Persimmon Trading Update.

[idpickering]

Persimmon plc announces the following update ahead of its Final Results for the year ended 31 December 2018, which will be released on 26 February 2019.

Persimmon has delivered another strong trading performance, with continued disciplined growth in 2018 in line with the Group's strategy. Total Group revenues of £3.74bn were 4% higher than the prior year (2017: £3.60bn). New housing revenues increased by 4% to £3.55bn (2017: £3.42bn). Legal completion volumes increased by 406 new homes, a 3% increase, to 16,449 (2017: 16,043), including private sales of 13,341 new homes (2017: 13,274). Our average selling price of c. £215,560 was 1% higher than last year (2017: £213,321). The UK housing market has continued to benefit from robust employment levels, low interest rates and a competitive mortgage market, which have supported confidence and customer demand across the regions.

Persimmon remains committed to increasing new home construction to meet market demand and has made a significant contribution to increasing UK housing supply since the launch of the Group's new strategy in 2012. Over this period we have opened 1,370 new selling outlets and delivered 97,175 new homes to the market, increasing our annual production by over 75%. The Group now has 31 house building businesses across the UK, having opened seven new businesses over the last four years. The Group opened a new operating business based near Ipswich in Suffolk on 2 January 2018 which has made good progress, delivering 348 new homes in 2018. Additionally, on 2 January 2019, we opened a new business based at Harworth, near Doncaster, which will support our growth across the Yorkshire region. The Group is seeking to identify similar regional expansion opportunities and will continue to invest in both its infrastructure and people to support further growth.

https://www.investegate.co.uk/persimmon ... 00020612N/

[monabri]

What does the market not like?

[pyad]

What does the market not like?

Why do you care what the market thinks?

HYP shares are intended for eternity as a minimum, or even for the most avid tinkerer, an extremely long time. Short term market fluctuations, which in any case are mostly random, should therefore have no bearing on the HYPer view. It makes little sense to attribute meaning to short term movements in a very long term strategy.

[idpickering]

This from TMF;

Forget the cash ISA! I’d pick up a 10% dividend yield from FTSE 100 firm Persimmon

The FTSE 100 dividend yield is attractive, in my opinion. But much higher yields are available if you’re prepared to invest some of your cash in individual stocks.

For example, shares in FTSE 100 house-builder Persimmon (LSE: PSN) currently have a dividend yield of 10.5%. Such a high yield would normally suggest that the market believes the firm’s dividend payment is likely to fall.

However, there’s no sign of this at the moment. In a trading update today, the firm said that its sales rose by 4% to £3.7bn in 2018. This increase was due to a 1% increase in average selling prices and a 3% increase in the number of home sold, which rose to 16,449.

Profit margins also appear to be stable, and the group ended the year with a cash balance of £1,048m. To put this in context, last year’s dividend of 235p per share cost the firm £732m. An identical payment is planned for 2019, so we can see this is already funded from last year’s surplus cash.

https://www.fool.co.uk/investing/2019/0 ... persimmon/

[simoan]

This from TMF;

Forget the cash ISA! I’d pick up a 10% dividend yield from FTSE 100 firm Persimmon

Oh dear. Did TMF always used to be this stupid or is it just me that's changed in the past 20 years? No mention of risk adjusted returns at all. I assume they probably believe there's no difference between holding cash at say 1.5%, and holding a single equity yielding 10%, just a much higher return for free! Totally ludicrous.

Si

[idpickering]

This from TMF;

Forget the cash ISA! I’d pick up a 10% dividend yield from FTSE 100 firm Persimmon

Oh dear. Did TMF always used to be this stupid or is it just me that's changed in the past 20 years? No mention of risk adjusted returns at all. I assume they probably believe there's no difference between holding cash at say 1.5%, and holding a single equity yielding 10%, just a much higher return for free! Totally ludicrous.

Si

To be fair Simoan, they do say this at the end of the item;

I agree that investing in house-builders at this point isn’t without risk. But Persimmon’s 10% dividend yield and strong balance sheet suggests to me that the shares could still be a profitable buy.

Ian.

[simoan]

To be fair Simoan, they do say this at the end of the item;

I agree that investing in house-builders at this point isn’t without risk. But Persimmon’s 10% dividend yield and strong balance sheet suggests to me that the shares could still be a profitable buy.

Ian.

Yes, but that's even worse. They're talking about market timing!! Nothing about the relative risk between shares in Persimmon and a Cash ISA. Time was that TMF did not do tips but the author has so little conviction they have the get out clause of using "suggests" and "could"- truly pathetic journalism.

Si

[Dod101]

Why do you care what the market thinks?

The answer I imagine is that the market might know something the poster does not and it might be useful for him to learn what it is.

The market is quite often right. I am not arrogant enough to dismiss whatever help I can get in my investing.

Dod

[monabri]

Why do you care what the market thinks?

The answer I imagine is that the market might know something the poster does not and it might be useful for him to learn what it is.

The market is quite often right. I am not arrogant enough to dismiss whatever help I can get in my investing.

Dod

Thank-you Dod, it was exactly that. I see nothing wrong with 'taking an active interest' in companies I've put money into. I also see nothing untoward in putting the question to others for their constructive views. I found Pyad's answer to be dismissive but somewhat expected based on his track record ( and if he doesn't like that comment then, I can't see myself losing any sleep over it).

[Arborbridge]

What does the market not like?

Why do you care what the market thinks?

HYP shares are intended for eternity as a minimum, or even for the most avid tinkerer, an extremely long time. Short term market fluctuations, which in any case are mostly random, should therefore have no bearing on the HYPer view. It makes little sense to attribute meaning to short term movements in a very long term strategy.

I agree with you..mostly.. but it was an LOL moment when you claim movements are mostly random.
Not including this one, surely? A price fall immediately after news from a company is hardly coincidental: - it might be something not to get fussed about as a HYPer, but it is not random.

To all those wondering about the price change - the fall is exceedingly muted and hardly significant, whether random or not. This should encourage those of us lurking around for a topup at some time.

Arb.

[idpickering]

To all those wondering about the price change - the fall is exceedingly muted and hardly significant, whether random or not. This should encourage those of us lurking around for a topup at some time.

Arb.

I hold Persimmon, and topped them up last October, and it is likely I will top up again, probably next month. I hold Taylor Wimpey too, and note that both are down a similar 0.6% as I type, so take it as a sectorial thing rather than PSN in isolation. Either way, such minor movements don't bother me, and I shall continue to hold.

Ian.

[OLTB]

To all those wondering about the price change - the fall is exceedingly muted and hardly significant, whether random or not. This should encourage those of us lurking around for a topup at some time.

Arb.

I hold Persimmon, and topped them up last October, and it is likely I will top up again, probably next month. I hold Taylor Wimpey too, and note that both are down a similar 0.6% as I type, so take it as a sectorial thing rather than PSN in isolation. Either way, such minor movements don't bother me, and I shall continue to hold.

Ian.

Hi Ian - I topped up Persimmon in Oct 18 when the price was £21.78 but when I looked at the overall income it now generates (or, perhaps, generates until the current return of capital programme finishes) it was touching 10% of my overall income. Because of this, and I don't want to rely on too much income from one source, I won't top up again until other HYP constituents income is more in-line with Persimmon's.

Cheers, OLTB.

[idpickering]

Hi Ian - I topped up Persimmon in Oct 18 when the price was £21.78 but when I looked at the overall income it now generates (or, perhaps, generates until the current return of capital programme finishes) it was touching 10% of my overall income. Because of this, and I don't want to rely on too much income from one source, I won't top up again until other HYP constituents income is more in-line with Persimmon's.

Cheers, OLTB.

Hi OLTB, ta for your input. I think you are very wise to not over expose yourself to any individual share in a HYP. I use a 10% overall sector, and 5% individual size maximum for my holdings.

Ian.

[pyad]

Why do you care what the market thinks?

The answer I imagine is that the market might know something the poster does not and it might be useful for him to learn what it is.

The market is quite often right. I am not arrogant enough to dismiss whatever help I can get in my investing.

Dod

So you really believe that something could be learned from the fact that PSN dropped a bit yesterday after the trading update, to add to the information contained in that update? As a HYPer I mean, not some short term trader.

To show how random that was, PSN is today up quite a bit so far today. So if the market was telling us something yesterday with the fall, 24 hours later it is telling us the exact opposite with the fairly big rise. And you call that "help" with your investing!

Do you not see how random and meaningless that all is? And especially so for a long term hold approach.

[Dod101]

I do not follow Persimmon but as a rule the market tends to know more than any of us individuals and occasionally it might be right. For instance, the banks share prices were all falling away in January 2008 and you know what happened. I think the fact that Vodafone's yield is now ridiculous is telling me anyway that the market thinks that the dividend might be unsustainable. Of course it will not always be right any more you or I will be but it is often a useful pointer when added to other information. As I said I am happy to take what I can glean wherever it is found.

I think to ignore such signals is arrogant without at least giving them due consideration. I gather that you do not dismiss such signals; you are not even aware of them.

Dod

[scrumpyjack]

The signal I read from the sharp bounce back in builders shares (Persimmon and Barratt) is that the market thinks there will not be a no deal Brexit, It was thought that would result in a sharp fall in house prices and so a very substantial fall in house builders' profits. As it is, Mr Market thinks there is a better chance of the current profits bonanza for builders continuing for some while longer with the accompanying special dividends etc.

The sudden change in builders share prices in this instance isn't just noise but a change in the market expectation of future profits and dividend paying capacity.

[Arborbridge]

I do not follow Persimmon but as a rule the market tends to know more than any of us individuals and occasionally it might be right. For instance, the banks share prices were all falling away in January 2008 and you know what happened. I think the fact that Vodafone's yield is now ridiculous is telling me anyway that the market thinks that the dividend might be unsustainable. Of course it will not always be right any more you or I will be but it is often a useful pointer when added to other information. As I said I am happy to take what I can glean wherever it is found.

I think to ignore such signals is arrogant without at least giving them due consideration. I gather that you do not dismiss such signals; you are not even aware of them.

Dod

The problem is that at the moment there are many shares (and even ITs) on what you might call ridiculous yields.
For older folk (that's Dod and I!) it would be understandable if a slightly different aspect came into play: that of saying "I need "x" % yield to live on given the capital I have, let's be happy with that".
I'm not saying that I am not tempted by high yields and one off opportunities - I still am - but I'm just think there are other appropriate ways of proceeding and which are still within the gammut of HYPing. There's no rule saying one must buy the share with the highest yield if one doesn't feel comfortable with the safety aspect. Those who quote PYAD's original texts about working down a list of shares in order of yield, sometimes gloss over the words he wrote about safety factors, and of looking more deeply into that aspect.

Arb.

[pyad]

The signal I read from the sharp bounce back in builders shares (Persimmon and Barratt) is that the market thinks there will not be a no deal Brexit, It was thought that would result in a sharp fall in house prices and so a very substantial fall in house builders' profits. As it is, Mr Market thinks there is a better chance of the current profits bonanza for builders continuing for some while longer with the accompanying special dividends etc.

The sudden change in builders share prices in this instance isn't just noise but a change in the market expectation of future profits and dividend paying capacity.

I'm genuinely suprised by this comment and the implied touching belief in the market expresssed and utterly spurious reasons suggested for the price changes by it and similarly elsewhere in this thread. Some of it is from people who far as I know have been investing for many years though it seems have learned little.

PSN is down so far today. Has "Mr Market" changed his mind yet again, all within 48 hours? If so he is staggeringly fickle, to the extent that he is totally unstable and deserves no faith whatsoever. The idea that very short term price movments are rational and that consequently they tell investors something which should influence their buying - (in an extremely long term strategy!) - is so obviously incorrect that it's hard to believe anyone who's been here more than five minutes can still think that.

Also, you who believe it are then yourselves irrational by investing in HYPs at all. For if all shares are correctly valued by the know-all Mr Market, then all shares whose values as measured by yield, P/E, P/B, or whatever, where below par, must be rubbish to be avoided at all costs. But by investing in above average yields, HYP style or any kind of value play, you are by such action recognising that the Mr Market is very often wrong, in fact so often that his very short term views aint worth dick. And associated with this, there are nearly always no reasons for very short term price movements.

Now do you get it?

[Arborbridge]

PSN is down so far today. Has "Mr Market" changed his mind yet again, all within 48 hours? If so he is staggeringly fickle, to the extent that he is totally unstable and deserves no faith whatsoever. The idea that very short term price movments are rational and that consequently they tell investors something which should influence their buying - (in an extremely long term strategy!) - is so obviously incorrect that it's hard to believe anyone who's been here more than five minutes can still think that.

I can completely relate to that. There is usually little or no relationship between company health and short term price movements. I think it's adviseable to say "usually", though

The longer the time expands from "short term" upwards, the less this becomes true : it's the voting machine versus the weighing machine analogy of WB in practice.

Arb.

[Dod101]

Pyad was the one who imported the idea of taking notice of 'short term' price movements or market noise. Of course that tells us virtually nothing and maybe Persimmon is not therefore a good example (I do not follow it so do not know) However my point was that taking notice of longer term trends in a market price and the related yield is of value have found. No one is saying we have a thoroughly efficient market, at least I am not. Unfortunately we are in danger of moving away from Persimmon in this thread and so I will leave it there.

Dod