Carillion post-mortem

[DiamondEcho]

Dealing with my late husband's portfolios has shown me that the buy and forget policy doesn't work. It was full of shares which were a good buy when he bought them but have gone downhill since

I agree with this. I don't know if 'invest and forget' ever worked satisfactorily but I do not believe that it does now. Perhaps these days the amount of current info we can get on a company is higher, that we're better able to make timely and informed decisions? Rather than in days of yore picking up old news via the old-media that the market had already digested and acted on.
We've also had maaany discussions re: whether to 'sell a cutter'. I.e. whether to sell a company that cuts or cancels a dividend. I'm not aware of that being in the original HYP 'rules'.

[Arborbridge]

Jim Slater varied a little on his "demand" for PEG. When he published "Investing for Growth" his sieve (as he called it) was for a PEG of 0.70. Incidentally, the numbers and percentages he used were all based on a rolling 12 month basis, on the grounds that one could more fairly compare shares with one another. It was an attempt to get over the varying accounting year-ends. And yes, PEG is price/earnings ratio divided by the eps growth rate. He used the normalised eps and would not give a growth company a PEG unless there were at least four consecutive period, including available forecasts. He would not give a PEG for building or construction companies.

If he was not after out and out growth shares, he would relax the PEG to unity. It is also common sense to check that the PEG for next year isn't going to be higher due to lower expected growth.

All rather non-HYP but it can be instructive to look at some or our companies this way.

Arb.

[Dod1010]

Thanks Arb. You have clarified the situation much better than I did.

Dod

[Dod1010]

Dealing with my late husband's portfolios has shown me that the buy and forget policy doesn't work. It was full of shares which were a good buy when he bought them but have gone downhill since

I agree with this. I don't know if 'invest and forget' ever worked satisfactorily but I do not believe that it does now. Perhaps these days the amount of current info we can get on a company is higher, that we're better able to make timely and informed decisions? Rather than in days of yore picking up old news via the old-media that the market had already digested and acted on.
We've also had maaany discussions re: whether to 'sell a cutter'. I.e. whether to sell a company that cuts or cancels a dividend. I'm not aware of that being in the original HYP 'rules'.

Glory Halleluia! In the original rules (per pyad) we should never sell. Thus he kept RBS through all its troubles and still has it today I think. Buy and forget works (has worked) with only a small number of very select shares, such that none of us can really afford I would have thought to embark on such an odyssey.

Good night

Dod

[Wizard]

With rumours of a bidder should those still holding be selling in to a rising market or holding out to see if a bid materialises

Terry.

[kempiejon]

With rumours of a bidder should those still holding be selling in to a rising market or holding out to see if a bid materialises

Terry.

That's all they can do with their existing shares though isn't it, hold or sell? In my experience there's a lot more rumours of takeovers than actually materialise. Carillion could be a bitter pill to swallow even at knocked down prices, weren't the books cooked?

[Bouleversee]

One can't help wondering if the govt. would want to continue awarding contracts such as the Chiltern section of HS2 to CLLN if it were owned by a foreign company although, come to think of it, they didn't seem to mind a foreign company being involved in a nuclear power station here.

Up around 19% today last time I looked which is great for those who bought at the bottom and worth selling now I should have thought but 19% of what is left of long term holdings is 19% of next to nothing so not very exciting.

[DiamondEcho]

In the situation of simply a rumour, I'd consider the target, who could viably bid for it and make it work? There would usually be a short-term but expensive exercise in attaining cost efficiencies/synergies for the new whole as a result. If it it were me I'd also look to confirm where possible that similar take-overs have happened in recent years in that sector.
I used to hold CLLN long ago, no longer, but generally speaking in the situation you describe I might be considering selling half now and holding the rest. If no bid materialises I'd expect the SP to drop right off, but at least booking that 1/2-sale should help to compensate.

I'd also keep an eye on the specific share board on ADVFN. It can get a bit 'wild west' at times over there, but you can also find some very insightful investors, and if you're lucky some industry insiders from that shares sector. https://uk.advfn.com/cmn/fbb/thread.php ... &from=8100
[This link is a recent but random landing point in the current major discussion thread re: this rumour. Scroll back more to when this rumour first broke if you have time...]. I'd hope doing so should give you more of a sense of what the answer to your question is.

[If you're new to ADVFN you can register for free. If you do you might want to do so under another user-name than here. No point risking joining the dots across various forums, esp. financial ones, for any loonies out there].

[idpickering]

Carillion shares jump almost 20% on rumours that a Middle Eastern firm is preparing a takeover bid

Shares in embattled infrastructure company Carillion rose nearly 20 per cent today after reports that a firm from the Middle East is interested in acquiring it.

The upward move in the share price today is in stark contrast to the 70 per cent plunge the share price took in July, when the group issued a profit warning and the its chief executive departed.

Carillion, which builds and maintains schools, hospitals, barracks, roads and railways, is in the eye of a Middle East investor, said to be waiting until Friday’s half-year results to make its approach, according to a report in newspaper City AM.

Read more: http://www.thisismoney.co.uk/money/mark ... z4ttEZd5FN
Follow us: @MailOnline on Twitter | DailyMail on Facebook

[Arborbridge]

Well, Hallelujah! As Dod might say. Once more my lack of courage (and adherence to the HYP guidelines) has seen me not buy in at the bottom

[Bouleversee]

Well, Hallelujah! As Dod might say. Once more my lack of courage (and adherence to the HYP guidelines) has seen me not buy in at the bottom

But how would you have known that it was the bottom? I did that(or so I thought) with IRV and NXT and they fell further, increasing my losses substantially. If you had bought in at what turned out to be the bottom or thereabouts, what would you be doing now?

[Wizard]

Well, Hallelujah! As Dod might say. Once more my lack of courage (and adherence to the HYP guidelines) has seen me not buy in at the bottom

But how would you have known that it was the bottom? I did that(or so I thought) with IRV and NXT and they fell further, increasing my losses substantially. If you had bought in at what turned out to be the bottom or thereabouts, what would you be doing now?

Surely purchase price is irrelevant to a decision to sell (for anything other than tax reasons)? But I would still be interest in views as to whether selling now or holding on gets the nod.

Terry.

[kempiejon]

Surely purchase price is irrelevant to a decision to sell (for anything other than tax reasons)? But I would still be interest in views as to whether selling now or holding on gets the nod.

Terry,

The original type HYPer only buys (in one hit) and is only ever a forced seller; so those with Carillion would hang on and hope for recovery, self healing or a takeover/buy out. A more progressive HYPer with tinkering rules might sell on the cut or suspension of dividends so would probably have already sold by now.

[Bouleversee]

Well, Hallelujah! As Dod might say. Once more my lack of courage (and adherence to the HYP guidelines) has seen me not buy in at the bottom

Surely purchase price is irrelevant to a decision to sell (for anything other than tax reasons)? But I would still be interest in views as to whether selling now or holding on gets the nod.

Terry.

But how would you have known that it was the bottom? I did that(or so I thought) with IRV and NXT and they fell further, increasing my losses substantially. If you had bought in at what turned out to be the bottom or thereabouts, what would you be doing now?

Surely purchase price is irrelevant to a decision to sell (for anything other than tax reasons)? But I would still be interest in views as to whether selling now or holding on gets the nod.

Terry.

I can't agree with you about that, Terry. If I had bought at a very low point and in a very short space of time had the chance to make a 20% profit, I would be very tempted to grab it while it was still there and not be too greedy, knowing that a takeover might not materialise, or at least sell half which could, assuming a reasonable sum invested, still produce a reasonable sum, whereas if I had already lost so much of my investment there was precious little left to sell I might be more inclined to sit tight in the hope that the takeover did happen and the offer price was higher than the present share price. Much depends on the current value of your investment. If £5k was originally invested in both scenarios, in the first case 20% would provide a very acceptable sum whereas in the second, where the investment had fallen to well under £1000, a 20% gain compared with the thousands lost is much less attractive.

Without knowing the details of your investment, I doubt if anyone could answer your question and even then it depends on the way you personally look at these things. All a gamble without a crystal ball.

[langley59]

I presume that share price rising so much today in percentage terms is due to shorts covering their positions in the event of a bid materialising. For any longs still holding lets hope one does.

[Bouleversee]

Does that mean it is likely to go down again tomorrow, then? Ditherers may have lost their chance!

[Arborbridge]

But how would you have known that it was the bottom?

Boueversee,
You noticed the "laughy?". My comment was ironic and reflects how often I have been here previously.

Of course one cannot know were the bottom is so it's always very risky. I think this one is particularly risky, but nevertheless, I have had regrets before at not buying after such a huge crash in price, when everything looked dark and dismal. Buying a sinking SP is highly risky and not to be recommended for more than the occasional dabble.

Arb.

PS Aren't you pretty safe with Next? The share price has zoomed up which shows there's good support.

[Bouleversee]

Arb -

"PS Aren't you pretty safe with Next? The share price has zoomed up which shows there's good support."

They do seem to be in recovery mode but still a long way to go so far as I am concerned. I don't really feel safe with anything at the moment, however.

[Dod1010]

Unless a holder, Carillion is for gamblers at the moment. It looks as if it could just as well go bust or at least be reconstructed in one form or another, as to receive a decent bid. I read somewhere it is worth only about £200 million? Is that it? And it cannot go for a rights issue because there is no support for it? So anyone buying is going to have to finance it as well and I doubt that due diligence is going to be very easy.

And to be worth Arb's while to make a decent capital return he would have to invest at least five figures. No thanks.

Dod

[moorfield]

Surely purchase price is irrelevant to a decision to sell (for anything other than tax reasons)? But I would still be interest in views as to whether selling now or holding on gets the nod.

In CLLN's case I've decided to sell either when the market does it for me, or when my HYP's overall income reaches its target next year at which point a non-income producing CLLN would no longer be needed anyway - whichever happens first.

I find deciding when to sell is much harder than deciding when to buy!