Marben's Misc Bits

Monday, Apr 02 2012 by
20

Well, I've finally moved into the 21st century and have started tweeting @marben100 .

Seems like a great medium for exchanging brief investment notes. However, it's not so good where things need more explanation or tweets need to be discussed... So, I've created this thread as a place to post more detail that doesn't conveniently fit into another thread - e.g. economic/political topics and brief posts on non UK companies that S'pedia can't yet support.

If anyone wants to discuss my tweets,or ask questions about them, this would be a good place to do so.


Filed Under: Investment Strategies,

Disclaimer:  

The author may hold shares in this company, all opinions are his own and you should check any statements that appear factual and not rely on them before making an investment decision. The author is NOT a qualified analyst nor authorised to give investment advice. Whilst the author is a director of ShareSoc, all views expressed are entirely his own and not necessarily those of ShareSoc.


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166 Posts on this Thread show/hide all

AlanJenkins2 6th Jan '14 147 of 166
1

That one's not for widows and orphans !

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marben100 6th Jan '14 148 of 166
2

In reply to AlanJenkins2, post #147

Very true! Distinctly speculative.

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marben100 15th Jan '14 149 of 166
4

Attended Fenner (LON:FENR) 's AGM today. I expect the AGM presentation will be availale on the company's website in due course, but it's not there yet. No time for a full write up, I'm afraid, but here are a few things I picked up:

  • Some 85% of Fenner revenues from the conveyor (ECS) division are from aftermarket service (mainly belt replacement). Hence this arises out of miners' OPEX budgets, rather than CAPEX. The company feels that this is poorly understood by the investment community, which presumes that Fenner's fortunes are linked to the evolution of miner CAPEX. Nick Hobson went on to explain that in the early stages of commodity price falls, miners sought to cut all costs (e.g. deferring belt replacement). Such deferent, however, leads to more breakdowns/interuptions, resulting in a higher cost/tonne for the miner, ultimately. As the commodity market progressed, however, miners would seek to improve their costs/tonne, which belt replacement would assist.
  • Their AEP division (via Mandals) is the market leadr in seals for fraccing operations. These seals are replaced every 1-2 weeks, whilst fraccing is underway.

 

So, my view is that Fenner is a sound business, that I seek to invest in long-term. Nevertheless today's statement appears to suggest that interim results will be poor. Management's optyimism about the second half remains to be seen. Therefore I was pleased to be able to cut my holding in Fenner i half @ 454p this afternoon, banking some profits. I expect I'll be able to buy that half back at a lower price, following the interims (should I still wish to do so then). By that time, there should also be some more clarity on commodity prices and the behaviour of the mining industry.

Regards,

Mark

 

 

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marben100 22nd Jan '14 150 of 166
1

I have held shares in the Qatar Investment Closed Fund (LON:QIF) (an investment trust) for some time. Their recent tender offer @ US$1.2674, however was too good to refuse, with the shares trading at well below $1.20, so I tendered my entire holding. I was pleasantly surprised to learn that all my tendered shares had been accepted. Nevertheless, I still like the trust (as Qatar's prospects look strong and the market is on quite a low rating) so wish to hold some. QIF announced their NAV as $1.3193 yesterday, so I was pleased to pick up an initial tranche @ $1.172 this morning. Will be looking to buy more if the SP drifts or NAV (announced weekly) rises.

Cheers,

Mark

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marben100 24th Mar '14 151 of 166
5

loglorry has enquired what's in my high-yield subportfolio. Here's a table setting it out:

Company EPIC Share Price Historic Yield Propor-tion of total Comments
           
Interserve IRV 668.50 3.2% 2.0% Was high yielding when purchased below 200p!
Braemar Shipping BMS 524.00 5.0% 1.8%  
AstraZeneca AZN 3866.00 4.6% 2.0%  
ICAP IAP 386.80 5.7% 2.1%  
Direct Line DLG 242.50 8.5% 2.6% Yield includes special divvies. Still attractive without those.
DNA2 DNA2 226.50 7.9% 1.8% The DNA funds are fixed-income like but with NAV growth potential, so I've classified as high-yield rather than pure fixed interest.
DNA3 DNA3 106.30 7.8% 1.6%  
Begbies BEG 43.00 5.1% 1.3%  
GLIF GLIF 58.20 8.6% 1.3%  

 

I see that I posted about in previously in #145 above. Main changes are disposal of Vodafone (LON:VOD) when the VZW sale was announced, disposal of Vianet (LON:VNET) - luckily only a small holding: I'm concerned about risks from regulation and the impact this may have on revenues. Also disposed of Halfords, after some strong recent gains and big fall in yield with lower divvy: not high-yielding anymore and (unlike Interserve) growth is priced in, raising risk. I topsliced ICAP since my earlier post, at a high price, if it continues falling might add some back. Added a small position in Begbies, which should benefit if the UK economy normalises and banks start crystallising some losses, instead of allowing zombie companies to hobble on. V recently added GLIF, whose change of direction looks interesting and which offers an exceptional yield, which that change in direction should support. Its shares are depressed for historic reasons IMO.

Cheers,

Mark

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marben100 25th Mar '14 152 of 166
2

I've now had a good look through the Admission Document (AD) for Manx Telecom (LON:MANX) (MT) , and decided to add a small number to my high yield porty.

The prospective yield of just over 6% is attractive, but there are quite a few risks Here are some that caught my eye:

  • I observe that during the period of Hg Capital's stewardship the business was transformed from a loss-making one (which is undoubtedly why the previous owners, Telefonica, sold) into a business generating decent profits. From Hg's annual reports, it appears that management were strengthened & better financial controls put in place to effect this turnaround. That indicates to me both upside and downside risks: if management can continue improving the business (and by improving the scope of the service offering, I believe they're doing the right things). On the downside, this improvement could be temporary and the business could slide back.
  • Regulatory risk: the AD points out that the increased transparency of being a public company may highlight profitability to the Manx regulator, tempting them to try to force greater competition, to MT's detriment. I'm not generally keen on highly regulated businesses.
  • Significant revenues/growth are obtained from the Isle of Man based eGaming sector. I have noted that this sector will be affected by the new POC Tax (H/T to CantEatValue for highlighting this issue to me). So, some potential threat to revenues here - but management are mitigating by broadening their the offering, including offering services onshore UK.
  • There is a signfiicant pension liability, but it appears to be manageable relative to market cap. & profits, with a gross liability of £67.8m and a net deficit of £3.3m as at 30 June 2013. The scheme is currently in surplus, but the company is contributing £2.3m p.a. (net of employee contributions), which needs to be deducted from profits to to get a more realistic view

 

On the positive side, a progressive dividend policy is promised, subject to business performance. So on balance, I felt it was worth having a few in my HY porty, which I'm trying to build up, and I don't find very many new attractive opportuntiies to do so, at present.

Results are due on 15th April, and I shall study both 2013 performance and the outlook statement carefully.

Cheers,

Mark

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marben100 30th Apr '14 153 of 166
3

Nice to see that 3 of my holdings have moved right to the top of the screen-of-screens:

 

I was debating whether I should trim AMEC back, as in my ShareSoc AGM report (accessible to ShareSoc members) on the company I'd identified that its Price:FCF was not great and the price has continued rising since, so might be looking a bit pricey now, but Stockopedia's more comprehensive quant analysis persuades me to stick with it! Let's see whether the quant. approach works on this one (though as quant. analysis is statistical, picking a single instance isn't exactly a fair test).

Cheers,

Mark

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marben100 1st May '14 154 of 166
1

One inetersting snippet in BG (LON:BG.) Q1 results:

In March, the Sunbird-1 exploration well intersected a gross hydrocarbon column of 44 metres in the Miocene reef, at 1 584 metres subsea, in a water depth of 723 metres, offshore Kenya. Oil and gas samples have been recovered to surface and are being analysed

Perhaps some read-across for Ophir Energy (LON:OPHR) offshore Kenya wells?

Is this the first possible oil discovery offshore southern east Africa? [recoverability/commerciality still TBC, however]

Cheers,

Mark

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emptyend 1st May '14 155 of 166
1

In reply to marben100, post #154

Hi Mark,

Is this the first possible oil discovery offshore southern east Africa? [recoverability/commerciality still TBC, however]

No it isn't. Ironclad was. However, as you say, commerciality is a completely different matter. Note that the oil in Mozambique was in the cretaceous.

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marben100 16th Oct '14 156 of 166
3

Sold my holding of December 2014 FTSE100 6500 put options this morning @ 36.91p .

The options "did what they said on the tin" and have more than trebled in value since my purchase in early September, hedging my portfolio against the major market fall we have just had. As a result, they have grown to be worth around 4.5% of my portfolio, which is a sizeable position for me. So, I'm faced with a dilemma: do I hold them in case of further market falls, or should I "take the money and run"? Two factors played into my decision: what is the risk/reward now?, and time.

Yes, it is entirely possible that the market could fall further, but if I were unhedged, would I buy a hedge now? The answer is "no". At current levels, I feel that the market is presenting value in several stocks and I'd be more likely to be a buyer than a seller - and I have indeed added to several positions, as readers would have seen from my Twitter feed.

The second factor is expiry time. As the December expiry approaches, the options start to lose time value with increasing rapidity and become a geared play on the index. That is not their purpose for me. Risk/reward has reversed from when I bought them, when they offered substantial potential upside in the event of a market fall, which did materialise, but only limited downside, should the market continue moving ahead. The situation has now reversed: yes, they would gain further if the market continues down, but they would lose value very rapidly if the market starts to recover.

So, I'm now happy to sell them and the resulting cash has brought my overall cash position up to around 16% of my SIPP porty, well ahead of my 11% target weight and allowing me to pick up bargains where I see them.

Whilst I think the market is offering value in a number of areas, e.g. housebuilders, Direct Line Insurance (LON:DLG) I am wary of natural resources. I feel the oil selloff may have further to run in the near/medium term and it could be several months before the current supply/demand imbalance corrects and the oil price stabilises and starts to recover (unless the mid-east situation worsens and supplies from the region are affected). This will hit (almost) all oilies but those with higher costs will be hit especially hard and I expect there will be some company failures.

Cheers,

Mark

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tournesol 16th Oct '14 157 of 166
3

Mark

seems to me that the market has taken a bath and is now busy throwing the baby out with the bath water.

I've no doubt that good stocks are being priced at ridiculously low valuations but the old problem is that such situations can go on indefinitely. Seems to me to be too early to be bargain hunting. Although having said that I could not resist the opportunity to pick up some Balfour Beatty prefs (BBYB) when they fell almost to par the other day. They pay a coupon of around 10% and with a new CEO being brought in to turn the co round, the risk seems sensible vs the reward.

I have turned temporarily negative about the oil sector. We have no real idea where the PoO will settle and no idea when funds will be available to finance development. Every stock in the sector seems to be getting hammered. I will want to see at least a semblance of stability looming over the horizon before I take on any exposure.

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AlanJenkins2 16th Oct '14 158 of 166

Hi,Mark.Lloyds bank looks reasonable value to me.Any views ?

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marben100 18th Oct '14 159 of 166
2

In reply to AlanJenkins2, post #158

I find banks too difficult to analyse & value, so I tend to steer clear. There is a risk that the Euro crisis is not really over but merely repressed and could emerge again. If it does, I expect that banks will be the first in the firing line.

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AlanJenkins2 20th Oct '14 160 of 166

In reply to marben100, post #159

Thanks for the view.

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jonnyt 21st Oct '14 161 of 166
1

I tend to agree. The risk is that the Eurozone plummets again and drags the UK and US down with it. The US is already showing signs that the recovery has run out of steam, only the UK looks strongish in the Western World at the moment but I'm sure the incoming Labour Government will manage to put us back at parity...

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marben100 17th Nov '14 162 of 166
3

Finally catching up with everything that happened whilst I was at Mello2014 and the aftermath.

I note that one of my deep underwater natural resources holdings, Baker Steel Resources Trust (LON:BSRT) , made an interesting announcement.

BSRT is an investment trust that invests mainly in unlisted mining companies - hard to think of a more contrarian play at present!

Looks like they're massively expanding the trust, I guess primarily to absorb holdings which they need to redeem for clients in other funds they manage. The interesting bit, however, is that they also plan to raise up to £100m, at a 15% discount to NAV, which equates to around 42p, by my reckoning - but the shares are priced at 31.3p today, having bounced somewhat on the announcement.

I agree with the thesis set out in the announcement that there are bargains to be had in the mining sector, especially cash starved companies with sound assets, which their capital raising could assist. As and when the global economy recovers, such assets could gain massively in value. I have to trust, however, that BSRT's managers won't step in too soon, and will demand tough terms from their investees, as I can easily imagine that the commodities sell-off may have further to run.

Anyhoo... if they can get the proposed placing away, I would expect the shares to trade not too far below the placing price. Hence I have added significantly to my holding today, with an expectation of being able to take some money off the table again, short-term, if they can announce a successful placing.

Cheers,

Mark

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Ramridge 17th Nov '14 163 of 166

Hi marben100
I can never get my head around placings going at a premium. Why would an institution agree to buy at a price greater than the current market value? I am obviously missing something pretty basic.

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loglorry 19th Nov '14 164 of 166
1

Ramridge - liquidity. There might not be enough depth in the market to buy what they need.

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marben100 Tue 9:48am 165 of 166
4

Crest Nicholson Holdings (LON:CRST) is one of my larger holdings, acquired initially in April last year., with some significant top-ups in September & October when I felt the SP was unduly depressed (correctly, with the benefit of hindsight). I therefore studied this morning's results announcement with interest.

On an initial look the results are very strong, with revenues, EPS and dividends growing strongly, ahead of expectations. The outlook is also reasonably positive There are a number of factors, however, which cause me some concern and so I've trimmed my holding @ just over 386p, though by < 20%.

  • Average selling price rose 15% and is now £287,000. Crest's South East (but not London) focus was one of the attractions, for me, as demand is particularly strong in that region - which is reflected in the ASP. Nevertheless ISTM that such a high price level is simply not sustainable. Median GROSS pay in the South East region is £24,391, so this ASP represents a very high multiple of regional average earnings.
  • FCF is slightly negative, after strong spending on land & working capital growth. Though debt remains modest & not troubling, I don't like the fact that, in effect, rising dividends are being paid out of debt.
  • ISTM that some caution is advised in the run-up to the general election, when the market may become increasingly nervous about the uncertainty of the outlook for the homebuiling sector, pending political decisions.

To some extent, all these worries are already "in the price", with the 2014 historic P/E now below 10 and the 2015 forecast below 8. However, I tend to favour Persimmon (LON:PSN), with a more sustainable national ASP of £190,500, a much higher annual cash payout, net cash and positive FCF. After this morning's sale, my Persimmon holding (which is my largest single shareholding overall) is now 55% larger than that I have in Crest. I also have a smaller holding in Bovis Homes (LON:BVS) within the sector.

My fundamental thesis for having significant exposure to the sector (8.8% of my portfolio) is that share prices appear depressed relative to current & forecast earnings, due to fears that the sector is around a cyclical high. I believe those fears are overdone, a) unlike past cycles debt levels in my investee companies are very modest: they have been much more cautious than in past cycles about the prices they pay for land. b) a strong supply/demand imbalance for homes remains and there is a strong political imperative, irrespective of which party is in power, to increase the rate of housebuilding substantially. Finally, the market fears rising interest rates will put pressure on the market - but economic conditions are forcing central banks to delay a tightening cycle and IMO even when rates do rise, they are only likely to do so at a modest pace. 5% rates mooted by a commentator I have seen seem a very distant prospect to me. I therefore feel that this positive cycle still has a long way to run and many housebulders will do well in the next 2-3 years, at least.

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Ramridge Tue 10:53am 166 of 166

Generally I agree that the medium term prospects for the housebuilding sector are benign. However just a note of caution for current would be investors. Most of the quality shares are currently trading at 90%+ of their 12-month high. Timing is crucial.
(I hold PSN, BVS and BKG, in total 14% of my portfolio)

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