearing people telling me that for a few years now and since then UK market has gone backwards a couple of times as well as Europe and Asia.


#2347

Hi @J_Westlock, Well I dont “feel” comfortable with US investments for several reasons:-
a) I dont like growth only investments which predominate in the US.
b) I dont like the large stock volatilty (which DOES spill over into the indices and ETFs).
c) I dont feel comfortable putting new money to work in a market thats already above its all time high. Thats not the case anywhere else in the world eg with the FTSE I feel that we are at least 300 points of the all time high. Even thats a bit uncomfortable TBH.
d) Right now with the GBP possibly going to rise 4-8% on a positive brexit outcome I feel I dont want to be putting new money overseas right now.
e) As you are aware dividends in the US are subject to withholding tax and investments in USD subject to currency charges - both of which I have found to be unpleasant headwinds to US investing.

So I guess the simple fact is that I dont like the US markets for all of the above reasons. Result of it all is that I largely stay away.

ATB

Pref


#2348

What “positive Brexit” outcome? You mean some Deal? We are just as likely to have a negative Brexit outcome with a No Deal or interminable negotiations with the EU.
You are therefore gambling (no other words for it) your wad by not diversifying into other markets like the US.

I don’t pay ANY WHT. I don’t hold any US listed stocks or funds.

I’m not convinced that the S&P500 is anymore volatile than European, Asian or UK markets tbh.


#2349

Well @J_Westlock, I understand your point about exposure to the US but I tell you quite frankly I have no plans to increase my US exposure. My portfolio IS diversified in many different ways, I have constructed it to be defensive and contain fixed interest, debt and equity investments and yes quite a bit of overseas exposure. Just not that much to US stocks for the reasons that I outlined in my previous post. I have AAIF, HFEL, JEMI, BRNA, ZWEU, IAPD, SEDY (from memory) and a few other ITs with the odd overseas holding. I reckon ATM I have about 30% overseas exposure which I think is more than enough. I am even considering repatriating some of it TBH.

In my time over on the Lemon Fool I have encountered a large community there following the HYP methodology. Some of these people have been doing it for 25 years and more and some have 7 digit portfolios. They have rarely if ever strayed out of the FTSE 100 for their stock selections and then probably only as far as the FTSE 250. So overseas exposure is not essential to investing success, though I agree that it’s another weapon in your armoury.

I might buy some VWRL at some point but buy some US ETF with a meagre yield the way things are right now – no I’m just not going to do it.

ATB

Pref


#2350

Sure, well each to their own.

Just because some of the fools on Lemon Fool have 7+ digit portfolios doesn’t make them wise investors by the way. It just means they’ve a large wad and almost certainly not attributable to any investment acumen.
The fact they then only invest in FTSE 100 stocks only goes to show that they are rather… foolish… but if you have a large wad then you can afford to be so.


#2351

I was looking at the accounts just last week for PSN so I know they maintain that policy. No long term debt is what they are well know for, and possibly that’s what simply wall street are calculating but not making clear completely clear.

I thought i’d go check on other housebuilders on that site but the ‘get started for free’ button now on the front page caused me to lose the will to live having little time on my hands right now.

As for a paid info. service, I suppose I really should bite the bullet but always feel that info should be generally free on the net if you know where to look. It is, of course, its pulling it all together and applying analysis tools that you tend to have to pay for.

Stockopedia seems to be very popular and well thought of but its a pretty steep bill to add to your overall costs for trading I always think.


#2352

@PrefInvestor1 and @J_Westlock

I think diversification across the globe is pretty essential but I know certainly Pref and I see this in a different light. E.g. To me if you have a 7 digit value portfolio (as many do on ii too, by the way) and its all in GBP and we have a No Deal Brexit. you could be losing 10% plus when measured against the US dollar … or a basket of international currencies.

I’d agree that the US markets are more volatile than the UK generally, but I’d disagree with you @PrefInvestor1 when you say ‘growth only stocks predominate’ in the USA. It really isn’t the case, its just that the ones we hear about a lot tend to be mostly that type. There are lots of more mundane US stocks of ordinary companies that don’t trade outside the US that are safe plodders.

Dividends are definitely lower generally, but certainly not if you are investing in master limited partnerships, for example. They seem not to be available for non-US citizens though.

FTSE 100 is relatively very high yielding at the moment but that is partly due to the FTSE high yielders mostly paying out in foreign currency which has pushed their yield up since the GBP fell in 2016, which rather underlines my first point. A ‘positive Brexit outcome’ will see those yields drop.

Some pluses investing in USA directly:
No stamp duty - very useful if you are a trader.
Their regulation is better than any other country.
Generally much easier to research US stocks than those in other countries without the need to sign up to a subscription site (in great part due to their regulation).
Simply more choice in more sectors. Some sectors in the UK are virtually dead these days, Look at, say, Water, or Utilities, compared to 10 or 20 years ago. Most of our utilities are owned by German, French, Spanish or Canadian companies and no longer listed here.

Also, to offset some of the listed disadvantages…
Withholding tax is easily avoided in my experience.
Once you have a pool of US investments and cash, there are no currency charges. Easy for me to say having had many US investments in my portfolio from before the big drop in GBP. I agree its a dicier proposition now to get to the same position.

Diversification isn’t what it once was. Global markets do tend to follow each other these days. However, USA seems to be the strongest market and can virtually stand on its own. It does react to global woes, but tends to bounce back quickly so long as the US economy is deemed to be going OK. After a bit of a panic the market sorts out who has what exposure to any problem economy and readjusts accordingly. Whereas if USA goes down, all the main markets around the world will follow.

That’s why a large part of my diversification strategy is to hold USD and buy stocks and funds valued in USD and NOT just funds that are invested in US companies but valued in GBP. That seems to be pretty essential to meaningful geographical diversification these days.


#2353

Yes, indeed. Having a multi-currency account is very useful.
Obviously, for SIPPs and ISAs they have to be in GBP which stops many from doing that.
As ever the FX rate works both ways, sometimes you will win with it and sometimes you won’t but hopefully it evens out… but clearly, some off the costs of say an ETF investing in foreign stocks but paying you in GBP will go toward any currency conversion so there you lose out on that element.


#2354

ISAs only actually. I have FTSE 100 companies paying divis in US dollars directly into my SIPP, no fx charges.

Lord alone knows why if that is allowed in a SIPP it isn’t allowed in an ISA, but you’re right, it isn’t unfortunately. You can hold US (or other country) stocks in their home currency, but all transactions have to be converted back to GBP.

I was going to make that point in my previous post but it was long enough anyway. One assumes most ETfs get about as good an exchange rate as possible though so will be 0.5% or less. No doubt they also have a pool of foreign currency to draw on too so can avoid fx charges once established.


#2355

Yes indeed. Also, going back to the diversification theme, it should be noted that the FTSE100 has returned an average of just over 5% pa over the last 5 years whilst the S&P500 has returned more than double that each year over the same period.
I guess the retired dentists, NHS consultants and NEDs squeezing their pips over on the Lemon Fool won’t care too much about that though… why would they need anything else but the low growth companies of their main home market?


#2356

Hi @Eadwig and @J_Westlock, We each have our own investing styles, determined to a large extent by our circumstances, assets, investment experience and not least our temperament and attitude to risk. Clearly we hold different views on the degree of exposure to the US markets and probably the GBP / USD situation as well. I don’t see that makes anyone right or anyone wrong in this situation, just different. We likely have different objectives and there are many routes to investing success.

I wish you both all of the very best with your investments.

ATB

Pref


#2357

Hopefully I didn’t come across as saying anyone was right or wrong. Personal circumstances and goals are always the most important aspect of investment, which is why its almost impossible to give valid advice to people asking for it on discussion boards like this unless you know those details.

You can of course give opinions, hopefully with reasons, as to your view on an individual stock and above I was simply trying to give my opinion on the wider topic of diversification.

What I didn’t say, as you are both probably well aware, is that the reason whole markets often move in lock step these days, is that massive funds with huge amounts of cash invest in an index or sector because they’re so large investing in any individual company is a tiny irrelevance.

When you consider that a relatively few people are in charge of these funds, it doesn’t take much herd mentality to see cash switch from one asset class to another all around the globe in a short space of time. Hence my point that even effective global diversification in stocks is a tricky business these days. Currencies give you a bit more protection, I believe, and seems particularly relevant given the strength of GDP over the last 4 years.

I still maintain that as the currency in which all global commodities are priced is US dollars then that seems the most important to have exposure to in terms of diversification.

No matter how insulated people believe they are, as @J_Westlock infers above, rather scathingly perhaps, it seems to me impossible to avoid some ramifications from the exchange rate of your local currency to the dollar.

It affects everyone whether they wear cotton, eat chocolate or drink coffee, the dollar exchange rate is behind each commodity not to mention the oil used to transport them and the gold, copper, nickel and rare earths used in your tablet or phone on which you are ordering them.

It seems an inescapable fact of life to me for all investors, whether or not we’re more interested in growth or dividends, higher or lower risk investments as a strategy preference.