Couple of one time heavyweights

[ADrunkenMarcus]

Apologies then, in that case. I interpreted, incorrectly it seems, that you were arguing the dividend was the driver, not the ability (based on the underlying business) to deliver the dividend(s).

Maybe I could have been clearer. The market is obviously sceptical to a degree because the dividend yield is so high, however there does seem to be a disconnect between LGEN's reported results and ability to pay the dividend (which they are doing) and the market's scepticism. If LGEN continues to do well and pay a dividend accordingly then 'Mr. Market' may then re-assess and re-rate upwards.

Best wishes

Mark.

[dealtn]

Apologies then, in that case. I interpreted, incorrectly it seems, that you were arguing the dividend was the driver, not the ability (based on the underlying business) to deliver the dividend(s).

Maybe I could have been clearer. The market is obviously sceptical to a degree because the dividend yield is so high, however there does seem to be a disconnect between LGEN's reported results and ability to pay the dividend (which they are doing) and the market's scepticism. If LGEN continues to do well and pay a dividend accordingly then 'Mr. Market' may then re-assess and re-rate upwards.

Best wishes

Mark.

My own view, in this case, is that LGEN have a hedge for Covid. The measure of which is not known, so it may be partial, or indeed more than 100%.

Investment/Insurance companies tend to invest their premium "float" in assets, and these assets move in price. Typically such assets are corporate bonds and as the Covid "situation" worsens the value of these assets tends to fall. So it can be rational for the share prices of companies such as LGEN to move negatively with worsening Covid type news.

However, I would argue, and particularly so for a company such as LGEN that serves the annuity and pension market generally, that bad Covid "news" is also associated with increased mortality and a reduction in life expectancy. As such the value of their liabilities also falls, and that is the "hedge".

It seems to me that the market is able to view the re-pricing of the assets easily enough, but the re-pricing on the liability side is less observable. It will only develop over time, and by its nature is re-priced gradually and conservatively by the actuarial profession, unlike the market re-pricing of the assets. (Note to self to see the next industry update due in October).

For the sake of disclosure I am long LGEN (but no other insurer types).

[Howard]

I am bemused to note that Shell London shares have now fallen below £10, closing on Friday at £9.905, and HSBC is now just above £3 at £3.03. How have the mighty fallen.

At these prices it is too late to sell so I will just need to hang on but what a change in fortunes in the last few years. If I were a business I would be showing those two holdings together with Imperial Brands if not exactly discontinued businesses (not yet anyway), then certainly as businesses held for sale, which I intend to do over the longer term.

Dod

Concentrating investments even in large companies can prove quite disappointing sometimes.

I have always smiled when I’ve read posts which praise the “culture” of some large companies and use it as a reason to invest. In another thread Shell was being praised recently for having a better culture than BP.

Shell, HSBC, Legal and General, some tobacco companies, Centrica have all been praised in the past for their culture. How are the mighty fallen?

Anyone who has worked for a major international company must be aware that it is quite difficult to assess the culture of the company, even from within and even at a senior level. The culture can change substantially without the leadership changing. For example HSBC has been involved in some dubious businesses and was lucky to be rescued from massive American sanctions by George Osborne when he was Chancellor. And yet it has been praised for its “culture” in forums here suggesting this as a reason for investing.

Don’t get me wrong, I am invested in Shell and L and G and for a time had shares in HSBC. But my reason for investing wasn’t some misguided belief in their culture. It was because they made up a part of a widely diversified portfolio.

A good example of the irrelevance of culture might be Tesco. As an early investor, their dividends soon paid for the shareholding. Warren Buffett was impressed with them at one stage. Was the culture at Tesco always wrong? As a customer I have always found them to be good (and especially efficient at handling Covid problems). As an investment for the future, with their low margins, who knows?

The Covid situation has reassured me that a widely diversified portfolio is a good strategy (including a number of HYP shares). Whilst some giant companies are out of favour now, others have benefited from the situation.

Regards

Howard


HSBC’s lucky escape in 2016: https://www.independent.co.uk/news/uk/p ... 32171.html

[Dod101]

I, at least, don't concentrate my investments in large companies and I am certainly one who believes strongly in culture. To take the Tesco example, under Terry Leahy, Tesco's culture was all wrong. They got arrogant, all conquering and even the staff on the shop floor seemed to think that customers were really a side issue. They were not always like that . Warren Buffett simply looked at the numbers I guess and liked them without digging into the 'soft' issues.

As for Shell it is much more collegiate in its culture, at least it has always seemed so to me, than say BP and much less prone to accidents.

For years HSBC was excellent although they always went in cycles. They need I think to have a strong hands on executive chairman and do not seem to have that in the current one who apparently lives in New York. The last excellent one they had was Sir William Purves in the 1990s which was their last golden decade. Then came John Bond who went on a disastrous buying spree, the results of which haunt them to this day. They still though have a very conservative balance sheet and are one of the better capitalised banks around, the more so by being forced not to pay a dividend for this year.

Dod

[ADrunkenMarcus]

Shell, HSBC, Legal and General, some tobacco companies, Centrica have all been praised in the past for their culture. How are the mighty fallen?

I think some of these companies are basically in managed absolute or relative decline. BP's share price has a touch of 1995 about it. Equity investing is for the long term but someone who purchased then would be sitting on no capital gain at all after 25 years, even on a nominal basis.

Best wishes


Mark.

[Wizard]

I see RDSB is now getting down very close to the immediate post Covid trough. The yield, assuming the dividend remains at 16c per quarter for a while, is now around 5% which seems a bit high but not outrageous. I am struggling to see what in the near term is going to get RDSB out of the current slump. But then BP has a forward yield, assuming no change in quarterly dividend, of nearly 7%. So either, Shell is carrying a premium, or, maybe there is still scope for further share price falls. I'm starting to consider crystallising my c.60% loss.

[88V8]

I'm dubious of crystallising large looses atm. Shell, BP....
Why? They will be worth more when CGT rates rise.
Yes, one can bring losses forward, but who is to say that this will not be curtailed as Rishi scrabbles behind the sofa.

I hope Shell will reinvent itself as an Energy company. In the meantime the divi is OK, not brilliant any more, but OK, and the capital was sunk anyway.

V8

[Dod101]

I'm dubious of crystallising large looses atm. Shell, BP....
Why? They will be worth more when CGT rates rise.
Yes, one can bring losses forward, but who is to say that this will not be curtailed as Rishi scrabbles behind the sofa.

I hope Shell will reinvent itself as an Energy company. In the meantime the divi is OK, not brilliant any more, but OK, and the capital was sunk anyway.

V8

I have little doubt that Shell will reinvent itself and so will just keep what I hold. I have held it for a very long time and have no idea whether I am looking at a loss at the moment or not, nor does it bother me one way or the other. BP may have the higher yield because the market thinks it may have to cut its dividend again. IN my opinion, which does not mean a lot, I think it has a higher yield because it is a poorer share all round.

Interesting to me that HSBC seems to be holding above £3.

Dod