IanTHughes HYP - June 2019 Top-ups

[MDW1954]

I was going off for a long weekend in January 2008 and the share prices of the banks were falling steadily. I had a bad feeling and so sold HBOS, Barclays and most of Lloyds. I deliberately kept HSBC which is the only bank I still hold.
Dod

The 'smell test' is important, even if HYP purists object to it. What your post illustrates -- at least to me -- is that one needs experience, to know what one is smelling.

We are all of us better investors than we were 5, 10, 15 years ago -- and yet the HYP rules have been constant over that period. I struggle to explain this (despite being a writer!) and have to fall back on notions such as "information", in the modern statistical sense.

Back in 2008, given the events of 2007, I knew enough to ask some of the right questions. I was in Hong Kong in April 2008, and that informed my views on all sorts of things, some of which are off-topic for this board. Suffice to say, I profited thereby.

I don't own SLA, and have never been able to convince myself why. Maybe I should stop trying, is the message I take from your post. The products, I like -- I have a host of SLA ITs. But my cash is with LGEN, apart from a modest slug with AV.

MDW1954

[Dod101]

MDW is absolutely right in my book. I call the 'smell' test, the culture and I can no more explain that than the 'smell' test itself. Investing is art not science and like all art, it takes a bit of experience and what I can only call a sixth sense. I have avoided the recent problems not because I am clever but probably because I am too cautious in some ways, although if I decide to buy something I just do it without too much research.

As always though Buffett was right with his Rule No 1. Do not lose money. Rule No 2. See Rule No 1. I think avoiding disasters is far more important than finding the ten bagger. I have had only one in my investing career and that was Tullow Oil where I bought at £1 and sold just short of £14 about 7/8 years later.

Dod

[Bouleversee]

And to think, the share price of BATS has increased by 27% since the end of Jan 19.

Not sure if that's or ! ( I'm glad about the recovery to date but a favourable top up opportunity might have passed).

You struck a cord with me tbh. I might just top up BLND instead. As for Imperial Brands, they're a hold for me now.

Ian.

What makes you think BLND are a good buy at the moment with retail in melt-down? It may be already in the price but do you see any recovery there in the foreseeable future and indeed isn't there more grief to come? I see they are one of the landlords Philip Green is pressurising for a reduction in rent and every day there seems to be another retail company going bust or negotiating a CVA. Lower rents must mean lower profits and possibly lower dividends. I hold BLND and Landsec but I certainly feel no desire to add; wish I had got rid in fact.

[Dod101]

Some years ago I held both BLand and Land Securities, got rid of them and bought B Land again more recently, but then with the retail sector in turmoil sold them again in favour of Primary Health Properties and Segro, both of which have done well for me. I would not be buying or adding to B Land now or any time soon.

Dod

[monabri]

Thanks for sharing your HYP and your management of it with us Ian. For me it's small top ups of British Land and British American Tobacco on 20 Jun 19. I've invested enough on Imperial Brands already buying in a number of times (6) whilst that knife has fallen.
Ian.

What makes you think BLND are a good buy at the moment with retail in melt-down? It may be already in the price but do you see any recovery there in the foreseeable future and indeed isn't there more grief to come? I see they are one of the landlords Philip Green is pressurising for a reduction in rent and every day there seems to be another retail company going bust or negotiating a CVA. Lower rents must mean lower profits and possibly lower dividends. I hold BLND and Landsec but I certainly feel no desire to add; wish I had got rid in fact.

I'm of the same opinion as Bouleversee. The outcome of Green's (avoids the use of any title) attempts to "restructure" a deal with the Landlords will set a precedent. I certainly wouldn't be buying this side of Wednesday this week (actually, I won't be buying after Wednesday neither).

From the Telegraph (paywalled)

https://www.telegraph.co.uk/business/20 ... -end-cvas/

"Some smaller landlords are indulging in a spot of schadenfreude and believe they don’t owe the former billionaire any favours, particularly when he is orchestrating slashing rents from a £100m yacht in Monaco."

"Intu has 35 Arcadia shops across its centres, around 15pc of the Company Voluntary Arrangement votes – meaning that it would require just one other big rebellious landlord to block the CVA. Land Securities is still on the fence, meanwhile Hammerson, Aviva and British Land are thought to support it."

"Trafford Centre owner Intu has already made it known it will not support the vote plans, no matter what concessions he makes as it feels that if it supported the rent cuts it would face demands from other landlords." (sic. don't they mean tenants?).

[Bouleversee]

It's a lose-lose situation for BLND whichever way that vote goes. Landlords are over a barrel.

[idpickering]

And to think, the share price of BATS has increased by 27% since the end of Jan 19.

Not sure if that's or ! ( I'm glad about the recovery to date but a favourable top up opportunity might have passed).

You struck a cord with me tbh. I might just top up BLND instead. As for Imperial Brands, they're a hold for me now.

Ian.

What makes you think BLND are a good buy at the moment with retail in melt-down? It may be already in the price but do you see any recovery there in the foreseeable future and indeed isn't there more grief to come? I see they are one of the landlords Philip Green is pressurising for a reduction in rent and every day there seems to be another retail company going bust or negotiating a CVA. Lower rents must mean lower profits and possibly lower dividends. I hold BLND and Landsec but I certainly feel no desire to add; wish I had got rid in fact.

Hi Lorna, ta for your input. I don’t claim any mystic insight towards the merits of BLAND, or any other share for that matter. For me it’s more a case of HYP balance, and buying the share during the downward trend. Thereafter it’ll be a hold. I’m leaning towards sharing the dosh between them and BATS again tbh.

Ian.

[Charlottesquare]

It's a lose-lose situation for BLND whichever way that vote goes. Landlords are over a barrel.

It does somewhat depend what form or retail space and where it is located, some space has alternative uses which is what I expect, long term, to see happening to it- something like Princes Street, Edinburgh, could well see apartments/quasi hotels and leisure more and more creeping in and there have already been reported proposals for residential use re parts of some retail parks in the UK.

Not all landlords are over a barrel, it really depends what sorts of units they hold, for instance a difficult Brexit could see (has seen already) far more demand for warehousing and storage space.

On a much smaller scale we carved up circa 15,000 sq ft of mainly open plan offices into much smaller units post 2007/2008 as demand dropped for the larger units, biggest single unit is now circa 1,000 sq ft but most are a lot smaller, all are currently let and rents are rising with a waiting list- the industry will react to the changes , it is just the larger beasts are like oil tankers, they take a lot longer to change direction.

[MDW1954]

You struck a cord with me tbh. I might just top up BLND instead.

Ian.

Ian,

Why?

Like others on this thread, and not for the first time, I'll point out the merits of PHP, BBOX, ESP, et al.

Sure, I hold BLND. But I wouldn't add to it right now. Whereas I'd add to any of the above.

Vide my remarks on "smell test", earlier in this thread. Especially with today's Arcadia news, the smell coming out of shopping malls right now is none too good.

MDW1954

[dealtn]

...with the retail sector in turmoil ...
Dod

Well I could have chosen any number of quotes in this thread but settled for this one which seemed to best express the "mood" of, I guess, not just those here, but the market as a whole.

However, being a natural contrarian my interest is piqued by such doom and gloom. You would think from comments generally that BLND was overly exposed to the High Street, and retailing.

I wonder how many on here have actually read the latest annual report, recently published. Within it we learn that "Retail" comprises less than half the assets at 45%. Furthermore this is expected to be at around 33% within 5 years. This changing ratio is as much to do with the current pipeline of development projects coming on stream, as much as further retail disposals. The occupancy rate of this "overweight" of Retail portfolio was at 97% as at year end, hardly disastrous. Digging further into the Retail Portfolio's make up we discover that 85% of it is in what is termed "multi-let", not High Street at all, but locations of the like of Meadowhall. An empty let in such sites is readily replaced (reflected perhaps in the 97% occupancy), and not necessarily at lower rents either, although of course than can and does happen.

Multi-Let, and Mixed Use, are appropriate descriptions of these destinations, and although lumped together as Retail, these will also reflect the trend away from shopping, towards "experiences". Retail will include cinemas, gyms, wall climbing, trampolining etc. too.

To see the disastrous effect of the demise on the High Street on British Land it is interesting to read of the "collapse" last year in footfall at it's owned sites, by a whole 0.9%, and of sales by the astonishing quantum of 0.5%. Against competitors these figures are outperformers of 230bps and 160bps respectively.

So the shares are now at less than 550p, against a Net Asset Value last recorded as 905p, and a dividend of 31p (up on last year incidentally and as a REIT in ISA that is fully delivered, and covered by company income). Furthermore the company has decided to utilise its cashflows by further investing in property. In particular it has found a REIT that is trading at about 60% of NAV, that is biased to London and the South-East with a successful history of delivering profitable development projects, and is buying such shares regularly from sellers. In other words it is also undertaking a share buy back.

Now of course things could all turn out for the worse, and investing here prove to be questionable in hindsight on both a short and long term perspective, but that is true of many investments (particularly as most here will know of high yield = high(er) risk type shares). For me though I can't help but be attracted to such scenarios where the asymmetry exists where everyone seems to "know" how a simple story of Retail disaster will pan out, as opposed to a possibility where it might not turn out to be so bad after all.

[MDW1954]

...with the retail sector in turmoil ...
Dod

Well I could have chosen any number of quotes in this thread but settled for this one which seemed to best express the "mood" of, I guess, not just those here, but the market as a whole.

However, being a natural contrarian my interest is piqued by such doom and gloom. You would think from comments generally that BLND was overly exposed to the High Street, and retailing.

I wonder how many on here have actually read the latest annual report, recently published.

Dealtn,

While I haven't yet read the latest annual report (although I am familiar with its predecessors), let me say that I don't disagree with a word you've written.

Let me also point out that I hold BLND, while I don't hold some of the other "usual suspects".

Nevertheless, I wrote above that I wouldn't buy more BLND. Why? Because I fear it may have further to fall.

Ultimately, I suspect I that will be buying more.

But not just yet...

MDW1954

[Bouleversee]

Dealtn:

I wasn't talking about the High Street. Mine is unchanged apart from a pub/restaurant closed some time ago and there have been no signs of activity since. I was referring to the shopping malls where the likes of Arcadia stores are situated and I see Green won the day which will mean a rent reduction for BLND, presumably. I agree that the buildings could be used for other purposes such as storage, which might be only temporary, or converted into flats (not sure how many would want to live in a shopping centre) but that will take time and in the meantime, like MDW, I don't feel inclined to add. Let's hope you are right, however, and we holders will all benefit.

When you say sales declined by only 0.5%, are you referring to sales of goods by the tenant companies? If so, why are so many in difficulties? As regards asset value, I did read somewhere that these valuations are out of date and one should not pay too much attention to the discount.

[Dod101]

Dealtn may be right but there have been so many false dawns for me with BLand that I certainly will not buy again. The income was OK but the capital was not and that interests me as much as income nowadays. Meanwhile PHP ticks along with steady dividend increases and share price gently rising. That is what I look for.

Dod

[IanTHughes]

MDW is absolutely right in my book. I call the 'smell' test, the culture and I can no more explain that than the 'smell' test itself. Investing is art not science and like all art, it takes a bit of experience and what I can only call a sixth sense.

This all sounds too much like a Mystic Meg solution to me. Unless someone can articulate what it is that the much vaunted "smell test" is picking up, then it really is a "nothing test" possibly borne out of a fear of taking a risk, which surely means one should stay away from the markets entirely. My own suspicion is that those who claim to be HYPers but also claim to rely on such a "nothing test" are simply making an excuse for the rejection of an otherwise perfectly acceptable high yield, simply because they do not like High Yield! A bit like the nonsense of High Yield "danger zones" also used as an excuse to reject an otherwise perfectly acceptable high yield.

I have avoided the recent problems not because I am clever but probably because I am too cautious in some ways, although if I decide to buy something I just do it without too much research.

What recent problems? My HYP is also going from strength to strength and with no need of any "nothing test" to help me out.

As always though Buffett was right with his Rule No 1. Do not lose money. Rule No 2. See Rule No 1. I think avoiding disasters is far more important than finding the ten bagger.

You are very fond of quoting that Buffet gem but never seem to have read anything else from the Sage of Omaha. What about the reaction to losses discussed here?

Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.

or, the patience is a virtue sentiment expressed here?

If you don’t feel comfortable owning something for 10 years, then don’t own it for 10 minutes.

or

Always invest for the long term.

Just some of the advice that you frequently choose to ignore, even though it comes from that same Warren Buffet.


Ian

[idpickering]

Excellent post dealtn, I couldn’t have put it better. Have a rec.

Ian.

[Dod101]

Ian

You may be right but beware of the danger of receiving comments you want to hear, otherwise known as confirmation bias.

Dod

[idpickering]

Ian

You may be right but beware of the danger of receiving comments you want to hear, otherwise known as confirmation bias.

Dod

Thank you Dod. Your words of caution heard and understood.

Ian.

[IanTHughes]

Ian

You may be right but beware of the danger of receiving comments you want to hear, otherwise known as confirmation bias.

What do you think your "sixth sense / smell test" is but confirmation bias?


Ian

[Alaric]

You may be right but beware of the danger of receiving comments you want to hear

Isn't that the point of the HYP - Practical board?

[idpickering]

You may be right but beware of the danger of receiving comments you want to hear

Isn't that the point of the HYP - Practical board?

Correct Aleric. I read other contributors' views, for which I'm grateful, but the decisions are mine alone.

Ian.