Alan - I think you are right. I foolishly bought into this at 350 and 360 thinking I was smart bottom fishing, but in reality, and back to Old Punter's point the buy and hold strategy seems to be aligned well with Terry Smith, Train etc (although Train has a few less than savoury results of late), and in Smiths case his selection or investable universe consists of about 75 world stocks -- not on the list are banks, insurance, building and construction, retail, some of the creative accounting pharma companies like AZN, GSK etc.
Based on some of the severe sell offs of late, one more poor report from M&S could see it well below 250 -- I'm collecting dividends which is nice isn't it, but not really that intelleigent a choice in my portfolio.
Their clothing side is in terminal decline. Even their older more loyal customer base has been slowly deserting, including myself. The quality has gone down the drain and now is no better than Primark, but you still are paying premium prices for their clothing. Meghan Markle will only tempt a few sheeple back into their stores temporarily.
Go back 20, maybe even 10 years and MKS clothing stores were busy. Visit one of their branches today and there's usually just a handful of people in there shopping around. So I believe they have become a tarnished brand as far as clothing is concerned. Steve Rowe and Archie Norman have got more than their work cut out to compete with the likes of Amazon, Next and Primark.
Agree, if we see 400p or so it may well be time to hand them back but cross that bridge when reached as will be in a different place.
Dare I say this "buy and hold for ever" approach is over lauded, pace Buffett, Terry Smith, Train etc who are infinitely smarter than me. An example, about 18 months ago I was a big bull of McCarthy & Stone at 145p which are now back to about the price I bought despite a strong equity market over the period. So zilch if I had done that. But the stock was volatile during the period and I traded the volatility and exited completely when I saw the ground rents consultative paper, so did very well as it turned out.
".... there is little doubt that M&S has been a poor investment over most lengthy periods relative to an inflationary measured number... Ultimately and over a longer period of time it looks like a dieing ember -- It won't be a long term investment for moi -- anything close to 450p would be syonara!!"
So much is true, at least for much of the last 10-15 years. Though it all depends on your "in-price", of course - whether you bought in at £6, £7, £8, at or near one of the various peaks, or the more like £2 you could get in 2000 and again in 2008? It's one of those market truisms, that looks like merely stating the bleedin' obvious at first glance, but disguises a much more fundamental and deeper truth that cannot be overstated...
I don't see M&S as a dying ember - any more than pretty much all companies are, potentially and eventually. Some merely last a bit longer than others... it has however had more than its fair share of poor management in recent years, people who have persisted in trying to make of M&S something it simply isn't, with the inevitable undewhelming results. This could prove another false dawn, of course... but I like what I see and sense thus far.
As it happens, 450p is also my "fair value" target - albeit I'm not expecting that overnight, certain things would need to happen on the delivery front. But if we do get back there, I think the lesson of the SP history would be that I should be existing the register with you at that point - stage-left and sharpish...
Bill - Train's summary is pretty spot on and there is little doubt that M&S has been a poor investment over most lengthy periods relative to an inflationary measured number. Short term cyclically, it could give back a decent return, but as a long term hold I'm doubtful it's a winner.
Still it's hard to argue that 306.2 at close of play today is the end of the story and a decent management team can stem the decline and get a decent return over a shortish (maybe even a few years) period of time and get a share price recovery.
Ultimately and over a longer period of time it looks like a dieing ember -- It won't be a long term investment for moi -- anything close to 450p would be syonara!!
Interesting and helpful to read Nick Train's opinions on MKS, he has a great record but is not infallible eg Pearson, nobody is - Buffet and Tesco. I like your assessment.
MKS will either get going again or crumble. The former seems to me much more likely than the latter, yes technology may remove some of the weaker retailers eg Debenhams and force the others to adapt, a job which I think Norman and Rowe should be able to do.
I put MKS in the same basket as GSK and RDSB, companies which are not going to fail but as you say the shares can be treated as cyclicals, sell when everyone is bullish and buy back when bearish, as I have done over the years in GSK and RDSB, and take a very nice income as well.
MKS I have not held for a very long time but have recently purchased, and intend to add if the price should fall further as a couple of brokers expect. Another bull point in my book if there are some brokers recommending sales. As it happens, per the HL website most brokers are saying hold or sell GSK, excellent.
"So MKS has destroyed more than half of it's real inflation adjusted capital value in a quarter of a century..."
Of course, Train picks out a fairly random period of history (albeit grounded in the present day)... and while 25 years may be a nice "round" number, it doesn't tell the full story, any more than any other randomly selected period does.
MKS actually grew its capital value more than four-fold, between the lows of late 1988 and the 800p reached at end 1997 - a pretty decent decade in anyone's book? And then (having given most of this back, of course), it delivered a three-fold increase between Oct 2000 and Apr 2007 (240p-odd up to 740p)... and THEN, from the post-crash lows of late 2008, ANOTHER near-three-fold increase over the 6-7 years to the 600p high of mid-2015...
History tells us different stories, depending on how we slice it... Actually, I think the long term MKS SP chart is itself a compelling lesson in stock market history - not least in that it depicts M&S as the ultimate cyclical stock, which you wouldn't necessarily expect - more like an airline than a high-street stalwart. There are good times to buy it, and fairly long periods of prosperity - but ultimately it's one you have to sell, it's not an Uncle Warren "buy and hold forever"...
All of this tells me that 305p today could indeed prove a very good "investment" ... only time will tell. But it's probably of scant comfort to anyone buying at £6 a pop, only a couple of years ago...
"... the introduction which captures these two points which is now telling me that should MKS recover some of it's lost ground, I will be out of this forever ... it was still a surprise to register that at their end December 2017 price of £3.15 the shares are no higher than they were in early 1992... Sobering thought isn't it?"
It all depends whether you are ultimately a "growth" or a "value" investor, Games... sobering perhaps for the former, but actually a bit more intoxicating for the latter!
Past performance really isn't any guide to future, etc, etc - as in, some of the time it IS, but some of the time it really isn't, which means that it isn't at all, in any useful way... There is "value" in the M&S brand, in the asset and operational base, and (almost certainly) in the net present value of potential prospective free cash flows.
Of course, we need some kind of combination of circumstance and management skill to get it out - but that is the game we play! If it was easy or obvious, then the rewards would not be there. As someone wise (I think, Jim Rogers) said, the more certain a proposition is, the less likely it is to be profitable... and someone else wise (probably Ben Graham), "good companies make bad stocks!" Or something like that...
I'm sure I can rustle up a few more clichés, if anyone in interested... actually, the most "sobering" aspect here is that this has come as any surprise to the Trainspotter, renowned professional fund manager of long-standing. Okay, I can see why someone of his investment style would not be tempted by MKS... but he ought to KNOW its history (as a stock, if not so much the business details). I do, and I haven't even followed it particularly closely, until recently... It doesn't speak well of his general market awareness - how can he be so sure that ULVR is such a wonderful investment if he doesn't know the "competition"?? It is, in the end, all relative...
This December update by Nick Train is one of the longest I've seen him put out and yet more thoughtful than usual. He's an odd charachter to listen to and his speech is somewhat laboured. Perhaps the slowness and disjointedness of his spoken words is an asset attached to his slowness of thought in stock selection and probably more importantly his minimal activity around stock selection.
Most relevant to Marks though is the introduction which captures these two points which is now telling me that should MKS recover some of it's lost ground, I will be out of this forever :-
"""" perhaps the biggest shock of 2017 was the sight of the market capitalisation of online clothing retailer ASOS exceeding that of Marks and Spencer. For so many decades and well before 1981, Ive only known M&S as the giant of its sector loved
by its customers and admired and feared by competitors and suppliers. But sadly no longer. Now to be clear, Lindsell Train has never been an investor in M&S and Id also known its shares had been a long term dull market although it was still a surprise to register that at their end December 2017 price of £3.15 the shares are no higher than they were in early 1992. Thats no capital return for a quarter of a century. """"
"Appreciate your confidence in MKS but I think it is a value trap unless you plan to trade in and out as she goes (down)..."
Maybe, maybe not, Deep... value traps tend to spring when and where you least expect them. I don't doubt there will be one or two among the quoted UK retail stocks - but far less clear which they are. More's the pity...
As for M&S... very strong FCF generation from what is now a very well-invested asset base... a large proportion of freehold vs leasehold property, giving them much more flexibility in "right-sizing" the physical footprint compared with the pack... a healthy pension funding position... valuable brand loyalty across a wide part of the shopping public (more so with older shoppers, though they are the ones with disposable money to spend, and they are living longer and longer).
None of the above will save them, ultimately, if their product continually fails to resonate... but it certainly all helps! And the current valuation demands less, going forward, than even for most other UK sector peers, depressed as most of them are.
Nice little rally today, taking us back towards where we started the year... a more appropriate reaction IMHO to what was, after all, a very 'neutral' trading update, no more, but no less...
I agree with Bill and Games and have just bought some more MKS at 302p on the view that there is likely to be some turnround in the medium term with Archie Norman calling the shots, from reshaping the biz and cost cutting, and with a 6% yield Idon't mind waiting.
The food business remains a good performer IMO, the rest has been problematic but should be capable of improvement.
Hargreaves: M&S turnaround plan may be too late
High street stalwart Marks & Spencer (MKS) saw sales fall in the third quarter and Hargreaves Lansdown believes the turnaround plan may be too late to help.
The company reported UK like-for-like sales fell 1.4% in the third quarter, news that pushed the shares 6.7% lower to 302.3p yesterday.
Analyst Laith Khalaf said the figures were disappointing especially in its food division, and online, which had been the bright light of the M&S empire.
He added that online sales growth looked pretty feeble when compared to the wider market.
Its still early days in the M&S turnaround plan, however the risk is by the time M&S gets up to speed, the rest of the pack might have disappeared out of sight, he said.
As I live near Salisbury I shop in that branch occasionally as its the only food supermarket in the city centre.
It is truely awful...
The none food part of the store [75% by area] looks like a cheap market stall with endless diaplays of t-shirts, jeans and bra's and designed to be as customer unfriendly as possible. I believe I would be expected to queue to pay!!!
The food hall is overcrowded and the checkouts are not fit for purpose. The few remaining standard lanes are too short, the self service almost always requires input from the [numerous] on hand staff and the express lanes are a design disaster, nowhere to put the goods you have bought to pack them.
The only saving grace is that some, but nothing like all, the products are very good.
On the bassis of this limited experience I suggest that MKS is not a retailer to be investing in regardless of the attraction of the 6% yield.
I remember being at an investment seminar in the late 90s and the presenter said in 10 years time there won't be such a thing as an internet company, they'll all be internet companies.
He was wrong, but 20 years later as time goes by he is looking more and more right.
Whole industries have been "disrupted" by the new kids on the block.
New industries are developing.
One thing for sure, things are changing at a pace.
Lots of the old establishes business find themselves at a crossroads and many are struggling to keep their market place hey once had. People nowadays show little loyalty when buying things. It's all about convenience and price. Quality was probably the M&S brands strongest point. Fewer and fewer people are looking for quality in a fast paced world that never stops and time has become a big commodity.
M&S and lots of other established retailers are facing a challenging future and most are too old school to adapt and move with the times.
Are M&S shares cheap, probably not, they're maybe fair value until such time as they find their way, find their USP, a thing they have been struggling with for years.
If they don't, who knows where they'll end up.
They are a 20th century company struggling to find it's mojo in a 21st marketplace.
"I'm going to be patient and latch on to your underlying optimism and possibly Archie's savvy -- who knows I might even turn a profit one day and get paid to wait... and provide me with income to cover some of the household bills lol !!"
Metrics @ 304p:
Divi yield 6.2% - FCF yield (each of last 2 FYs) 11.2% - P/E (fwd) 11x - EV/EBITDA (historic) 5.4x
Plenty there to pay those bills, Games - you can probably afford to turn up the heating and leave the TV on all night!
The FCF is key here IMHO (as I have always said) - few will look at it, yet time and again it proves one of the better lead indicators. It may well dip a bit this year and subsequently, but it would have to fall a LOT - and stay fallen - to invalidate the current investment case. You are more likely to hear commentators wax lyrical about NXT's FCF than MKS' - yet NXT FCF yields 6-7% for the equivalent last 2 FYs (and will also likely dip this year).
MKS has spent most of the last 10-15 years over-spending, getting its range wrong, and misunderstanding its core customer - or at least, taking it for granted and fluttering its (overly made-up) eyelids elsewhere. Getting it even a bit more right in each of these areas will make quite a big difference... the signs here, from Rowe and Norman, are fairly encouraging thus far, I would say...
"I bought this at the 350 level thinking that the sentiment toward brick retailers was a tad overdone - but the more this goes on, the more you realise it's no longer looking like a cyclical swing, than an exhaustive structural change to other more innovative online outfits and desperately competitive other high street and supermarket expansions..."
Retail will remain a tough old game, of course - for everyone, not just "brick retailers". But ultimately, M&S are still growing overall sales (ex-International, which is being deliberately down-sized). Food in particular - sure, LFLs remain somewhat soft here, that that is only ever one part of the picture, and particularly so here.
The turnaround will take time, but I think they have the right people doing it - few investors are truly patient (quite the opposite usually) and perfectly understandable if those who are not choose to go and play elsewhere. Ultimately I will be looking at the free cash flow, which has been excellent in the last couple of years and I expect this to continue (though only time will tell).
Very few people do their "big food shop" (a trend that is falling) in M&S, they'll get treats from there. Where I live there is an M&S in a garage across the road from Aldi. Every week Aldi's car park gets busier and busier. But the thing is loads of people are buying their Specially Selected range which is often sold out. The quality is similar to M&S and around 50% cheaper. The stigma of shopping there is falling and I think that will have a n impact on M&S food sales going forward. The country is a mess, people are becoming very price sensitive. http://www.telegraph.co.uk/business/2018/01/04/record-christmas-helps-aldi-sales-top-10bn-first-time/
Nothing wrong in changing one's mind, Alan; I couldn't agree more.
Heaven knows about a bear market..........if only we did!
Additionally, the possibility of a Corbyn/McDonnell Government is casting a shadow over certain sectors.
I am keeping a very close eye on my investments and intend to increase my cash weightings over the next few weeks/months. However, many of my holdings are geared to producing a decent income, and in the main, I shall be staying put.
Games, I think you are probably correct in the longer term and brick retailers are in a very difficult position, nevertheless, they won't disappear entirely. Basically, I am taking a calculated risk on Archie being able to pull the business round and /or possibly sell the thing! In the meantime, the divis are some reward for being so optimistic!
I also hold Tesco as a recovery play and their shares have taken a pasting today after the latest figures were a shade down on city expectations. The SP did get somewhat ahead of itself though. At least I have made good dosh on Tesco and have cashed in some of my profits.
Yes, like you, I have made excellent profits on my techie investments and at my age it has also been good to receive excellent divis from my oilies and financials.
Good luck to us all!
Anyone can change their mind, and one needs to be decisive in this game. When food retailers like SBRY, TSCO, MRW and Waitrose all show positive trading results over Xmas period, and MKS is the only laggard amongst them, and then the cauliflower steak farce - none of this is helping things along. Better to make a small error of judgement than an eventual costly one.
Still have the big bear market to come as we now have the longest running bull market in history (at least in the US). This year or 2019?
dregor -- also holding, but it shouldn't probably be a big position if one at all given the way it continually struggles. I bought this at the 350 level thinking that the sentiment toward brick retailers was a tad overdone - but the more this goes on, the more you realise it's no longer looking like a cyclical swing, than an exhaustive structural change to other more innovative online outfits and desperately competitive other high street and supermarket expansions.
Ah well I least I held Paypal and Microsoft over the last 2 years to compensate for these underperforming UK die hards.
"On the other hand , can you actually see MKS disappearing? They have been in decline for years and yet they are still there."
So are Debenhams, and look what happened to their sp over the years. They will soon be screwed as their business falls into losses and are unlikely to survive the next few years unless taken over. MKS are basically going down the same path only at a much slower rate thanks to their food business propping them up.
Poor Xmas trading but well signaled a few days ago by analysts. Mehgan Markle's recent MKS promotional stunt might attract a few sheeple back into their stores, but they can't rely on that kind of nonsense each week. Sold first thing and should have done so yesterday.
"Bryan Roberts, global insight director at marketing firm TCC Global, said: "While we expect 2018 to finally see some genuine signs of a turnaround in M&S's womenswear business, the trading over Christmas was disappointing.
"A last-minute rush proved too little, too late to rescue the overall period.
"It is within food that many rivals have closed the gap on M&S in terms of innovation and premium ranges, while also putting M&S's prices in sharp relief. We would like to see a simpler pricing architecture with less reliance on multi-buys."
I see that Tesco has done better this Q, but at what margins. There's just so much competition. Marks will have its loyal customer base, but that's based on perception of quality in terms of product and service. Lose that perception, Marks, and you'll be on a slippery slope - according to Lupo, anyway.
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