Centrica and SSE

[Arborbridge]

77ss wrote:

Robbery? Do you seriously think that this is a big worry?

Want to focus on political threats? Focus on Brexit Blight. Far more reaching than any proposals by a party that may not even be elected.

Yes, I do think it's a big worry, but that does not preclude my thinking Brexit is a bigger worry

However, this isn't the place to discuss it.

[ayshfm1]

There isn't much we can do about Corbyn, but he is the biggest risk to the utility portions of my HYP portfolio (arguably more far reaching than utilities but difficult to quantify).

He is a nationaliser and he also deliberately doesn't clarify what he intends. But those of us who have studied history knows where this ends. The risk being we won't be compensated for our assets becoming state owned. Or at the very least it will appear so which drives the price down and allows nationalisation at a fraction of todays values

Given May's abject performance so far I'm becoming convinced he will be elected.

As for BrExit it isn't a risk in of itself, it's what the UK government of the day chooses to do with those freedom. Today Corbyn would run into EU legal problems if he intended to implement his stated policies, post BrExit the UK is a sovereign nation and is not answerable to a supra national organisation, he'll literally be able to do as he likes.

[moorfield]

There isn't much we can do about Corbyn

We can not vote for him ...

[Gengulphus]

Is this one story which hints that LTBH is dead as some believe?

Dunno - but I do know that's a topic for a strategies board, not this one...

Really? The Board Use thread had 126 replies debating what is on and off topic for this board, but after that thread was closed there was no follow up clarification. There was a lot of debate about the extent to which selling was or was not a valid topic for this board, but no conclusion and no definitive statement. So I struggle to see how anyone can know the answer.

Yes, really - because what I said was about LTBH, which is a description of strategies that do little or no voluntary selling - little enough that one normally ends up holding for a very long time (many years or even decades). Whether to choose to sell in a particular instance cuts across that - it's an issue that can be faced both by those who don't use LTBH strategies and by those who do (just not in any significant way by those who use the most extreme "never sell voluntarily" form of LTBH strategies).

To give an example, my own main HYP, which will reach its 15th anniversary next spring, currently contains 39 holdings. I've just checked through them: 23 of them have been held for over 10 years and another 6 for over 5 years. I think that shows says that the strategy I use is a LTBH one - but I most certainly do sell occasionally. And I'm quite certain that general questions about that sort of strategy, such as whether it's of a 'dead' type, are strategic ones. The same is not the case for questions about particular instances of actual practical selling decisions, such as whether to sell Tesco or Carillion (FWIW, I did sell Tesco earlier this year, when end-of-tax-year CGT planning added to my reasons in favour of doing so; I haven't yet seen a case for selling Carillion at its current price that I find convincing enough).

Gengulphus

[spiderbill]

Thank heavens my holding of Centrica is small, cos it's now 51% down on capital value. SSE merely 10% down.

Commiserations - but people should note that this is a comment on your personal investment fortunes and how unfortunate your past buying decisions have been, not on the HYP merits or otherwise of the two shares.

Commiserations gratefully accepted!
My comment was more of an aside to the main point of alerting people to the article, and I would hope that the majority of readers here would be well aware that there is a big difference in assessing whether a HYP share has done well or badly over a period of time and assessing whether it is a buy right now.

However there is a larger point in there too - one that I mentioned a few times on the old TMF boards. How long and how big a sustained drop does there have to be for an investor to think that maybe the market either just doesn't like a share and isn't going to change its mind, or knows something that the rest of us don't? My choice of Centrica at the time I bought it (May 2013) was a popular one, but it has slid ever since. Even if my focus is mostly on income (as HYP convention says) I'd have to be totally blind to capital for it not to be considered a bit of a disaster. Some shares do recover - e.g. I was under water on HSBC for a long time but was lucky enough to time buying more at the bottom and am now well in profit on both capital and income - but some just keep going down and down.

My concern is that some see a drop like that as an opportunity without taking much wider and more detailed aspects into account. While I don't imagine Centrica will be another Carillion, it does seem to have a long term share price malaise. We keep hearing that good HYP shares "should" show a little capital growth as well in the long term but too many popular HYP shares don't seem to be managing that (as well as a few falling off cliffs).

Whether that is because we are choosing badly (maybe chasing too much yield?) or whether there is a flaw in HYP itself, is another matter, and possibly one for the strategy board.

Spiderbill

[77ss]

77ss wrote:

Robbery? Do you seriously think that this is a big worry?

Want to focus on political threats? Focus on Brexit Blight. Far more reaching than any proposals by a party that may not even be elected.

Yes, I do think it's a big worry, but that does not preclude my thinking Brexit is a bigger worry

However, this isn't the place to discuss it.

In my view, these financial self-help boards are not the place to post political opinions at all. So why did you feel free to do so?

We all have our political outlooks and opinions. We should leave them behind on this board. I try to do so, but perhaps I should have have just reported your post, which I found tendentious and offensive, rather than responded to it.

[Breelander]

In my view, these financial self-help boards are not the place to post political opinions at all...

They have their place - that's not on this board but here and here.

[Arborbridge]

77ss,

My remark was not intended to be political and I had no idea it would be interpreted that way, so I'm sorry for any misjudgement on my part. I can't help wondering if you are a little too sensitive.

I expressed the view that nationalisation would a greater loss to shareholders than price caps, and you brought in the complication of Brexit which in your view is a greater danger, with which I agreed. If shareholders are not compensated fairly, I believe that would effectively be robbery - but I don't mind if you do not agree and express that view.

The relevance of this to HYP was already begin discussed when I posted.

Arb

[Dod1010]

I am with Arb on this because I feel that political proposals/actions and their effect on shares/share prices are something any investor needs to be aware of and may or may not feel that some action is desirable. It is to my mind just as legitimate to discuss the effect of political actions here as to discuss the loss of sales say because of a discouragement of smoking. The trouble is that it then morphs into long political discussions about the rights and wrongs of the policy proposed (and lots of other irrelevant policies often enough) That I think is the bit that needs to be stamped on.

For instance the threat by Corbyn seems to me to perfectly real and therefore something that ought to be taken into account in future investment decisions and maybe even current ones. The pros and cons of what he is proposing should be verboten but given the feelings aroused that needs very careful moderating.

Dod

Moderator Message:
edited to remove derogatory word. This is HYP forum not PD. Bear this in mind in future please. Raptor.

[Raptor]

Moderator Message:
I agree that Brexit and change in government needs to be explored as to how it affects HYP (in fact all forms of shares,IT's, ETFs etc). Could these be better discussed on Macro & Global Topics, or even HYP Strategies if along the lines of how it affects HYP overall as a strategy. Your help and understanding is appreciated.
Raptor.

[77ss]

I can't help wondering if you are a little too sensitive.

Quite possibly, Arb. Its a question of cumulative impact.

Your post was far from the worst on the HYP board - it was just the final straw for me.

[Arborbridge]

77ss,

Understood. I'll abide by the Pax Raptorius

[TahiPanasDua]

"I am with Arb on this because I feel that political proposals/actions and their effect on shares/share prices are something any investor needs to be aware of and may or may not feel that some action is desirable. It is to my mind just as legitimate to discuss the effect of political actions here as to discuss the loss of sales say because of a discouragement of smoking. The trouble is that it then morphs into long political discussions about the rights and wrongs of the policy proposed (and lots of other irrelevant policies often enough) That I think is the bit that needs to be stamped on.

For instance the threat by Corbyn seems to me to perfectly real and therefore something that ought to be taken into account in future investment decisions and maybe even current ones. The pros and cons of what he is proposing should be verboten but given the feelings aroused that needs very careful moderating.

Dod"

Dod,

you have made a very important point here. I feel you are right to differentiate between events of any kind, including political and public health, that may, or may not, have a significant effect on a HYP share and detailed examination of that event as a topic in itself. I agree that very limited discussion of such topics is sometimes valid on this board.

Of course it is difficult to avoid such a thread morphing into something off topic. From experience, we know how frequently this happens and I am not innocent. As a result, we have to rely on the vigilance of the board monitors to ensure this does not happen. The monitors have guidance on what is allowable but it will always be a delicate decision process. However, we should not pedantically ban the merest mention of, say, politics where that is relevant as we cannot assume that readers automatically read the politics and strategies boards. For example, this may be true of those readers who rely on Strategic Ignorance because they may have no interest in matters political.

I am sure there will be those who feel my post should be on the strategies board but this misses the point.

TP2

[moorfield]

I am with Arb on this because I feel that political proposals/actions and their effect on shares/share prices are something any investor needs to be aware of and may or may not feel that some action is desirable. It is to my mind just as legitimate to discuss the effect of political actions here as to discuss the loss of sales say because of a discouragement of smoking. The trouble is that it then morphs into long political discussions about the rights and wrongs of the policy proposed (and lots of other irrelevant policies often enough) That I think is the bit that needs to be stamped on.

I think has pyad has already stamped on it quite well, didn't he?

This means deliberately ignoring all forecasts and opinions for the long term future of the economy, the sector or the individual share on the basis that nobody knows and that those who think they know, know even less.

http://www.businessinsider.com/high-yie ... 012-9?IR=T

Sorry, someone had to bite...!

[vrdiver]

A HYP candidate has a high yield because Mr Market is worried about political intervention, but we can't talk about it?

CNA / SSE yields are high (e.g. CNA forecast around 6.5 vs historic of around 5%) but no comment to anybody saying "wow! what a gem for my HYP"?

Such silence would be a disservice to our fellow HYPers, some of whom, should they buy and market fears come true, might wonder why nobody here mumbled at least something about their choice, or what else was being left unsaid...

[Gengulphus]

However there is a larger point in there too - one that I mentioned a few times on the old TMF boards. How long and how big a sustained drop does there have to be for an investor to think that maybe the market either just doesn't like a share and isn't going to change its mind, or knows something that the rest of us don't? ...

As regards the first possibility, if the only problem with a share is that the market just doesn't like it, it's the ideal HYP purchase! And if the market additionally wasn't going to change its mind, well, that would just mean that it will remain such a purchase indefinitely... But in practice, the market always will change its mind eventually - or it will be revealed that there is some other problem with the share.

As regards the second possibility, in the case of Centrica why go looking for something the market knows and we don't when there are clear things that both the market and we do know that explain the sustained drop? First dwindling earnings and dividend cover in 2013 and 2014, then the dividend cut in early 2015, then the succession of held dividends since, making a quick recovery look unlikely, and all along a steadily worsening political climate towards the utilities, to the extent that now even the political party which one would expect to be friendliest towards them is taking concrete measures against them... The dividend cut was by about a third and all else being equal, would explain a similar drop in capital value, while the other factors could IMHO easily explain the fact that the capital value drop is greater than that at a bit over a half.

To be clear, I'm not arguing against the notion that major drops in capital value need looking at. But on its own, the fact that another investor has experienced an N% capital drop isn't helpful: one needs to know over what period to be able to see what the reasons might be. And while one can sometimes deduce that information reasonably accurately from the implied price and looking at a share price chart, that won't usually be the case. (Your particular case comes close, as you must have bought near all-time highs - but it could still be in either about 2007 or about 2013, or of course parts of it in one and parts in the other. My 17% drop has vastly more possible explanations...)

And one always has to consider "irrational exuberance on the purchaser's part" as the explanation! Even when one is the purchaser oneself, in fact, but it will generally take longer to deal with the possibility when someone else is the purchaser.

Basically, my point is that if one wants to start a discussion about a share's prolonged decline, it's much better to 'de-personalise' and disambiguate it with an objective description of the drop: "Centrica has fallen by over 50% over the last four years" is a better invitation for such a discussion than "my Centrica holding is over 50% down" because it gets everyone talking about the same drop, doesn't require them to go looking at share price charts to try to see what period is being talked about and is less likely to head in the unproductive direction of everyone giving the percentages for their own holdings...

Anyway, as indicated above, I think the reasons for that drop are fairly clear and known to us as well as the market, so neither of your two possibilities applies in this case. The question now is whether those reasons will continue... My own view is that the company seems to have worked its way through the difficulties of a few years ago and if left to its own devices, would be a decent investment. BUT it seems very unlikely indeed to be left to its own devices by the politicians, and the range of reasonably realistic possibilities in the current political climate is a very broad one. That makes it a pretty big gamble in my view - which reduces its attractiveness as a HYP share anywhere from considerably to totally, depending on the HYPer.

Gengulphus

[idpickering]

I can't help wondering if you are a little too sensitive.

Quite possibly, Arb. Its a question of cumulative impact.

Your post was far from the worst on the HYP board - it was just the final straw for me.

Don't give up 77ss. I fully get you on this. There is far to much nit picking and one up manship hereabouts.

Can someone point me to the HYP Practical Board please?.....

[BreakoutBoy]

A HYP candidate has a high yield because Mr Market is worried about political intervention, but we can't talk about it?

CNA / SSE yields are high (e.g. CNA forecast around 6.5 vs historic of around 5%) but no comment to anybody saying "wow! what a gem for my HYP"?

Such silence would be a disservice to our fellow HYPers, some of whom, should they buy and market fears come true, might wonder why nobody here mumbled at least something about their choice, or what else was being left unsaid...

Well, I did try up thread to point out the advantages CNA has as a HY option.

Anyway, I have been moderated one time too many or somesuch, so will bid you all adieu, permanently.

[Raptor]

Moderator Message:
Rereading my previous post I believe I should have been a bit more specific and my apologies. The posts were becoming more "general" posts on what could/would/should happen with Brexit or political change. These posts were not SSE or Centrica specific posts. Obviously how these affect SSE , Centrica is relevant. Again my apologies that it "read" no discussing brexit or politics on HYP Practical. Raptor.

[moorfield]

Moderator Message:
Again my apologies that it "read" no discussing brexit or politics on HYP Practical.

<devils advocate>
Why would any good HYPster "read" that in the first place?
</devils advocate>