Value Investing

[PinkDalek]

That made me laugh, having been told I'm not welcome to comment on Vodafone re non HYP they moan that I'm talking about it on this board. Crazy

Sorry but I don't follow, which may be because I haven't been following TLF for a few days.

You are discussing Vodafone here on "High Yield Shares & Strategies - general" and the only mention of them in that Topic at the Biscuit Bar is by you viewtopic.php?p=163387#p163387.

Can you point to where it is suggested you can't post about Vodafone on this particular board?

[Walrus]

That made me laugh, having been told I'm not welcome to comment on Vodafone re non HYP they moan that I'm talking about it on this board. Crazy

Sorry but I don't follow, which may be because I haven't been following TLF for a few days.

You are discussing Vodafone here on "High Yield Shares & Strategies - general" and the only mention of them in that Topic at the Biscuit Bar is by you viewtopic.php?p=163387#p163387.

Can you point to where it is suggested you can't post about Vodafone on this particular board?

Sorry to be clear. I have been told multiple times I shouldn't discuss Value/capital gains or international high yield shares on the other board. Have had numerous posts deleted/amended scolded by moderators. Now I am doing what I have been told people are taking issue with it on that link. We have multiple threads on the same subject etc etc.

That's all I meant. Sorry

[PinkDalek]

Got it, thanks. I've yet to read the Biscuit Bar discussion fully - it is somewhat long. Best to continue on here, as you are doing.

[richfool]

But aren't, to some extent, "high yielding" shares also "value" shares, in that they are stocks that have fallen out of favour, thus their yields have increased making them attractive to those seeking higher yielding stocks?

For example, Alastair Mundy, Manager of Temple Bar IT is renowned for being a value investor, and he holds stocks like Lloyds, specifically because he sees them as undervalued and paying a healthy dividend.

Gadges point noted about how long they may take to recover to perceived full value.

[pyad]

As the founder of the original Value Shares board on the old TMF (and the HYP board there) I thought I'd drop in my 2¢ about the creation of a value board here.

It may be a good idea but the main requirement in my view is that value shares are fairly narrowly defined, just as the HYP board is fairly narrowly defined. Like HYP, it will attract the odd troll or genuine poster who is not familiar with the board rules, so it requires tight moderation to maintain its purpose. Are the mods prepared to offer that?

Having a narrow(ish) definition risks offending the few who disagree with the definition, for the benefit of satisfying the many who wish to use the board for its intended purpose. It is a risk that is well worth it in my view. There has to be room for some manoeuvre within the definition but not too much, otherwise the board loses its reason for existence.

Before people claim that the idea of value is too vague, it is quite simple. A value share is one standing below the market as measured by commonplace quantitative filters like P/E, Price/Tangible book, Net cash etc. The critical point is that the investor believes the market has unreasonably undervalued it and is thus looking for a capital gain as the value is outed. Other non quantitative factors may also be taken into account such as widespread negative views by brokers which can be a positive for a value player. The exact filters investors use will vary, the more that are applied the deeper the value. Probably the king of the value ratios is P/TB in my view, specifically <1.

There's your definition, good luck if you go for it. And don't permit the definition to be diluted by people suggesting a P/E of 50 is cheap because of the eps growth rate. That sort of play aint value in my view.

Another question is whether the value board will attract sufficient support to justify its existence. I cannot know and only time will tell but the runes are not favourable given that the old TMF value board dried up. At the risk of appearing arrogant, I think it started its decline after I ceased posting to it. It's a risk game and not all plays will out satisfactorily, there are those that will fail. The point is that on balance it should work, for those with the extreme patience to see it through, often years.

[PinkDalek]

As the founder of the original Value Shares board on the old TMF (and the HYP board there) I thought I'd drop in my 2¢ about the creation of a value board here. ...

Your post might be of value over at the Biscuit Bar, where there's been plenty of discussion on the subject:

Value Board viewtopic.php?f=21&t=12978

Which lead to this Poll and (5 page) Discussion:

Would you like to see these additional investing boards? viewtopic.php?f=21&t=13388

There's a holding message on that one by Clariman here viewtopic.php?p=163922#p163922

[TUK020]

I already have a heavyweight position in NG, and a fair holding of IMB.
I have been dithering over whether to top up the half units I had in MARS, BT or VOD.

In the end, I have gone for two top ups in the last week of VOD, the last being today at 165. THis now takes VOD to one of my heavyweight bets. These are companies in my High Yield Portfolio, that are at the top end on the weighting, that I am hoping to make a capital gain and top slice to recycle funds into the portfolio.

Current Heavyweight bets are NG, BAT, RDSB, and now VOD.
Feeling a bit nervous about VOD to be honest, specifically their lack of dividend cover.

[tjh290633]

Interesting. My top 5 shares by weight are AZN,RDSB,GSK,RIO and SGRO. They stand at 35%, 31%, 29%, 21% and 20% above median weight. My trigger for trimming back is 50%. That was at the end of last week, and it may well have changed as the market fell. The order certainly changes as shares go XD, for example.

When I top up a holding, it may go above median weight, but it would be virtually impossible to top up a share already above the median weight. However a rapid recovery from a depressed situation can lead to an overweight position. Also, a share which does not follow the market down can do the same.

TJH

[TUK020]

Up until very recently, my heavyweights also included AZN, BA, GSK, but I have top sliced these,
AZN I unloaded a bunch at 5900, and BA at 660. GSK at 1600.
Looking at the charts, this looks like lucky timing
BA is an interesting one. As far as I can tell the recent share price spike was driven by news of reviewing the pension fund deficit down, dropped their yield to a point that I didn't feel guilty about trading a chunk.

I redeployed the funds into MARS, PSN, BT & VOD.
VOD got a double pug, bought at 185, and then again at 165


TJH,
I am trying to follow your variation of the High Yield Portfolio with re-balancing, but a couple of other twists (much down to lack of self discipline)
I am trying to pick not just High Yield shares to top up, but also looking for ones that may offer a capital gain.

[tjh290633]

Up until very recently, my heavyweights also included AZN, BA, GSK, but I have top sliced these,
AZN I unloaded a bunch at 5900, and BA at 660. GSK at 1600.
Looking at the charts, this looks like lucky timing
BA is an interesting one. As far as I can tell the recent share price spike was driven by news of reviewing the pension fund deficit down, dropped their yield to a point that I didn't feel guilty about trading a chunk.

I redeployed the funds into MARS, PSN, BT & VOD.
VOD got a double pug, bought at 185, and then again at 165


TJH,
I am trying to follow your variation of the High Yield Portfolio with re-balancing, but a couple of other twists (much down to lack of self discipline)
I am trying to pick not just High Yield shares to top up, but also looking for ones that may offer a capital gain.

So you are trying to stock pick. I reckon that your chances of success are less than 50/50.

What criteria are you using?

TJH

[TUK020]

What criteria are you using?

TJH

I am still trying to define/refine my strategy, but what I am looking for is the subset of stocks that both meet HYP criteria and represent a value opportunity for capital re-rating.

I have not yet developed a set of hard and fast metrics that I am looking for, but the nub of it are stocks where the price has been dropping to the point where there are favourable PE, Yield ratios, and I think I understand why the market is punishing the stock in terms of dividend cover or debt, and whether the dividend is likely to be sustainable.
Well aware that such a mindset might have me on the track to discover the next Carillion, I am also using a 'brake' factor which is to check my stocks position on the short selling tables, and unload anything above an arbitrary 5% level. (Down side to this last is that it has resulted in me missing the recent recoveries in Sainsburys and Tesco).

So onto VOD.
I think the headline earnings are depressed by depreciation after a major cycle of capital expenditure (generational network roll out requires a refresh every 10-15 years), but FCF seems to be sufficient to cover dividend. The asset swap with Liberty should improve their ROCE. While the PE ratio does not represent value territory, I am expecting the earnings to continue their recovery.
Some of their properties are suffering major headwinds (Turkey, India), but they do have a significant spread in their portfolio, and seem to have been taking steps to improve their competitive position in India.
The share price has dropped by a third this year, taking the yield well into danger territory. This seems to be overdone.
They were vying with BT for the top of my HYPTUSS spreadsheet. I gave them a double dollop of top up money.

[Alaric]

Well aware that such a mindset might have me on the track to discover the next Carillion

Perhaps you have to take the view that you are buying part ownership of the Company. So does the balance sheet contain much of value? If there's a lot of "goodwill", be very cautious.

[pyad]

Hi Pyad,

Everything I know about value investing (pretty much bugger all really) I learned from you on TMF, apart from why Buffet stopped doing it and following Ben Grahams approach (never mind what the company does just buy it on a margin of safety and hope for the value to out) and went over to buying quality stocks when they are available at a price that enables high compound returns over many years of holding. An approach I find much more of interest than a short term value buy and sell play (gamble?)

You as I recollect used "Smell" when deciding whether to buy a company after identifying it as worth a sniff after PTBV said it was.
I also believe that rising EPS was your favoured outer and high divs while waiting was no bad thing either.
You also seemed to favour a blue chip play whenever possible e.g. Aviva.

Nice to see you here.

Gadge

Hello Gadge, I recall you well during those events in spacetime where my world line and yours met for a while.

I don't follow or post on TLF much and when I do it's mostly on the HYP board. But I noticed that someone had started a Value Investing thread so I thought I'd give it a scroot. However it seems from most of the posts that people do not mean value as we understand it and are not concentrating on P/TBV<1 as their principal filter. Also they are swayed by pointless macro concerns, failing to realise that value is essentially just a numbers game. Some numbers are more likely to win than others (but not certain) and overall it works, if you have the extreme patience and personality to see it through. I very much doubt that anyone here does.

[GoSeigen]

Hello Gadge, I recall you well during those events in spacetime where my world line and yours met for a while.

I don't follow or post on TLF much and when I do it's mostly on the HYP board. But I noticed that someone had started a Value Investing thread so I thought I'd give it a scroot. However it seems from most of the posts that people do not mean value as we understand it and are not concentrating on P/TBV<1 as their principal filter. Also they are swayed by pointless macro concerns, failing to realise that value is essentially just a numbers game. Some numbers are more likely to win than others (but not certain) and overall it works, if you have the extreme patience and personality to see it through. I very much doubt that anyone here does.

That's a rather haughty way to treat other readers if I may say so -- but at least we know that your account hasn't been hacked!

GS

[OhNoNotimAgain]

[
A certain amount of arrogance is OK as long as it is accompanied by something to be arrogant about. I've been known to be a tad conceited myself. But .

Moderator Message:
edited out personal comment. Raptor.

If people really looked at the evidence before taking a stance it would make the debate much more informed.

Pyad is right, you need an inordinate amount of patience but most people cannot ignore the sugar rush of looking at some item of corporate news and "doing something". For most investors the best thing they can do is walk the dog or go fishing.

[formoverfunction]

[
A certain amount of arrogance is OK as long as it is accompanied by something to be arrogant about. I've been known to be a tad conceited myself. But .

Moderator Message:
see above.

If people really looked at the evidence before taking a stance it would make the debate much more informed.

Pyad is right, you need an inordinate amount of patience but most people cannot ignore the sugar rush of looking at some item of corporate news and "doing something". For most investors the best thing they can do is walk the dog or go fishing.

"For most investors the best thing they can do is walk the dog or go fishing."

Especially if you are a value investor, it some times takes me months if not years to get a stock I want at the price I want. The benefits can be excellant, but the frustration! Oh, the frustration of it!

I'm keen on UK property, asian and european income at the moment. I'm seeing other investors I chat with, mainly income focused, nursing 20% losses, where I've only got 25% - 50% of the money I want in those stocks/sectors invested.

Again, it's not easy on the nerves seeing something go down 20% and still only just starting the scaling in process.

Not many are willing to see their position drop by 20% AND then commit more. More often than not, they run in the other direction.....

[Lootman]

Especially if you are a value investor, it some times takes me months if not years to get a stock I want at the price I want. The benefits can be excellent, but the frustration! Oh, the frustration of it!

Much of the time you may never get to buy that share. You may be fine about that, of course. But it's something of a joke around these parts that those who were waiting for Vodafone to drop to one pound ended up never owning it. Whilst those who bought it anyway did quite well when Verizon did their deal.

Scaling on the way down is all well and good as long as you have unlimited funds. Doing that with financial shares after 2007 would have been an unmitigated disaster.

Sometimes what is needed is not patience but rather an admission that you were wrong, cut your losses and move on.

[Dod101]

I seldom look at a value investing board because I really do not know what it means, but if it means waiting for years for a share at the 'right' price (per formoverfunction) then I know why I do not look. Maybe if I were a lot younger it would be different although I doubt it.

I want/need value from any investment, usually in the form of yield but not always. However I need to have a very clear idea of why I am holding any share, and splitting up my total holding into HYP and what I call value helps because with what I call value shares, I am looking primarily for a capital gain and am not bothered about the income. With HYP shares it is obvious that I am looking for a sustainable and preferably growing dividend.

Dod

[TheMotorcycleBoy]

Some numbers are more likely to win than others (but not certain) and overall it works, if you have the extreme patience and personality to see it through.

For the benefit of a newcomer here, can you please elaborate on what exactly you mean by the above?

I'll take a guess. All you are saying is "wait till Price has fallen sufficiently such that P/TBV and P/E reach your buy criteria"?

thanks Matt

[formoverfunction]

Especially if you are a value investor, it some times takes me months if not years to get a stock I want at the price I want. The benefits can be excellent, but the frustration! Oh, the frustration of it!

Much of the time you may never get to buy that share. You may be fine about that, of course. But it's something of a joke around these parts that those who were waiting for Vodafone to drop to one pound ended up never owning it. Whilst those who bought it anyway did quite well when Verizon did their deal.

Scaling on the way down is all well and good as long as you have unlimited funds. Doing that with financial shares after 2007 would have been an unmitigated disaster.

Sometimes what is needed is not patience but rather an admission that you were wrong, cut your losses and move on.

"Doing that with financial shares after 2007 would have been an unmitigated disaster"

I didn't, but I went in heavy in 2009/10 - that £100k turned roughtly into £500k now I guess - and again just before the brexit vote. You can't be driven by one single strategy afterall. Sometime you just have to get out or go for it.

As far as unlimted funds, I'm not at the point that, but I now only invest dividend income, and roughly every 4 months I generate enough to take a full position. If there isn't something I want, I look at near cash alternatives or just hold the cash.

You of course have to recognise when you are wrong and cut your loses. That's easier if you've only scaled in, not gone in full throttle. I'm afraid that's a thing I try to do only when I'm totally convinced and there's a complete and total market correction. When everything looks pained.

Yes, your are correct, sometime you never get to but a share at the price you want, and that's absolutley not a problem at all. Why should it be? If the market has a different opion, that's fine.There's not a lack of things to invest in after all.

Things don't always work out, I'm down alot on Standard Chartedand & latin am IT's, but that's OK. The latter at least throws out a decent little div stream and you've never know there might be a point with STAN that I'll be happy to average down.

There's just no need to rush in my mind ever if your a private investor and increasingly in our interconnected world, it feels like we'll get really "go for it days'' until one of those appears, I'm more than happy to take the slow lane.