Value Investing

[Raptor]

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There have been a few personal swipes at individual posters on this thread. Please abide by the sites "rules", any more and posts will be deleted and passed to admin to review. Thanks for your understanding. Raptor.

[SalvorHardin]

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

PYAD's method involves looking at four things (price-earnings ratio, dividend yield, price to tangible net asset value and debt) and comparing them to the market average. It's summarised in the link below (the articles on the UK Motley Fool website were removed last year):

https://www.fool.com/investing/value/20 ... tocks.aspx

Some of us prefer the original definition of "value investing" which comes from Benjamin Graham and is "buying shares at a substantial discount to their intrinsic value", which is quite subjective.

https://www.investopedia.com/terms/v/valueinvesting.asp

Back in the early 2000s on TMF there was considerable disagreement on the value shares board between people who followed PYAD's criteria and those who used Graham's ideas, especially when applied to small oil explorers. These oilys didn't meet PYAD's criteria so some people tried to get TMF to stop us pointing them out by deleting posts and imposing strict rules as to what could be posted. We gave up after a while and moved to the Oil and Gas shares board.

Our argument was that the balance sheet grossly undervalued discovered oil reserves which would be worth a lot more in a trade sale (as we were seeing in actual deals). Also the recovery in the oil price meant that these companies were becoming profitable (most were regular loss makers, as is normal for exploration companies). PYAD's method discouraged the use of forecast P/E and there was a lot of antipathy towards overseas assets (the expression "bongo tinpot" was sometimes used).

It turned out that the oil fans were right with many oilcos producing spectacular gains, life changing amounts for some of us including early retirement and paying off mortages (the sector saw a lot of multi-baggers with up to 100 times for some Soco shareholders).

[Breelander]

PYAD's method involves looking at four things (price-earnings ratio, dividend yield, price to tangible net asset value and debt) and comparing them to the market average... (the articles on the UK Motley Fool website were removed last year) ...

But they are still available in the Internet Archive Wayback Machine.

How I Find The Best Value Shares
By Stephen Bland (TMFPyad)
February 18, 2005

https://web.archive.org/web/20130527133 ... 050218.htm

VALUE INVESTING - Minimise the Downside

VALUE INVESTING - Maximise the Upside

[Lootman]

PYAD's method involves looking at four things (price-earnings ratio, dividend yield, price to tangible net asset value and debt)

Some of us prefer the original definition of "value investing" which comes from Benjamin Graham and is "buying shares at a substantial discount to their intrinsic value", which is quite subjective.

It turned out that the oil fans were right with many oilcos producing spectacular gains, life changing amounts for some of us including early retirement and paying off mortgages (the sector saw a lot of multi-baggers with up to 100 times for some Soco shareholders).

It does not surprise me that the broader and more globally recognised definition of value prevailed in that case. In particular conflating yield with value seems misguided, whilst P/E ratios are very sector-specific rather than absolute. P/B ratios proved to be useless when the banks imploded since nobody could compute book values. And debt can be both positive or negative according to other factors.

The idea that four numbers can make you rich regardless was always suspect.

[TUK020]

PYAD's method involves looking at four things (price-earnings ratio, dividend yield, price to tangible net asset value and debt) and comparing them to the market average. It's summarised in the link below (the articles on the UK Motley Fool website were removed last year):

https://www.fool.com/investing/value/20 ... tocks.aspx

SalvorHardin,
helpful post, thank you
Is there an easy way to screen the FTSE to retrieve those numbers?

[TheMotorcycleBoy]

The most useful resource, being a publication of recent average PEs for the FTSE100 and 350. Can such a thing be found for free online, or am I having a laugh?

[tjh290633]

I remember the time on TMF Value board, when PYAD called Aviva as a farm bet. It took a long time to come to fruition, but it did. I know that the time came when I wanted a fresh insurer, after RSA had problems, and AV. fitted the bill.

It's the old story, the market may have deeper pockets than you, and you are unable to wait for the time required.

TJH

[Breelander]

The most useful resource, being a publication of recent average PEs for the FTSE100 and 350. Can such a thing be found for free online, or am I having a laugh?

For free you get a summary chart, if you subscribe to the FT you can get interactive charts and historic data as well.

FT100 INDEX PER https://markets.ft.com/data/indices/tea ... =UKX.P:FSI
FTA 350 PE RATIO https://markets.ft.com/data/indices/tea ... =NMX.P:FSI

[TheMotorcycleBoy]

The most useful resource, being a publication of recent average PEs for the FTSE100 and 350. Can such a thing be found for free online, or am I having a laugh?

For free you get a summary chart, if you subscribe to the FT you can get interactive charts and historic data as well.

FT100 INDEX PER https://markets.ft.com/data/indices/tea ... =UKX.P:FSI
FTA 350 PE RATIO https://markets.ft.com/data/indices/tea ... =NMX.P:FSI

Thanks for these Breelander, these are very useful - and presumably the very thing that investors like "pyad" must use in their investment choices.

But seriously - are they for real?

They are telling me that both the FTSE 100 and 350 are trading really quite cheaply now.....am I right?

For example my newbie eyes are telling me that average PER for both indices was between 35-40ish is summer 2016 (yes just prior to Brexit), and has gradually fallen to about 12 now.

Interestingly the sharpest correction seemed to occur recently, about Jan-Feb this year.

So we shouldn't be fearful of a crash, and that now is probably a good time for equity purchase.

M&M

[Raptor]

The most useful resource, being a publication of recent average PEs for the FTSE100 and 350. Can such a thing be found for free online, or am I having a laugh?

For free you get a summary chart, if you subscribe to the FT you can get interactive charts and historic data as well.

FT100 INDEX PER https://markets.ft.com/data/indices/tea ... =UKX.P:FSI
FTA 350 PE RATIO https://markets.ft.com/data/indices/tea ... =NMX.P:FSI

Thanks for these Breelander, these are very useful - and presumably the very thing that investors like "pyad" must use in their investment choices.

But seriously - are they for real?

They are telling me that both the FTSE 100 and 350 are trading really quite cheaply now.....am I right?

For example my newbie eyes are telling me that average PER for both indices was between 35-40ish is summer 2016 (yes just prior to Brexit), and has gradually fallen to about 12 now.

Interestingly the sharpest correction seemed to occur recently, about Jan-Feb this year.

So we shouldn't be fearful of a crash, and that now is probably a good time for equity purchase.

M&M

I also checked FTSE250 and it shows the same fall from Grace.

P/E at 15.34 currently a year ago it was 22? Fortunately for me the only company I have with a higher P/E is VOD and it has been like that for quite a while now along with low cover of 0.7.

I remember reading something about the falling P/E somewhere. Will see if I can find it.

Raptor.

[TheMotorcycleBoy]

Perhaps a lot of it is due to the approach of Brexit deadlines?

https://www.ft.com/content/64e7f218-4ad ... 14ce4af89b
https://www.dw.com/en/2018-the-year-of- ... a-41930811

(I'd be intrigued to see what the S&P500 PER looks like)

[Raptor]

Perhaps a lot of it is due to the approach of Brexit deadlines?

https://www.ft.com/content/64e7f218-4ad ... 14ce4af89b
https://www.dw.com/en/2018-the-year-of- ... a-41930811

(I'd be intrigued to see what the S&P500 PER looks like)

Quick check shows it rising over 24?

Raptor.

[TUK020]

Not part of the rigorous figures analysis, but another pointer worth keeping an eye on - Director's share deals.

e.g. VOD. Share price has dropped by a third this year. Between 3rd - 7th Sept, 8 directors have purchased approx £1.5m between them at prices ranging 1.64 - 1.66.
From the Hargreaves site:
https://www.hl.co.uk/shares/shares-sear ... ctor-deals
Unfortunately, VOD doesn't make much sense when looked at in PYADic terms, as it is waiting for an earning recovery before the PE ratio looks attractive.

[Raptor]

I also checked FTSE250 and it shows the same fall from Grace.

P/E at 15.34 currently a year ago it was 22? Fortunately for me the only company I have with a higher P/E is VOD and it has been like that for quite a while now along with low cover of 0.7.

I remember reading something about the falling P/E somewhere. Will see if I can find it.

Raptor.

This is from IG about the FTSE100 P/E. Seems a "small" number of companies make up the bulk of the index and thus a small change in them can reflect a big change in the P/E for the index.

Raptor.

[TheMotorcycleBoy]

This is from IG about the FTSE100 P/E. Seems a "small" number of companies make up the bulk of the index and thus a small change in them can reflect a big change in the P/E for the index.

Thanks Raptor. Pretty amazing that HSBC,BP and Shell comprise 23% of the total capitalisation, at the time of that articles writing.

So anyway, I grabbed the PEs of shell, hsbc, BP (10.9, 12.2, 13) and took a quick glimpse at their markcaps. Shell and BP have similar markcaps, where as hsbc is about half the weight. Thus the average for a combined firm of those 3 =

((10.9x2) + (13x2) + 12.2) / 5 = 12

Which would suggest to me that the average for the remaining firms is about 12 still.....does that sound plausible?

PS Another thing that I saw in that link that I can't get my head around is in the graph at the bottom we have the trailing PER and the forward PER. Now whilst I think that I understand that the trailing PER is the PER based on the current price and the most recent earnings, but the forward is based on current price and the predicted future earnings. Which makes me really wonder what the point is of having the Fwd. PER at total since it, to my mind at least, is just a guessimate.

[Breelander]

Shell and BP have similar markcaps...

No, they don't. Shell is nearly double that of BP. You need to add the market cap of RDSA and RDSB. See the table here..

http://www.stockchallenge.co.uk/ftse.php

[TheMotorcycleBoy]

Shell and BP have similar markcaps...

No, they don't. Shell is nearly double that of BP. You need to add the market cap of RDSA and RDSB. See the table here..

http://www.stockchallenge.co.uk/ftse.php

Ok, thanks. I did not realise both the RDSA and RDSB were traded on the LSE.

What's the exact difference between them? In fact does anyone know if there's a LF thread discussing both those two shares, i.e. compare and contrast etc.?

M&M

[ReformedCharacter]

Ok, thanks. I did not realise both the RDSA and RDSB were traded on the LSE.

What's the exact difference between them? In fact does anyone know if there's a LF thread discussing both those two shares, i.e. compare and contrast etc.?

M&M

https://seekingalpha.com/article/405603 ... l-b-shares

RC

[TheMotorcycleBoy]

Ok, thanks. I did not realise both the RDSA and RDSB were traded on the LSE.

What's the exact difference between them? In fact does anyone know if there's a LF thread discussing both those two shares, i.e. compare and contrast etc.?

M&M

https://seekingalpha.com/article/405603 ... l-b-shares

RC

Many thanks, RDSB shares are the ones with best divi then:

The B shares have the dividend access mechanism, while the A shares do not. What the dividend access mechanism allows B shareholders to do is to forego withholding tax (15% under Dutch law, verified by the Dutch Revenue Service). Withholding tax reduces the size of your investment earnings, so taking the right steps to not be subject to this is highly advised.

[TUK020]

The gist is that RDSA pay dividends in Euro's (but subject to Dutch witholding tax), and RDSB pay dividends in sterling.
Dutch witholding tax is due to be scrapped in 2020 (part of the Unilever restructuring tale).
If you are a UK tax payer, you will want RDSB.