"Is AIM-listed insolvency services group LSE:BEG:Begbies Traynor poised for prosperity? The Bank of England's 0.25% interest rate rise to 0.5% merely pars monetary stimulus to its level before the EU referendum; yet a relentless build-up of debt ..."
I did exactly this thinking i was being prudent in 2007/8 it was a bad move, the shares were circa 80p and have never really got close to the entry price again. They also raised money just before that at 160p and the funds that backed that are seriously underwater. Yes they pay an ok dividend but liquidity is bad and they seem unable to move the earnings and therefore share price forward.
In my view any downturn that may be around the corner will not be as bad as 2008/12 with the almost collapse of the financial system, so dont buy into the argument that they will rise when the **** hits the fan it did last time and they didn't budge.
Yes ive collected ok divis to reduce the pain of capital loss but its one of the poorest performers in my portfolio, allbeit i am in at circa 80p not 50p.
I think you have a wise approach. BEG is a hedge against a downturn but that does not mean the sp will not fall. All boats fall and rise with the tide.
I have already bought into a number of funds as shares and not directly into the fund so that I can manage them. Interestingly, I have received some information on a model portfolio aimed at protecting against a correction/financial collapse. You will be perhaps pleased to know that SEDY is one of the choices. Others include two bonds, IGSD and IBTL. These are to protect against deflation further down the line of the collapse. Others are BTEM; SMT;BGS;IAPD;GBSS;PHSP and SPGP. Two funds are also included; Trojan and Ruffer. Not having big amounts of cash available, I will substitute RICA for the funds. RICA is a Ruffer preference share and is very stable but boring giving protection in bad times with some dividend income.
Nobody really knows what will happen in another financial collapse. Due to the indebtedness existing in the world, I guess that credit will be unavailable and bank accounts frozen. Governments will employ a bail in approach in a vain attempt to avoid default. It's not something to dwell on for too long but if it happens, it will be sudden. There will be no warning. However, we are all aware of the non-performing debt of the major Italian banks and the fact that Deutche Bank holds a lot of their debt. Deutche Bank is too big to fail, lol.
I already hold GBSS and PHSP which are ETF's gold and silver which are backed by actual metal which is vital. I also hold FRES and PAF.
I intend to pick up others on this list as money becomes available.
I note Begbies announced solid interims yesterday. I am reluctant to lean to heavily on them as a downturn hedge given their small size but they do fit the bill pretty much perfectly. I am going to build up my position over the next few months in anticipation of a market downturn which surely must come at some point!?
I've not really invested in active funds before but have been considering Majedie Tortoise fund to give some protection. The fees at 1.5% put me off though.
I too have been adding to my emerging markets exposure the last 18 months. Mainly through ETF's such as VFEM, SEDY, CPJ1, (equities) and SEML (Bonds). Aim to have around 6-8% of my ISA in emerging markets going forward.
A somewhat delayed response to your question but it still holds good. I have held this stock for some time for much the same reasons as you ie it is a rough hedge against a downturn and pays a good dividend. I cannot name any other stocks on the LSE that gives the same position other than precious metals and related ETF's. My attention has moved towards funds and particularly those that are invested in emerging markets. It's not without risk but that seems to be where growth is currently.
You must be aware that retail as a sector is suffering disruption from new technology. If a business such as BHS does not keep up with the latest developments of online ordering and click and collect let alone latest fashions particularly for ladies, then turnover suffers. There is also a surfeit of competition and increasing costs due to the minimum wage increases to be phased in from the 1st of April this year through to 2020. French Connection, Mothercare, Bonmarche have all issued profit warnings over the last 12 months. Many high street shops will close over the next 5 years.
The steel industry cannot be profitable when a big country such as China produces steel more cheaply than we can. The added problem here is that China has over produced for its home market and needs to move the produce on. It does this by having a sale on the export markets. It's not a new phenomenon. There have been issues of "dumping" excess produce on international markets many times in the past. The US gets very shirty when this action threatens its own industries. The UK government will have to decide whether it can afford to subsidise the steel industry until the glut of produce falls and prices recover, sell on the steel works or close it down and pay unemployment benefits to thousands of steel workers and supporting network companies' staff. It's going to be expensive either way.
BEG have done a red flag alert about British exporting companies suffering if the UK exits the EU. It may well be challenging for some companies if the UK exits the EU but as far as the country is concerned, it is no big deal. The UK exports account for around 30% of GDP. 12% of that goes to EU countries. Much of the 30% is due to services and not manufacturing.
The pound has weakened already due to the "threat of Brexit" and also the lack of will by the B of E to increase interest rates. Much hope and expectation has been expressed by politicians since the 60's for increased exports by weakening the pound but it has never worked in a sustainable way.
I put much more hope in an independant UK to forge new trade agreements without the suffocating over regulatory EU. Our exporting businesses, as service orientated, are geared up for the future. The future is robotics and there will be ample demand for repairs and maintenance.
Being held to ransom due to the Banks protecting their loan books. But where can they go next with negative interest rates. Even when the FED are attempting to raise USA interest rates, but failing the Banks, are hanging on by the skin of their teeth!!!
" BEGBIES TRAYNOR GROUP PLC (LSE:BEG) conforms to our usual criteria for interesting shares in the Support Services Sector of the market. No-one, effectively, talks about it yet the share price manages reasonable movements despite the absence ..."
I totally agree, MacPithy. If anything, the pressure on interest rates is still down. The Eurozone, Japan and China maybe are issuing QE which, temporarily weakens their currencies and has the effect of exporting deflation. Negative interest rates now exist in Denmark and Switzerland and some German bonds are now negative. The scheduled rise in interest rates in the US is likely to be postponed unless job figures improve and Company earnings hold up.
I understand that some zombie companies have shown signs of recovery which may well continue while interest rates stay at current levels. It just depends if the current UK growth rate holds up and continues which is doubtful imo.
BEG may be regarded as a boring share to many. I am happy with my holding here whilever the dividend remains stable. I can sleep easy and don't have to worry about volatility unlike other stocks I hold.
BEG has been astute with acquisitions in recent times and the latest one looks of the same calibre. There still hasn't been the normal bout of insovencies in this current growth cycle but I am sure it will happen in due course. As the move out of recession becomes more established, hopefully, the banks should become stronger also. This should then lead to zombie companies being closed down particularly if interest rates rise at some point.
BEG is still struggling with lack of business. They have cut back on costs and added some small acquisitions and the latest one will contribute profits in this financial year. Stockopedia has a high rating for BEG and the interim dividend is held at 0.6p. The fly in the ointment is the issue of a placing at 40p a share which I don't expect I will be offered any. If the sp drops down below that level, it may be a buying opportunity.
I'm sorry you think BEG is a bad stock. Might I suggest there are no bad or good stocks but simply bad decisions by investors when choosing when to buy and when to sell. Having said that, there are bad managements but I don't include BEG's management in that category. My entry level is just under 35p which also attracts a dividend yield of 6.2% currently so you see that I have a completely different opinion of BEG. I read Paul Scott's daily blog on Stockopedia and that is where I first came across BEG. The strange thing about Begbies is that the busiest period for insolvencies is not when the market is in crisis but now when it is improving and growing. I picked up this info from the Paul's blog and at that time BEG's sp was depressed. If I hadn't seen the info, I would have thought like you that it would be no use buying into an insolvency company when the market is recovering. By the way the blog is free and you can receive it automatically to your e-mail account.
I bought into BEG twelve months ago and have stayed invested for the excellent dividend. The reward for remaining invested is also now a significant capital gain. There is still some doubt about the continued existence and survival of zombie companies so business may well remain slow later this year. I think it depends on whether the banks' balance sheets are robust enough to withstand the write offs needed when terminating a loan that is only being serviced but stands no chance of ever being repaid.
The message is just confirming that business levels ie insolvencies, are reduced. This means reduced income and profit. The economy is still bumping along the bottom and the banks are not fully recovered from the crisis. If the economy continues to recover, that is when I believe we will witness more insolvencies and we, as a nation, haven't reached that point yet.
Well done on your profit, Alan. I really don't know the reason for the sudden rise in the sp. I am guessing that business has increased for BEG. I know it sounds perverse but when an economy recovers from a recession, during that recovery there are more Companies and organisations that fail. Until I find the reason for the sp uplift, I am holding on to my investment here. I am not over exposed financially by holding and one of my priorities is income. BEG fits my requirements nicely.
Sorry folks but couldn't resist it. We've had an unexpected sharp rise in the space of a 2 months. As you can see from the graph this is either about to break out from its long sp torpor or more likely to slide all the way down again. There's been mainly 'Sell' trades over the past week or so and although there's a nice div in 2 months time, what's the point if it slides back well past the ex-div price.The constantly improving GDP and economic outlook isn't going to help sentiment IMO towards BEG either in the medium or long term either. There's also only a 3% spread currently on the sp compared to the usual 8%-12% I've seen since I've been following it.So I'm 'out' for the time being (probably prematurely with a decent profit
The dividend is also very attractive being over 6% and secure. This Company is not a shooting star but will rise when bank balance sheets become stronger and can withstand foreclosures of zombie companies. There are also likely to be more insolvencies when the market improves more and interest rates start to rise. This will happen as sure as night follows day.
The dividend is very secure. Have a look at Paul Scott's blog, or his column on Stockopedia for some insightful comments. He sold his holding recently, but simply because he reckoned there were better prospects elsewhere.
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