Marben's Misc Bits

Monday, Apr 02 2012 by

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,


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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174 Posts on this Thread show/hide all

emptyend 1st May '14 155 of 174

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 174

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.



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tournesol 16th Oct '14 157 of 174


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 174

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

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marben100 18th Oct '14 159 of 174

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 174

In reply to marben100, post #159

Thanks for the view.

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jonnyt 21st Oct '14 161 of 174

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 174

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.



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Ramridge 17th Nov '14 163 of 174

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 174

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

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marben100 27th Jan '15 165 of 174

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 27th Jan '15 166 of 174

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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marben100 21st Feb '15 167 of 174

Just posting this (non-investment related) message to try to save other Norton users the two hours I have just wasted.

Got onto my computer this morning to find that my I.E. browser had crashed. Found I was completely unable to restart it, without getting repeated error messages "Internet Explorer has Stopped Working". Tried everything to fix it, including uninstall/reinstall. Eventually checked the windows event log which showed the error related to IPSENg32.dll... that in turn led me to this forum discussion:

I use Norton 360 and it appears that Symantec have released an update last night that breaks Internet Explorer! Pretty disastrous.

I shall revert to Chrome which is unaffected, thank goodness, until Norton release a fix. They will have rather a  lot of irate users!



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marben100 21st Feb '15 168 of 174

In reply to marben100, post #167

It appears that Symantec have now resolved this problem. If you're experiencing it, run LiveUpdate.

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tournesol 21st Feb '15 169 of 174


do yourself a favour and come over to a Mac

With a degree in computer science and ~40 years as an IT professional, I can honestly say that my best ever decision was to ditch Windows and all that goes with it and come over to Apple


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schober 21st Feb '15 170 of 174

Better still make your pc dual boot by adding linux as second operating system; linux is free! (as in free beer and in free speech)
I did that 5y ago and never use windows now even though its there

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antisana 23rd Mar '15 171 of 174

In reply to marben100, post #162


This was a post which spurred my interest and several months later I've bought a few. Thanks for the idea.

Having now seen a bit more of the proposed plan, it seems they intend the first use of the war-chest (July) to buy back their own shares in the market if at a discount of more than 15%, so they should have plenty of funds to raise the price from around 31 today (still) to around 38 (NAV most recently quoted at 42.5).

It looks interesting, but all depends on them getting the placing away successfully.


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marben100 23rd Mar '15 172 of 174

In reply to antisana, post #171

Hi Chris,

Things have moved along bit with Baker Steel Resources Trust (LON:BSRT) since my post last November. In particular, the placing and open offer (at 36.2p, after NAV was marked down to 42.6p) raised little cash - only around £1m. Further shares were issued to acquire assets, as set out in the prospectus issued by the company - so little to cheer investors, so far.

As per my Tweets, I ditched the extra shares that I had acquired in November last December, for a modest loss, when the NAV fell again and it looked increasingly implausible to me that they could raise funds at a significant premium to the then share price.

I still retain my original holding, as there's plenty of value potential that could be unlocked, but that will depend on commodity markets bottoming.



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marben100 8th Jun '15 173 of 174

Adjusted profits & amortisation of acquired intangibles

Richard Beddard recently wrote an article about Judges Scientific (LON:JDG) , where he discusses the accounting treatment of acquired intangible assets, and whether adjusted profits (ignoring the amortisation costs) are a fair reflection of "true" profits.

There is one particular area of where I do think this treatment is entirely justified: acquired customer relationships. Unfortunately, IFRS rules require a discrete value to be assigned to customer relationships on acquisition and for that value to be amortised over time. Here's why I think that statutory treatment is problematic and an adjustment is entirely justifiable.

Q: What investment is required to generate or maintain customer relationships? A: Sales and marketing. However, sales & marketing is never capitalised in the normal course of business but is always treated as an expense. Therefore, whereas depreciation of a tangible asset  broadly reflects the actual cost of replacing it in due course (which will be capitalised), we're in danger of double counting sales & marketing costs, which are already reflected as an expense in the accounts and so I do thin k it's entirely justifiable to adjust out amortisation of customer relationships, which is often the major part of the amortisation of acquired intangibles figure.

When considering adjusted profits appearing in an annual report, I always check the accounting notes to discover how much of that figure relates to acquired customer relationships. If it's the major part, then I generally view the adjusted figure as fair. This contrasts with businesses that capitalise software development expense, and where those costs don't appear in the P&L: in that case the amortisation represents a real expense that would otherwise flatter the P&L.



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marben100 27th Feb 174 of 174

Gosh, is it really that long since I last posted on this thread?!

It's been very a busy day, so rather than tweet individual trades (which I often, but not always, do), I'll document what I've been doing here and then tweet out a link.

So, first up was the outcome of the Lord Chancellor's review of "Ogden rates" (see ). Direct Line Insurance (LON:DLG) has been a core position of mine for some time now, due to its excellent track record of returning cash to investors. Informed investors had been expecting a decision on the Ogden rates for some time, which was promised before the end of February and I had been aware that DLG used a rate of 1.5% vs the previous statutory rate of 2.5%, giving it a certain margin of safety in its reserving of expected claims liabilities. It was therefore with some shock that I read this announcement from £ADM before the market open (DLG did not report the magnitude of the change in their initial RNS). A drop from 2.5% to -0.75% was far worse (from insurers' POV) than expected. I therefore decided to cut my DLG holding significantly ASAP after the market open, and did so at an average of 337.2p. Having seen DLG's subsequent RNS I am pleased that I did so. Suspect their divvy payout is going to be rather less than I had hoped as a result, but will wait for their results on 7th March before considering my next steps.

Next up is Custodian REIT (LON:CREI) . The shares have been extraordinarily strong of late, and are now trading at a premium of over 10% to the NAV  of 101.9p, last reported for December (less the dividend of 1.5875p subsequently paid) and a shrunken yield of around 5.8%. Given Custodian's propensity to make regular placings (enabling them to enlarge their portfolio), I felt it prudent to trim at this level, with a view to buying back more cheaply if/when another placing is announced. Happy to bank some cash in the meantime by trimming @ 111.25p.

BlackRock Commodities Income Inv Trust (LON:BRCI) is another share that usually trades at a premium to NAV - but was on a discount today. So, deployed some of that cash to re-enter BRCI @ 83p having sold out in December @ 87p, when the shares were trading at a premium of around 7% to NAV. With the likes of BHP Billiton (LON:BLT) raising their dividend substantially, BRCI is likely to be able to follow suit. Currently yielding 4.8% @ 83p.

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