Buying Opportunities or Falling Knives

[BusyBumbleBee]

Always on the lookout for shares to buy I have come across these unloved stocks.

AEW UK Reit (AEWU) - Yield 8.55%
Global Ports (GPH) - Yield 13.9%
Gore Street Energy Storage GSF - Yield 7.49%
New River REIT (NRR) - Yield 11.09%
Regional Reit (RGL) - Yield 7.83%
SQN Asset Finance (SQN and SQNX) - Yield 8.5%
VPC specialty lending (VSL) Yield 9.98%

All with what appears to be a sustainable yield of more than 7% and a series of quietly confident RNS's. All appear comfortable within their chosen niche and the annual reports appear to show that the board and/or manager are doing things right and building a business for the long term. Some of them have undoubtedly been hit by the Woodford syndrome.

In my view all of these are seriously undervalued and if I hold them (which I do) I can look forward to rich dividends and when (if) the market rerates them, a substantial gain. But - and here's the rub - have I bought a packet of falling knives or is this strategy of buying unloved shares a valid approach.

By the way NRR has risen 32% in a month and GSF has risen 5% over a little bit more time. The others SPs are holding their own at the moment.


.

[puffster]

All appear comfortable within their chosen niche and the annual reports appear to show that the board and/or manager are doing things right and building a business for the long term.

SQN have been pretty hopeless, their top asset lending company went bankrupt and they bought it out (or something like that). They have had problems with other lendings as well. The discount to NAV reflects these problems (share price has fallen from 117 to 82) and the NAV seems to be slowly reducing.

Regards, Puffster

[monabri]

The yields are very high..for a reason.

[BusyBumbleBee]

SQN have been pretty hopeless, their top asset lending company went bankrupt and they bought it out (or something like that). They have had problems with other lendings as well. The discount to NAV reflects these problems (share price has fallen from 117 to 82) and the NAV seems to be slowly reducing. Regards, Puffster

SQN have indeed not done well, puffster - but that is history and they are where they are - it's what happens from here on that matters.. The major trouble was with a solar panel company from which they hope to extract the money they lost. Furthermore it was only the ORDs that were affected by this. The C shares are invested elsewhere. They are hopeful of recovering the money which is why they put off the share class merger.

At the end of 2017 the SP was above NAV (17% or so) and is now 13% (ish) below NAV which has not actually changed a great deal. If the Suniva problem works thru even half way OK then that will be OK by me too. So it doesn't seem to me to be a falling knife.

[BusyBumbleBee]

The yields are very high..for a reason.

What reason?

[PrefInvestor]

Always on the lookout for shares to buy I have come across these unloved stocks.

AEW UK Reit (AEWU) - Yield 8.55%
Global Ports (GPH) - Yield 13.9%
Gore Street Energy Storage GSF - Yield 7.49%
New River REIT (NRR) - Yield 11.09%
Regional Reit (RGL) - Yield 7.83%
SQN Asset Finance (SQN and SQNX) - Yield 8.5%
VPC specialty lending (VSL) Yield 9.98%

Hi BBB, You certainly seem to enjoy investing in some exotic stocks !. I have experience with some of those that you have listed.

3 REITs in the list I note. AEWU I have held before, an unremarkable smallish REIT quite high yield quite high but share price has languished in the low 90s for much of the time. RGL ditto, a somewhat better REIT IMV which at least trades closer to NAV and with a bigger market cap than AEWU. And of course NRR the third REIT in your list which has been doing very well since the Green King transaction. I had a flutter on this as you know and got my fingers burnt. I am watching from a safe distance now. It looks to be going like a train, but my guess is that there are many who are still underwater even now. I dumped all my REIT holdings late last year when it became clear what brexit and the disastrous state of the high street was likely to do to commercial property prices. Was tempted back by NRR but am out again now.

SQN and VSL two debt investments with a bit of a chequered history ?, both high yield but pretty volatile. VSL was a Woodford stock at one time I think. SQN managed to make a loan to a company that went bust I understand ?

https://citywire.co.uk/investment-trust ... d/a1235000

I quite like debt investments, but I don’t hold either of these.

GSF is a new small player in the renewables space specialising in battery storage. Didn’t get off to a good start when the IPO didn’t raise as much in the way of funds that they wanted as I understand it. Personally not impressed by battery solutions ATM, looked at them in some detail when I had my solar panels installed. Very expensive and no guarantee that they will last very long. The technology will improve with EVs etc. and I agree that in the long term it’s a good idea, especially for the grid. But right now I am not impressed and I can see no reason why larger scale installations are likely to be any better. So personally I have decided not to invest in this renewable stock, but I do hold most of the other renewables as you know.

The following article may also be of interest:-

https://citywire.co.uk/investment-trust ... e/a1238288

Global Ports is a new one on me. I’ll have to read up on that one !.

All comments are just my personal opinion obviously !. Anyone reading this please DYOR etc.

Hope you are well BBB and enjoying the NRR recovery…..

ATB

Pref

[Alaric]

Global Ports is a new one on me. I’ll have to read up on that one !.

Its price has collapsed from around 500 to around 300 in the past year. Presumably they have maintained the dividend for the time being, thus accounting for the high yield. So is it on its way out or a recovery share?

A gamble unless you put the legwork in to see what's disclosed and what's hidden in the accounts. Even then, it's on the speculative end of the spectrum.

A superficial search suggest their line of business is to own or run ports popular with cruise liners.

[BusyBumbleBee]

Yup - I like a bit of exotic excitement, Pref. But I do a lot of research before committing and I am certainly not encouraging others to invest. Posting here is more to stimulate discussion than anything else. And who knows - someone may add some other ideas into the pot. As usual I have put some comments into your post which makes it easier to understand the context :Thus {-- comment --}.

Always on the lookout for shares to buy I have come across these unloved stocks.
AEW UK Reit (AEWU) - Yield 8.55%
Global Ports (GPH) - Yield 13.9%
Gore Street Energy Storage GSF - Yield 7.49%
New River REIT (NRR) - Yield 11.09%
Regional Reit (RGL) - Yield 7.83%
SQN Asset Finance (SQN and SQNX) - Yield 8.5%
VPC specialty lending (VSL) Yield 9.98%

Hi BBB, You certainly seem to enjoy investing in some exotic stocks !. I have experience with some of those that you have listed.

3 REITs in the list I note {-- not surprising as this is a sector that has taken a recent hammering - particularly retail oriented ones--}. AEWU I have held before, an unremarkable smallish REIT quite high yield quite high but share price has languished in the low 90s for much of the time {-- But it yields well and seems to be properly run --}. RGL ditto, a somewhat better REIT IMV which at least trades closer to NAV and with a bigger market cap than AEWU {-- true and I like its business model--}. And of course NRR {-- of course!!! absolutely hammered by the Woodford fiasco--}the third REIT in your list which has been doing very well since the Green King {-- more I suspect due to the Woodford fiasco --}transaction. I had a flutter on this as you know and got my fingers burnt. I am watching from a safe distance now {-- I held my nerve there and have been rewarded - the fundamentals seemed good and indeed still do --}. It looks to be going like a train, but my guess is that there are many who are still underwater even now. I dumped all my REIT holdings late last year {-- good move at that time --}when it became clear what brexit and the disastrous state of the high street was likely to do to commercial property prices. Was tempted back by NRR but am out again now {-- I am trying to look to the future - not the past and I think the fall was a) overdue with a bit of a bubble as investors took a lot of REITs to a premium over NAV in a desperate search for income and b) was seriously overdone --}.

SQN and VSL two debt investments with a bit of a chequered history ?, both high yield but pretty volatile. VSL was a Woodford stock at one time I think{-- I think so too and he is, I believe out of it now--}. SQN managed to make a loan to a company that went bust I understand ? {-- see my earlier post o SQN above --}

https://citywire.co.uk/investment-trust ... d/a1235000 {-- I think there is a bit ore than the £2.4 million coming back --}

I quite like debt investments, but I don’t hold either of these. {-- have you looked at RMDL? --}

GSF is a new small player in the renewables space specialising in battery storage. Didn’t get off to a good start when the IPO didn’t raise as much in the way of funds that they wanted as I understand it. Personally not impressed by battery solutions ATM, looked at them in some detail when I had my solar panels installed. Very expensive and no guarantee that they will last very long. The technology will improve with EVs etc. and I agree that in the long term it’s a good idea, especially for the grid. But right now I am not impressed and I can see no reason why larger scale installations are likely to be any better. So personally I have decided not to invest in this renewable stock, but I do hold most of the other renewables as you know. {-- I bought in on the morning they announced their tie up with the Irish government - and am not regretting it (yet?)--}

The following article may also be of interest:-

https://citywire.co.uk/investment-trust ... e/a1238288
{--

the suspension of the UK’s capacity market mechanism judged by the European Court of Justice to be illegal state aid.

should be unwound soon as it is fundamental to grid management - which will reverse a sharp, earlier SP fall --}

Global Ports is a new one on me. I’ll have to read up on that one !. {-- Bought this one at IPO - which was seriously overpriced : sold it soon after (at a slight loss): but bought back in when it's share price seemed to have bottomed --}

All comments are just my personal opinion obviously !. Anyone reading this please DYOR etc. {-- ditto for me --}

Hope you are well BBB {-- Yup - but very busy on a big project with parish councils --} and enjoying the NRR recovery….. {-- very much so --}
ATB .. Pref

with kind regards - BBB

[PrefInvestor]

PrefInvestor wrote - I quite like debt investments, but I don’t hold either of these. {-- have you looked at RMDL? --}

Hi Again BBB, Yes I have RMDL on my watchlist and have had for a while. A bit small for my liking though (~£120M) and I am currently thinking of topping up my SWEF (a similar sort of investment) as they are a bit bigger (~£420M), no stamp duty and so slightly higher yield (but nothing much in it really).

I currently hold NCYF, RECI, SWEF, SEQI & SHRS. All of which have done OK, sort of 5-10% total return over about 12-18 months. Not dramatic, but frankly I prefer slow and steady !.

ATB

Pref

[BusyBumbleBee]

I am currently thinking of topping up my SWEF (a similar sort of investment) as they are a bit bigger (~£420M), no stamp duty and so slightly higher yield (but nothing much in it really). ... I currently hold NCYF, RECI, SWEF, SEQI & SHRS. All of which have done OK, sort of 5-10% total return over about 12-18 months. Not dramatic, but frankly I prefer slow and steady !. ATB Pref

Very interesting, Pref. especially SWEF because it meets a number of the criteria I consider which are:

a) does it have a yield of 7% or more? {-- No - but it's close --}
b) does it have a history of increasing dividends? {-- No! and no policy there either --}
c) does its share price oscillate? and how frequently and by how much? {-- Yes within 102 to 110 (with an outlier at 112) every few months --}
d) where is it within its oscillation band? {-- at the bottom --}
e) is it registered in the channel islands? {-- Yes - making it cheaper to trade --}
f) is it trading at a discount to NAV? {-- roughly at par --}
g) it there a foreign currency risk? {-- Yes - but largely hedged - with Brexit on the horizon this is more of a concern than normal --}
h) What's the spread? and can you buy/sell within the spread? {-- 1 penny and most trades go thru within the spread --}
i) what is the cash buffer? Is it too big giving a drag on earnings? {-- Seems the management is aware and manages this to keep some for dividends but not letting it get too big --}
j) are the chairman's and Manager's reports believable and convincing?{-- Yes --}
k) are management fees reasonable? and sufficient to incentivise the manager? {-- Pretty low : no incentive plan?--}
l) does the manager have other symbiotic interests? {-- yes but not seriously worrying --}

So: one to keep an eye on but not one to rush out and buy. But if it drops a bit more I may dabble to trade it for an extra 5-8% per annum. More I suspect for other half than me.

NCYF, RECI, SEQI & SHRS are of little interest mostly because their yield is too low for this portfolio and I don't see any upside to any of them.

with kind regards - BBB

[PrefInvestor]

SWEF......

Hi Again BBB, Well I have a limit order set to buy some more at 101.5 if it ever gets there, looking at the charts it has been down there occasionally just recently. That was about the price when I bought my first tranche and as you say the price seems to operate in the range 100-110ish.

We clearly have a very different investing style though. For me very small companies and/or yields of more than 7% and extremely volatile stocks are all things I tend to avoid in general. I have often said that if I could get an old fashioned ISA savings account paying 5% then I’d give up investing in the stock market in an instant. My debt IT holdings so far have given a reasonable approximation of that kind of performance and I’m happy with that. Those preferences are also the reason I don’t hold the likes of VSL and SQN.

ATB

Pref

[BusyBumbleBee]

SWEF......

Well I have a limit order set to buy some more at 101.5 if it ever gets there... ATB ... Pref

Bit the bullet myself yesterday and bought £10,000 worth (hate paying the extra £1 if you go over £10K) at 102 in one of my wife's portfolios. Thanks for pointing SWEF out to me.

with kind regards - BBB

[PrefInvestor]

SWEF......

Well I have a limit order set to buy some more at 101.5 if it ever gets there... ATB ... Pref

Bit the bullet myself yesterday and bought £10,000 worth (hate paying the extra £1 if you go over £10K) at 102 in one of my wife's portfolios. Thanks for pointing SWEF out to me.

with kind regards - BBB

Hi Again BBB, Well I hope it works out for you - but I can offer no guarantees obviously. All I can say is that I have a holding and hope to have a bigger one sometime soon, but with these sort of companies one bad loan can spell bad news for the SP.

ATB

Pref

[thebarns]

Interesting thread.

I bought some RMDL today.

I also find that the constituents of VT RM Alternative Income fund provide some useful options and I also hold a number of those directly, in addition to a number of VCTs and preference shares - all in the name of diversifying reasonably high income sources in addition to the normal high yield shares.

[PrefInvestor]

Hi Again BBB, Well my SWEF limit order was filled today at 101.25 so I have my top-up. Lets hope for it to swing back up towards 110 now......!

ATB

Pref

[BusyBumbleBee]

Well I have a limit order set to buy some more at 101.5 if it ever gets there... ATB ... Pref

If it doesn't get there tomorrow you will have missed the boat I hope - but as someone said "I can offer no guarantees obviously."

[PrefInvestor]

Well I have a limit order set to buy some more at 101.5 if it ever gets there... ATB ... Pref

If it doesn't get there tomorrow you will have missed the boat I hope - but as someone said "I can offer no guarantees obviously."

Hi Again BBB, I'm afraid SWEF hasnt been doing that great since we purchased, but thats investing isnt it !. I see someone likes SWEF a lot though and bought 1,000,000 shares after the bell today (25/9) at 100.8 !!. Was that you....? (only kidding).

Hope you are well.

ATB

Pref

[johnhemming]

In my recent screening I steered clear of Reits because of no deal Brexit risk.

[PrefInvestor]

In my recent screening I steered clear of Reits because of no deal Brexit risk.

Personally I would agree with steering clear of REITs ATM - just my personal opinion. SWEF isn’t a REIT it’s a debt investment though but some of BBBs other picks are REITs eg AEWU, RGL and NRR - but they have all been doing pretty well.....

ATB

Pref

[johnhemming]

Those are, however, an exposure to property and an extended no deal will I think hit property reasonably hard.