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National Grid - A medium/long term good buy?

Wider investment strategy discussions not dealt with elsewhere
Dod101
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Re: National Grid - A medium/long term good buy?

#89005

Postby Dod101 » October 18th, 2017, 6:53 am

Fred

The Morningstar comment is largely on the cost of capital v return on capital not about its moat, although I agree that the initial thrust of the article would suggest that that is its worry. The UK grid produces around 25% of its profits as far as I can see and there is some stirring around separating the grid within NG itself (Maybe along the lines of Openreach in BT?)

I assume that as for SSE there are advantages in owning the distribution network (apart simply from profit because of course that is regulated) but I cannot see that NG is a bad investment. It does not so far as I am aware go in for speculation. and produces steady and decent rises in its dividends. It seems to me a good long term buy. It is not though a licence to print money. I hold both NG and SSE.

Dod

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Re: National Grid - A medium/long term good buy?

#89010

Postby FredBloggs » October 18th, 2017, 7:14 am

Dod101 wrote:Fred

The Morningstar comment is largely on the cost of capital v return on capital not about its moat, although I agree that the initial thrust of the article would suggest that that is its worry. The UK grid produces around 25% of its profits as far as I can see and there is some stirring around separating the grid within NG itself (Maybe along the lines of Openreach in BT?)

I assume that as for SSE there are advantages in owning the distribution network (apart simply from profit because of course that is regulated) but I cannot see that NG is a bad investment. It does not so far as I am aware go in for speculation. and produces steady and decent rises in its dividends. It seems to me a good long term buy. It is not though a licence to print money. I hold both NG and SSE.

Dod

For sure. So, why focus on this, which is completely untrue. NG has the widest, deepest economic moat of any company in the UK.
We downgraded our moat rating – which indicates that the company has a slender competitive advantage - from narrow to none on our lack of confidence that National Grid can consistently realise returns on capital greater than its cost of capital.

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Re: National Grid - A medium/long term good buy?

#89053

Postby richfool » October 18th, 2017, 10:27 am

Isn't the Morning Star article focusing predominantly on NG's US operations?
We have reduced our fair value estimate to 990p a share from £10.50 due to higher capital expenditure estimates and lower earnings estimates for the US regulated activities because of higher operating costs.

We downgraded our moat rating – which indicates that the company has a slender competitive advantage - from narrow to none on our lack of confidence that National Grid can consistently realise returns on capital greater than its cost of capital. The historical rate-setting structures – which determine how much utilities can charge customers - in the US are a key drag on return on invested capital (ROIC) going forward, especially as National Grid invests heavily in the US during the next three to four years. In the US, National Grid has struggled to keep pace with its allowed returns and regularly earns 2-to-3% less than its UK operations.

Perhaps they're too hung up on the US side of the business.

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Re: National Grid - A medium/long term good buy?

#89061

Postby Dod101 » October 18th, 2017, 11:23 am

richfool wrote: Perhaps they're too hung up on the US side of the business.


You may well be right and I think NG itself spent some time discussing that in their recent Annual Report. Still, they will have been benefiting from the strength of the US Dollar to Sterling which must have helped the outcome.

I rather think that Fred is a little too gung-ho about NG and its 'economic moat' because as I said it is not a licence to print money and with political issues threatening an ever larger influence, I think all holders (including me) need to be on our guard.

Dod

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Re: National Grid - A medium/long term good buy?

#89064

Postby FredBloggs » October 18th, 2017, 11:31 am

Dod101 wrote:
richfool wrote: Perhaps they're too hung up on the US side of the business.


You may well be right and I think NG itself spent some time discussing that in their recent Annual Report. Still, they will have been benefiting from the strength of the US Dollar to Sterling which must have helped the outcome.

I rather think that Fred is a little too gung-ho about NG and its 'economic moat' because as I said it is not a licence to print money and with political issues threatening an ever larger influence, I think all holders (including me) need to be on our guard.

Dod

Be assured, I have my feet firmly on the ground. NG is just a cash cow in my plans. I expect little from them except maybe a modest capital appreciation over the mid to long term as greater electrification spreads throughout the economy. And a nice little divi as a bonus too. This seems a much more likely outcome than it did even a few months ago, I think. I'm all ears if anyone thinks that the national grid is in any way threatened economically, I just cannot buy it from where I'm sitting. Grid demand can only go one way, even if we get things huge implementation of home battery storage etc.... My guess is that UK energy capacity has to grow by at least 25 to 30% over the next couple of decades as a minimum . The vast majority of that capacity in England and Wales will pass through the grid.But I'm only an engineer, may be I have too simple a view of these things.

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Re: National Grid - A medium/long term good buy?

#89118

Postby richfool » October 18th, 2017, 3:45 pm

I vaguely remember National Grid going through a capital raising exercise of some sort, back in around 2013/2014. I can't remember the reasoning behind it.

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Re: National Grid - A medium/long term good buy?

#89159

Postby tjh290633 » October 18th, 2017, 6:27 pm

richfool wrote:I vaguely remember National Grid going through a capital raising exercise of some sort, back in around 2013/2014. I can't remember the reasoning behind it.

In http://www.investegate.co.uk/national-g ... 00118369E/ they commented that:

"Strong financial position: issued £2bn of very competitively priced hybrid bonds
...
From a financing perspective, the Group made significant progress over the year, successfully completing a £2bn hybrid debt transaction and raising £3bn of further long-term funding at very competitive rates.

Overall, this regulatory, operational and financial progress combined to underpin the Board's confidence in a new progressive dividend growth policy, announced in March 2013. Continued, sustainable, dividend growth is an essential element of the total return that National Grid delivers to its shareholders. The Group's strategy and financing structure are fully aligned with supporting this, enabling the business to deliver further value through investment led growth.
...
In February 2013 National Grid raised approximately £2bn of new long-term funding through the issue of very competitively priced hybrid debt securities. These have a final maturity of 60 or 63 years, can be called at the Company's option at an earlier date and have a number of additional features which differentiate them from the Group's other unsecured debt including coupon step-ups and the ability to defer coupon payments. The credit rating agencies treat these instruments partially as equity in their consideration of the Group's financial metrics, effectively strengthening the Group's balance sheet compared to the issuance of traditional debt.

The ability to issue hybrid debt represents an opportunity for the Company to access additional liquidity and provide further support to the Group's growing balance sheet if required.

In addition to these hybrid securities, National Grid issued over £3bn of new long-term debt during the course of the year, including the largest corporate Maple bond issue at the time, to finance the ongoing operations and growth of the Group.

National Grid expects to raise, on average, around £3bn of long-term debt each year to fund the expansion of the business and to refinance maturing debt. The current credit ratings of the Group are an important factor in the businesses' ability to access funding at attractive rates and in a wide range of currencies and markets. The Board believes that maintaining strong credit ratings, with the resultant access to liquidity and attractive funding costs, is a key driver of value for the Group."


That's all I can find in the RNS.

TJH

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Re: National Grid - A medium/long term good buy?

#90785

Postby FredBloggs » October 26th, 2017, 12:06 am

NG alert - Shares on sale, top up while stocks last. Lovely divi too 8-)

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Re: National Grid - A medium/long term good buy?

#91124

Postby richfool » October 27th, 2017, 12:34 pm

FredBloggs wrote:NG alert - Shares on sale, top up while stocks last. Lovely divi too 8-)

Fred, I think that was just a "Happy Hour" promotion. :) The SP bounced back up quite quickly the same day.
Currently around 917p.

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Re: National Grid - A medium/long term good buy?

#91126

Postby FredBloggs » October 27th, 2017, 12:37 pm

richfool wrote:
FredBloggs wrote:NG alert - Shares on sale, top up while stocks last. Lovely divi too 8-)

Fred, I think that was just a "Happy Hour" promotion. :) The SP bounced back up quite quickly the same day.
Currently around 917p.

Yep, I was real busy and missed a 890p top up opportunity. Oh well.

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Re: National Grid - A medium/long term good buy?

#94374

Postby FredBloggs » November 9th, 2017, 12:20 pm

FredBloggs wrote:
richfool wrote:
FredBloggs wrote:NG alert - Shares on sale, top up while stocks last. Lovely divi too 8-)

Fred, I think that was just a "Happy Hour" promotion. :) The SP bounced back up quite quickly the same day.
Currently around 917p.

Yep, I was real busy and missed a 890p top up opportunity. Oh well.

Well, NG is on sale again today. It's bed time here now, so I've made a limit buy order to top up overnight. Let's see if the magic pixies fill the order and in turn deliver me a nice little present by way of a divi after the new year.

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Re: National Grid - A medium/long term good buy?

#94398

Postby richfool » November 9th, 2017, 1:13 pm

FredBloggs wrote:Well, NG is on sale again today. It's bed time here now, so I've made a limit buy order to top up overnight. Let's see if the magic pixies fill the order and in turn deliver me a nice little present by way of a divi after the new year.

I am watching it too, Fred. Though I have a holding already and don't really want to go overweight on it.

Let's hope the magic pixies fulfill your dreams for you! :o

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Re: National Grid - A medium/long term good buy?

#94609

Postby FredBloggs » November 9th, 2017, 11:12 pm

richfool wrote:
FredBloggs wrote:Well, NG is on sale again today. It's bed time here now, so I've made a limit buy order to top up overnight. Let's see if the magic pixies fill the order and in turn deliver me a nice little present by way of a divi after the new year.

I am watching it too, Fred. Though I have a holding already and don't really want to go overweight on it.

Let's hope the magic pixies fulfill your dreams for you! :o

Nothing found under the pillow this morning :cry: Perhaps my limit order was a penny or two too ambitious. Not to worry, I'll leave the linit order in place till month end and see if I get lucky.

Just to add, it feels real nice to effectively get my leccy and gas FOC paid for by NG 8-)

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Re: National Grid - A medium/long term good buy?

#94642

Postby FredBloggs » November 10th, 2017, 8:20 am

I am increasingly wondering about the future corporate structure at NG. Since NG sold off a lot of it's low return, high spend gas distribution network to the Chinese, since then SSE are seriously looking at hiving off their UK domestic businesses. I have been wondering if NG might just incorporate in the USA or elsewhere and move the UK assets into a subsidiary, probably loaded down with all NG's corporate debt and other low return liabilities or assets. I think that would have the effect of making a state take over of the UK power and gas networks a pretty toxic proposition for the next government. These thoughts are encouraged in my mind by the increasing amount of capital expenditure into higher return American projects. I see NG as the next best thing to a legal personal bank note printing press, almost. For sure, all this political posturing is going to put a lid on the share price for the foreseeable future, I think.

http://www.telegraph.co.uk/business/2017/11/09/national-grid-pours-investment-us-uk-political-threat-looms/

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Re: National Grid - A medium/long term good buy?

#94644

Postby baldchap » November 10th, 2017, 8:31 am

I have been wondering if NG might just incorporate in the USA


I do hope that this will one day be the case. I do hold but would hold more if they were ex UK, and not just for the quarterly div.

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Re: National Grid - A medium/long term good buy?

#94898

Postby richfool » November 11th, 2017, 12:09 pm

As a subscriber I expect Fred will have spotted this article in the Telegraph. What I could view free petered out just after a "but..... "! Thus I wonder what the bottom line recommendation was?

http://www.telegraph.co.uk/investing/sh ... ed-income/

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Re: National Grid - A medium/long term good buy?

#94907

Postby FredBloggs » November 11th, 2017, 12:21 pm

richfool wrote:As a subscriber I expect Fred will have spotted this article in the Telegraph. What I could view free petered out just after a "but..... "! Thus I wonder what the bottom line recommendation was?

http://www.telegraph.co.uk/investing/sh ... ed-income/

It was along the lines of -
For this portfolio – where the aim is to deliver a sustainable income of 5pc – it remains a "hold".

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Re: National Grid - A medium/long term good buy?

#95492

Postby FredBloggs » November 14th, 2017, 12:08 am

FredBloggs wrote:Nothing found under the pillow this morning :cry: Perhaps my limit order was a penny or two too ambitious. Not to worry, I'll leave the limit order in place till month end and see if I get lucky.

Just to add, it feels real nice to effectively get my leccy and gas FOC paid for by NG 8-)

Woke up this morning with a little present under my pillow. Apparently, the magic stock market pixies went shopping again last night. There it was, under the pillow when I woke up, a nice little parcel of NG stock bought and delivered at 890p. It seems there was a Blue Cross Sale on NG for a short while yesterday. Now I need to think about getting a leccy car to make the best of the free leccy delivered courtesy of NG divis. Ex divi on November 24th, I think, so bought nicely in time to capture it 8-)

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Re: National Grid - A medium/long term good buy?

#95608

Postby richfool » November 14th, 2017, 2:57 pm

FredBloggs wrote:
FredBloggs wrote:Nothing found under the pillow this morning :cry: Perhaps my limit order was a penny or two too ambitious. Not to worry, I'll leave the limit order in place till month end and see if I get lucky.

Just to add, it feels real nice to effectively get my leccy and gas FOC paid for by NG 8-)

Woke up this morning with a little present under my pillow. Apparently, the magic stock market pixies went shopping again last night. There it was, under the pillow when I woke up, a nice little parcel of NG stock bought and delivered at 890p. It seems there was a Blue Cross Sale on NG for a short while yesterday. Now I need to think about getting a leccy car to make the best of the free leccy delivered courtesy of NG divis. Ex divi on November 24th, I think, so bought nicely in time to capture it 8-)

Well actually, I did succumb and top-up yesterday, though I got mine at 896p. I was doing a bit of top-slicing and had some leftover, and as you say was alert to the approaching ex-div date.

viewtopic.php?f=15&t=8293&p=95443#p95443

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Re: National Grid - A medium/long term good buy?

#98085

Postby richfool » November 23rd, 2017, 10:37 am

FredBloggs wrote:Woke up this morning with a little present under my pillow. Apparently, the magic stock market pixies went shopping again last night. There it was, under the pillow when I woke up, a nice little parcel of NG stock bought and delivered at 890p. It seems there was a Blue Cross Sale on NG for a short while yesterday. Now I need to think about getting a leccy car to make the best of the free leccy delivered courtesy of NG divis. Ex divi on November 24th, I think, so bought nicely in time to capture it 8-)

Fred, you might be able to get an even better "Black Friday" deal on NG now. Further recent falls and going "Ex-dividend" today, have brought the SP down to around 863p. (Yield; 5.59%)


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