Provident Financial (PFG) should I sell?

[ZipserSir]

Good morning! I have always been a buy and hold HYPer, but I am taking stock of my sharrs and thinking about a haircut. I bought PFG a few months before the shares went off a cliff in 2017 and have lost nearly 90% of their value. Normally, I'd take a thing like this on the chin, but looking at PFG I have a feeling that the next time I hear from them they will tell me how well things are going and could I help them out with some extra cash to keep things improving. Oh, and of course, if you don't your remaining holdings with be virtually worthless. I don't have any inside information, this is just a feeling! Anyone else have any thoughts?

[IanTHughes]

Good morning! I have always been a buy and hold HYPer, but I am taking stock of my sharrs and thinking about a haircut. I bought PFG a few months before the shares went off a cliff in 2017 and have lost nearly 90% of their value. Normally, I'd take a thing like this on the chin, but looking at PFG I have a feeling that the next time I hear from them they will tell me how well things are going and could I help them out with some extra cash to keep things improving. Oh, and of course, if you don't your remaining holdings with be virtually worthless. I don't have any inside information, this is just a feeling! Anyone else have any thoughts?

If you believe that you can successfully re-allocate the 10% of your capital that remains into a holding that you are confident will outperform PFG, then go ahead - but do remember to include all charges and Stamp Duty in your calculations. If you believe that your HYP will be better served by sticking with PFG, leave alone.

Sorry, but I cannot give you any other advice as I am all too well aware of my inability to see into the future with any level of confidence. In other words, before making any decision you must be completely honest with yourself about your ability to really know what may happen either way. Otherwise, if you sell PFG, the reason will be simply because you have so far lost 90% by value, but still having no idea what might be a better solution.


Ian

[Alaric]

t looking at PFG I have a feeling that the next time I hear from them they will tell me how well things are going and could I help them out with some extra cash to keep things improving.

It's had a good run for the last three months, but then it needed to, as the August price was at its lowest.

http://tools.morningstar.co.uk/uk/stock ... E%24%24ALL

It's restored a modest dividend, a 4.3% yield at the current share price.

The Woodford effect has presumably worked its way through.

Are they likely to need a rights issue? Don't know.

Meanwhile industry rival Non Standard Finance, who attempted a takeover bid for PFG earlier this year has issued a profit warning.
https://www.theguardian.com/money/2019/ ... it-warning

Problems for the sector as a whole perhaps.

From the Guardian report

NSF’s profit warning comes just weeks after the collapse of QuickQuid, the UK’s biggest payday lender, which left more than a million customers facing financial uncertainty.

Some peer to peer lenders have also been struggling.
https://www.theguardian.com/money/2019/ ... pawnbroker

[kempiejon]

PFG offer about 4.5%, though as you'll probably know they've cut from a level of 98p to 10p. Like Ian said if you think you can pick a better income and return from a share go for it. My HYP is mostly hands off so PFG stays in my portfolio, for a while they were a good little earner growing the dividend 5 fold over 10 years from about 20p.

[88V8]

With so little of the capital left, you may as well hang on imho.

I wish there were some way of knowing that it's time to jump off these sinking ships, before they hit the bottom.

V8

[Dod101]

The op sounds a bit p**ssed off. Were I him I would sell. On the other hand, were I dedicated to income, well who knows? But sell on general feel.

Dod

[idpickering]

The op sounds a bit p**ssed off. Were I him I would sell. On the other hand, were I dedicated to income, well who knows? But sell on general feel.

Dod

Agreed Dod. Mind you, if I was the OP I would've hopefully dumped PFG long before it had got as bad as it currently is. Having said that, I realise that none of us can accurately tell the future of any of our holdings. In short to the OP, drop this dog, learn from this, and move on.

Ian.

[Wizard]

The op sounds a bit p**ssed off. Were I him I would sell. On the other hand, were I dedicated to income, well who knows? But sell on general feel.

Dod

Agreed Dod. Mind you, if I was the OP I would've hopefully dumped PFG long before it had got as bad as it currently is. Having said that, I realise that none of us can accurately tell the future of any of our holdings. In short to the OP, drop this dog, learn from this, and move on.

Ian.

I think the interesting question (to me anyway), is what people see as the difference between PFG and Imperial Brands (IMB). A couple of people here suggest selling, but have recently advocated holding IMB. Of course PFG has dropped further and has cut its dividend, but there is talk of some fear of the IMB dividend being at risk and that this is partly driving the share price drop. So what is it about IMB that people see as different to PFG?

[Dod101]

I probably will do nothing about it but I was seriously thinking of buying Imperial. I think there is no comparison between the two companies. Imps has an assured if slowly shrinking market and no one that I have seen seems to be seriously suggesting that their dividend is at risk. Both shares are affected by regulation risk to a greater or lesser extent but it seems to me that that is about as far as it goes. I am prepared to accept that Imps is oversold. I do not think that that can be said of Provident Financial. Even if you had bought Imps at its peak of around £40 3 years ago, you would have lost about 65%, which may not feel like it but is in fact a far cry from 90%

If it makes any difference, I hold Imps but have never held Provident Financial.

Dod

[Wizard]

I probably will do nothing about it but I was seriously thinking of buying Imperial. I think there is no comparison between the two companies. Imps has an assured if slowly shrinking market and no one that I have seen seems to be seriously suggesting that their dividend is at risk. Both shares are affected by regulation risk to a greater or lesser extent but it seems to me that that is about as far as it goes. I am prepared to accept that Imps is oversold. I do not think that that can be said of Provident Financial. Even if you had bought Imps at its peak of around £40 3 years ago, you would have lost about 65%, which may not feel like it but is in fact a far cry from 90%

If it makes any difference, I hold Imps but have never held Provident Financial.

Dod

Surely with a dividend yield of nearly 12% the market is suggesting a significant risk of a dividend cut?

[tjh290633]

Don't ask me. When I decided to go for a doorstep lender, I chose Cattles. Look where that got me.

TJH

[Dod101]

I probably will do nothing about it but I was seriously thinking of buying Imperial. I think there is no comparison between the two companies. Imps has an assured if slowly shrinking market and no one that I have seen seems to be seriously suggesting that their dividend is at risk. Both shares are affected by regulation risk to a greater or lesser extent but it seems to me that that is about as far as it goes. I am prepared to accept that Imps is oversold. I do not think that that can be said of Provident Financial. Even if you had bought Imps at its peak of around £40 3 years ago, you would have lost about 65%, which may not feel like it but is in fact a far cry from 90%

If it makes any difference, I hold Imps but have never held Provident Financial.

Dod

Surely with a dividend yield of nearly 12% the market is suggesting a significant risk of a dividend cut?

Well as always what do I know? But to answer your question, the market sometimes gets it wrong, and I can see no reason why Imps would cut its dividend. Their recent results were OK and that would have been the time to do it. Instead they issued reassuring news on their main business, the manufacture and sale of tobacco products.

Dod

[idpickering]

I probably will do nothing about it but I was seriously thinking of buying Imperial. I think there is no comparison between the two companies. Imps has an assured if slowly shrinking market and no one that I have seen seems to be seriously suggesting that their dividend is at risk. Both shares are affected by regulation risk to a greater or lesser extent but it seems to me that that is about as far as it goes. I am prepared to accept that Imps is oversold. I do not think that that can be said of Provident Financial. Even if you had bought Imps at its peak of around £40 3 years ago, you would have lost about 65%, which may not feel like it but is in fact a far cry from 90%

If it makes any difference, I hold Imps but have never held Provident Financial.

Dod

Surely with a dividend yield of nearly 12% the market is suggesting a significant risk of a dividend cut?

Well as always what do I know? But to answer your question, the market sometimes gets it wrong, and I can see no reason why Imps would cut its dividend. Their recent results were OK and that would have been the time to do it. Instead they issued reassuring news on their main business, the manufacture and sale of tobacco products.

Dod

Without wanting to come across as a Dod groupie, I very much agree with what he has said above, and he’s probably articulated it better than I could anyway. I have more faith in IMB, and there is a temptation to buy even more, but I’m resisting that. iMB vs PFG? No comparison. Give me the former rather than the later any day. I get that there’s a risk even with the former, but I accept that.

Ian.

[Alaric]

iMB vs PFG? No comparison.

Looking at the chart of dividend yield for PFG over the last 5 years, they seemed to be trundling along at around the 4% mark. That's until they spike and are suspended in 2017 - 2018 alongside the collapse of the share price and the rights issue.

[Wizard]

Surely with a dividend yield of nearly 12% the market is suggesting a significant risk of a dividend cut?

Well as always what do I know? But to answer your question, the market sometimes gets it wrong, and I can see no reason why Imps would cut its dividend. Their recent results were OK and that would have been the time to do it. Instead they issued reassuring news on their main business, the manufacture and sale of tobacco products.

Dod

Without wanting to come across as a Dod groupie I very much agree with what he has said above, and he’s probably articulated it better than I could anyway.

I think there are worse things to be

I have more faith in IMB, and there is a temptation to buy even more, but I’m resisting that. iMB vs PFG? No comparison. Give me the former rather than the later any day. I get that there’s a risk even with the former, but I accept that.

Ian.

That also a 'Dodian' perspective as I am taking it to imply that to be, at least in part, based on a view around organisational culture (for want of a better word).

But it raises a question in my mind. IIRC, unlike Dod, at one point you did own PFG, but decided (with characteristic good foresight) to sell out. Is my recollection correct? If it is the question is, what was it that was acceptable about PFG that then became unacceptable? I have asked similar questions of you a number of times, because as I say you have a knack of getting out before the worst of brown stuff hits the fan. I have never really felt I have had an answer that gives me anything to get my teeth in to and try to apply to my own 'dogs'. My conclusion has therefore been that it is some sort of high quality 'sixth sense' or 'gut feel' you are blessed with, that is not really replicable. Do you think that is a fair conclusion?

[Dod101]

Wizard
Do not let me influence anyone please!

I appreciate you are asking IDP and I will be interested in his respone to your question, but for me, in general, I sell if the dividend is cut and/or there is a profit warning (often they occur at the same time). No doubt there are times when it might be better to hold on, and of course with Provident Financial we are well past the time for a sensible sale. Now it is simply a matter of a) what the holder feels more comfortable doing and b) what feeling he has for the future of PFG. I could never answer the first question for anyone else of course and am not equipped answer the second, never having held the share.

Dod

[idpickering]

But it raises a question in my mind. IIRC, unlike Dod, at one point you did own PFG, but decided (with characteristic good foresight) to sell out. Is my recollection correct? If it is the question is, what was it that was acceptable about PFG that then became unacceptable? I have asked similar questions of you a number of times, because as I say you have a knack of getting out before the worst of brown stuff hits the fan. I have never really felt I have had an answer that gives me anything to get my teeth in to and try to apply to my own 'dogs'. My conclusion has therefore been that it is some sort of high quality 'sixth sense' or 'gut feel' you are blessed with, that is not really replicable. Do you think that is a fair conclusion?

Thanks for your kind words Wizard. Mystic Meg I ain't believe me. Maybe it's being an ex copper that makes me more perceptive, I dunno? But what I do know, is that if I see things are going downhill in relation to one of my share (not the stock price specifically obviously), then I tend to listen in to what my gut says. If a share unsettles me like that then I'd rather dump it and move on, as I did with PFG, and Carillion too. As for PFG, I sold on 25 Jul 17. I originally bought them years before, for the diversification they offered to my HYP, and the nice yield at that time. I realised however, that there is such a thing as 'diworsification', and that one didn't have to have a finger in every pie. The weakness of the share (PFG) in 2017 highlighted that point even more, so out they went.

Ian.

[Alaric]

The new managers of the suspended Woodford fund have taken the decision to sell. They sold sooner rather than later.


https://citywire.co.uk/investment-trust ... e/a1285285

[PinkDalek]

The new managers of the suspended Woodford fund have taken the decision to sell. They sold sooner rather than later.


https://citywire.co.uk/investment-trust-insider/news/blackrock-kick-starts-woodford-sell-off-with-50m-provident-sale/a1285285

That was back on 22 October leaving BlackRock with about 9%. The latest position is here totalling 5.83%:

https://www.investegate.co.uk/provident-fin-plc---pfg-/rns/holding-s--in-company/201911070936266380S/

The full url shows the date of the RNS in reverse (20191107).

[idpickering]

Thanks for your kind words Wizard. Mystic Meg I ain't believe me. Maybe it's being an ex copper that makes me more perceptive, I dunno? But what I do know, is that if I see things are going downhill in relation to one of my share (not the stock price specifically obviously), then I tend to listen in to what my gut says. If a share unsettles me like that then I'd rather dump it and move on, as I did with PFG, and Carillion too. As for PFG, I sold on 25 Jul 17. I originally bought them years before, for the diversification they offered to my HYP, and the nice yield at that time. I realised however, that there is such a thing as 'diworsification', and that one didn't have to have a finger in every pie. The weakness of the share (PFG) in 2017 highlighted that point even more, so out they went.

Ian.

Further to my comment above, for clarification before I'm asked, I sold on 25/07/17 @ 2174p per share. Sorry for not mentioning that in my earlier post.

Ian.