I hope you dont mind if I respond to several of those points in a single post
BubblingUp. Yes the £4.35 entry price was prescient in hindsight (haha see what I did there). But at the time PSN was on a PE of 12 and dividend yield of 2%. What management have done in the intervening years has been a remarkable turnaround by aligning the workforce and structurally integrating the supply chain to accelerate production at lower cost as seen in steep improvements to top and bottom lines as well as free cash flow. While management have lined their own pockets they have also been extremely shareholder-friendly. Jeff Fairburn has been at the helm for most of that time so I am exceedingly thankful for his efforts. Ironically both those metrics PE and Div Yield are slightly BETTER at todays price. On BRK, please come and join us on the BRKA board where we could do with more posters.
Cavebear. PSN is still worth buying IMHO as the price has dropped and is on a PE of around 11 and dividend yield of 9% by my calcs. Whats more, that dividend yield is sustainable. Have a look at PSNs recently released balance sheet (link below). They have £1.3 billion in cash. No borrowings. They have been generating after tax free cash flow of +£500 million each year. Very few companies tick all these boxes, especially at a 9% yield. I dont know of any.
Here is the link to the recently released financial statements:
Dutchman. Thanks for sharing that valuable learning point. You have my sympathy and empathy. A divorce cost me +50% plus huge emotional blow. There was nothing positive about the destruction of our family unit. Families are the basic living cells of our society yet family law encourages divorce by rewarding the partner who wishes to exit.
What would be the point in buying now in anticipation of what is effectively a special div. If you are unable to do it within a tax free environment, you will merely be getting (a portion) of your own capital back and be taxed on it for the privilege.
"It could have been so different. If our Dogs hadn't included LSE:CPI:Capita, the troubled outsourcer whose share price plummeted at the end of January after it issued a profits warning, we would be trumpeting yet another year of outperformance ..."
Apace, I may have done well on a few shares, but believe it or not my overall Housebuilders portfolio over the years is barely better than break-even..... WHY ? well the reason is that on Brexit vote day I stayed up till about 3:00am, by which time the result was fairly clear in my mind. I then went on to II, and other platforms and set sell orders for other housebuilders without setting a limit..... BIG MISTAKE. The ones held where the platform managed to operate in the market panic that ensued sold for 50% of the previous days price. Yes the real drop was 50% or so in those first few minutes. Anyone who bought my shares made 30% in the day! Lesson ...... dont panic.
Strangely enough aspace, before I read your post I was debating with myself whether to add more PSN when it was down earlier this morning, or make an initial investment in BRKB. I went for the latter on the basis of steady growth and an interesting stock. If only I could have got your amazing 2011 price on PSN!
Sounds like you have done well on several shares there, Dutchman.
Prompted by your posting I checked my own compound average on PSN since buying in early 2011 at £4.35 and came pretty much spot on the same as your average all-inclusive compound gain of 36% per annum. I then doubled my holding about a week or so ago when the price was at £24.23. So today was a very happy one.
My next best is Berkshire Hathaway which tends to reliably increase 10-15% per annum with no dividend. Has also been a good USD hedge against Sterling. So I cannot match your record of several excellent picks. PSN is the one and only stand-out in my portfolio.
But I don't mind because once I settle on a share I invest heavily (in the context of my little world) which in turn magnifies the gains. Although it does reduce my diversification.
Sure the CEO has milked it and it does reflect badly on board governance. But I cannot manage PSN and he seems to be doing a pretty good job of it. Having committed my capital, PSN has given it ALL back plus extra. Which is more than I can say for Lloyds Bank and a few other of my holdings.
My curiosity was aroused by Aspace's reference to this being the best share he ever bought. I thought I would check against my holdings. I bought Persimmon in late August 2012 and to the end of January 2018 it had returned just shy of 36% compound annual growth including all divi's, returns of capital etc. Comparing it to any of my other holdings owned for all of the same period it was only beaten ( just) by Exel, a French Agri machinery company originally tipped my Merryn in the Saturday FT. Within a whisker was also Porvair, and also slightly beating it was TR European Growth IT, but in this case I added heavily to my holdings about 2-3 years ago which distorts the comparison.
With a P/E under 13, a forward yield of nearly 9% with the special dividend, loads of cash in the bank and plenty of land to build on these must be worth considerably more than the current price. After understandable profit-taking I'm hoping they'll fly some more.
Well done Aspace. You sound a bit cheerier than in your last post. I had only just realised the SP had fallen below my previous buy price and was mulling where I could raise funds for another buy when I saw the RNS this morning . Too late already! Never mind, I am looking forward to about as much in dividends (for 3 years at least) as I would have made had I doubled my stake and the dividend had been frozen.
Could this have been a little bribe sorry sweetener from the CEO to calm the minions fury about his self-enriching bonus plan? If so, it could just have worked.
What struck me as odd here was that PSN gave an unambiguously positive trading update in January yet the share price still dropped to £24. As I said in my last post this was an unjustified price drop for a company with loads of cash that has consistently delighted shareholders for each of the past several years.
Insiders were prohibited from buying as it was a close period. So we retail investors had the price drop to ourselves.
On top of today's 11% price rise we have also been promised an extra 125p dividend in March in addition to the usual 110p dividend in July.
Yet we see little positive press for this corporate cash-gusher.
Those of us following this board can have this little baby to ourselves. PSN has been the best share I ever bought.
Surprised nobody posted a message after share price rose over 11% this morning. Excellent results. I am very satisfied and pleased that PSN is my second largest, no after today's rise now my largest value share holding. Some key points from results:
"In addition, the Board is pleased to confirm that the scheduled capital return of 110 pence per share, or c. £340m, will be paid, subject to shareholder approval, on 2 July 2018 as a final dividend in respect of the financial year ended 31 December 2017"
"Following this further improvement of the payment schedule the total value of the Capital Return Plan is estimated to be c. £4.1 billion or £13.00 per share, over double the original plan value of £6.20 per share"
Nice to know shareholders will get a goodly share of profits as well as executives.
Interesting article in the Weekend FT by Merryn Somerset Webb on charitable giving.
"If, for example , Jeff Fairburn, the newly super-rich chief executive of Persimmon, hands over £10m of his bonus to charity his gift will cost the treasury - hence the rest of us - £5.65m"
Worth a read anyway IMO. I am not happy with the amount money the government forks out to charities a lot of them being religion based. Many are are not IMO worthy causes. Merryn titles article "Britain's charitable giving model undermines democracy".
As often happens, I top up and the share price goes down.
Well, I've done it again as the share price has dropped and PSN has now become my second largest investment.
It seems strange the share price is languishing around 24 at a PE of only 11, strong cash generation and 1.b billion in the bank. What's not to like? Hence I've made a big commitment - in my little world at least.
I look forward to the year end results on the 27th Feb.
"I know companies that do lose or even have a significant vote against a remuneration package acknowledge the fact and say they will take it into account; I don't ever remember reading a company actually DID change the package"
A rare thing I agree, but it has happened
CEO Bob Dudley's total pay package for 2016 was cut by by an eye watering $8 million to a derisory $11.6 million. Poor Bob, not sure how he got by, but no doubt it will balloon again as oil price rises (for which he deserves all the credit I'm sure).
For better or worse, I topped up on current price weakness, getting in at £25.82 so had already made an immediate loss at the closing price of £25.71.
By my calcs this puts PSN on a PE of 11.5 with dividend of 4.3% which makes it too modestly valued in my view given that in the Jan 2018 prelim announcement it appears PSN is meeting the nation's demand for new housing, sales are up and they anticipate profits will beat market consensus. So I estimate a profit after tax of approx £700m. Hopefully a little more.
Since the 2012 capital efficiency strategy was launched PSN has outperformed strongly year after year. The capital return plan was BOTH accelerated AND increased in 2016. Today we are poised to receive £1.10 in Jul 2018. Last year they kindly gave us an extra interim dividend of 25p. Fingers crossed for this year.
Unlike the past behaviour of banks, PSN is a company doing precisely what we want companies to do: make and sell stuff that's needed.
With Britain's continuing need for housing I don't see that situation changing in the foreseeable.
Unless CEO Jeff Fairburn's super-sized bonus resulting in chairman Nicholas Wrigley's resignation results in further bad publicity.
And in addition to what "Hang..." said, I think the government would have to make the vote on directors remuneration binding instead of advisory. I know companies that do lose or even have a significant vote against a remuneration package acknowledge the fact and say they will take it into account; I don't ever remember reading a company actually DID change the package. I know some sort of fall-back proviso would have to be made in any legislation but at the moment even if we muster enough votes, the board of any company can effectively ignore it.
I'm puzzled by a lot of things surrounding this crazy bonus scheme that our directors, in their wisdom, voted in (although they are supposed to be working with shareholder interests at heart).
1) I know the Chairman and head of remuneration have resigned because of the sheer generosity of the scheme, but surely they must have known how these bonuses have been building up over the past few years. Couldnt they have acted sooner?
2) Why has Jeff Fairburn, & other beneficiaries, not also resigned in embarrassment at taking such a disproportionate reward for their efforts, or why hasnt he offered to take just a proportion of the bonus, even 25% would still be a nice little earner.
3) Why has the board of directors not determined that the negative press relating to these payments has caused a downturn in the sp. They could actually rectify the situation by persuading the recipients to forego at least some of the bonus payments in order to, in part at least, counteract the sp drop, so actually doing what they are paid for (& receive bonuses for) and work in the interests of the shareholders!
As a shareholder I fear a backlash from the government. Theres nothing they like better than punishing greedy directors, especially when its a vote-winning move. Anyhow, as a consequence and even though Im a very long term holder, I am planning to reduce my holding in PSN by at least 50% over then next few months.
Regarding the disenfranchising of private shareholders due to shares being held in nominee accounts, so making voting on remuneration difficult, I think that it makes little difference, since private shareholdings are such a small overall percentage of most companies total equity. Even if we were all to vote against a remuneration package it would still be voted through because of institutional holdings (pension funds, investment trusts, unit trusts etc), even though most of the underlying beneficiaries are also private investors. IMO there would need to be more radical change along the lines that the weighting of votes from these institutions would be reduced considerably ... dont see it happening of course!
The considerable negative publicity Jeff Fairburn has attracted also makes Persimmon a target of the politicians who may now choose to use Persimmon or the housebuilding sector generally as a bad example of corporate excess particularly given its connection to 'help to buy'. A positive has been turned into a negative.
Thanks for that info I shall make it a priority to email Stephen and make views known.
Perhaps more investors on this board and others should also follow suit to add a bit more impetus to a Shareholder Spring.
It is not exactly Maggie's view of shareholder democracy where a wider pool participate in the capitalist sytem as investors but it might just give us our voice back.
It seems we are not alone in wanting to exert a little more control over the companies we ultimately own as this recent article from Moneyweek argues.
I agree with the sentiments re Director's bonus scheme. The scheme was designed and agreed some years ago, maybe 5 maybe 8 I cant remember and was all linked to the large dividends/return of capital we have been receiving, the cost of the bonuses would have been charged against profits over the intervening 5/8 years. Having said that it was stupid not to have included a cap on the level of bonuses.
With regard to Nominee accounts and votes and receiving annual accounts etc. it does seem to me that we are effectively being disenfanchised.
The organisation to email is The Financial Reporting Council who are responsible for the Corporate Governance Code,the Stewardship Code and many other aspects of corporate reporting. Write to Stephen Haddrill Chief Exec whose email address is; [email protected]
Don't complain about this particular bonus but just how the nominee shareholding system disenfranchises private investors and means that comapny directors cannot be held to account.
You may think this will make no difference, but they get so few comments from real private investors, it will - believe me! Go on it's worth 5 minutes.
charlus "..obscene level of pay that has been granted to CEO and others"
I too was horrified by the huge size of bonuses. A large proportion of shares are owned by institutional investors. They should be more diligent about agreeing to over generous bonus schemes.
PI who own shares through a nominee account can exercise their voting rights by instructing their broker company how they wish to vote. I have done this on several occasions with my broker Charles Stanley Direct. All shares in ISA's I believe are held in nominee accounts.
There is a catch however as at the moment shareholders can vote against a remuneration package but the company is not bound by a vote even if shareholders do vote it down.
I have to say I am very surprised that there has been no comment or discussion on this Board about the obscene level of pay that has been granted to CEO and others.
Even the Chairman and head of the renumeration committee were sufficiently embarrassed by their own incompetance to resign from the Board.
£800m bonuses to be divied up amongst execs with a staggering £109m going to Fairburn alone.
THIS IS OUR MONEY FFS !!
Sadly, as most now have nominee accounts we seem to lose our right to exercise our vote at AGMs and veto outrageous bonus plans.
This is the unacceptable face of capitalism.
I am not a big fan of Government intervention but a simple rule change to allow shareholders with nominee account to retain their right to vote and make their voice heard as owners of the company would surely be a step in the right direction.
"2017 has been a strong year for the stockmarket, but not all investment strategies have done well. Given the bullish conditions, it's probably no surprise that "value" investing in the market's cheapest shares has not generally paid off. But good ..."
"This budget was always going to be especially tricky for the chancellor. Hitting fiscal targets amid wide divisions over Brexit, while also spending more on populist policies to distract voters from Conservative party infighting and dysfunctional ..."
Lots of potentially interesting things going on with house builders right now connected to the budget. These include stamp duty change for first time buyers, potential help to buy changes, changes to planning regulations (use of green belt), government initiatives for more affordable homes etc. Seems to me these could be either really positive for housebuilders or really negative. The sector has been pretty heavily whacked lately despite what I thought were some pretty positive trading statements. Confess I am not optimistic of whats likely to come out in the budget. Like to hear what other people think.
If the government does get rid of help to buy, it'll be for something better for the house buyer. Turkeys don't vote for Xmas.
Until the last 12 months, builders were continually whacked when reporting profit margins and returns on capital that most FTSE 100 companies could only dream of. It hasn't happened so much this year, although Bovis were deservedly punished for their performance.
Why? Because the market always wants them to not just exceed expectations, but to shoot the lights out with every update. For some reason, they (analysts) set the standards very high in this particular sector. Probably because many of them told their clients to steer clear and were made to look foolish for years.
I know lots of investors from these boards and elsewhere that have refused to get involved with the sector during this cycle.
They're quite happy to invest in other companies which are much, much harder to actually fully understand. RDSB, ULVR, RIO, HSBA just to name a few examples off the top of my head. All mid-high dividend, FTSE 100 companies, but hugely complex. They don't mind investing in those.
Housebuilders are relatively straightforward and simple. When there is demand, they up the number of houses they plan to build, when it falls off, they can easily adjust - that's why they sub-contract much of the building work.
This cycle, there has been very little M&A activity in a race to buy growth which saw the last cycle end in disaster as the financial crisis unwound. That still seems to cast a long shadow for many investors, but all they've done is fail to take advantage of the best UK growth story, (cyclical, granted) over the last 40 years. Bar none.
Where I think the builders have been particularly clever is in managing the change from exciting high growth to slower growth, high dividend paying boredom without actually slaughtering the stock price. That transition is usually very painful (for shareholders) and is what almost always happens in such a scenario, no matter the sector. PSN, especially, always plan on the assumption that there will be a housing sector crash at some future point and plan accordingly inc. no long term debt.
I hope I'm not speaking too soon. It could be that the market slaughters the stock price anyway, despite the underlying businesses being fundamentally better than sound. Look at what happened after the Brexit vote, for example (see chart).
That is the problem, I suppose. UK builders (except TW) are wholly exposed to the UK economy, whereas 70% of the FTSE 100 earnings come from abroad. There are only a few companies that are 100% exposed to the UK for their revenue, and the builders certainly fit in that category.
By the way, PSN increased forward sales forecasts AND the government keeps talking about reforming the planning scheme that makes developments such a longer-term proposition, so I think the markets have over-reacted to the 'flat sales' comment in just a single quarter. Overlooking the highest monthly house price rise news for several months that was released on the same day, I noted.
Keep an eye on the P/E is my advice.It has never really got out of hand in the sector this cycle, except perhaps with one or two London specialists. That's what has made them such an obvious buy.
FTSE P/E is currently 23, historic average is 15. Builders are UK-based though, so I would say anything over 20 is too high with all the uncertainty ahead. I'm sure qa Labour government would be hostile to builders making in excess of 20% return on our capital, for example.
sgd, "what has happened during the last 2 months to make you now decide to sell?"
Nothing to do with the company other than the price. I thought there was a good chance I may be able to re-buy before ex-div date thus taking the dividend twice, as it were.
Far more to do with personal accounting reasons, needing to generate cash at some point (I withdraw all my trading profits every year and re-start with the same amount that I have had invested for the last 15-20 years (plus a little bit for inflation).
I do wonder about the reduced number of immigrants coming into the country should the government ever manage to enforce the policy. That will see demand fall off somewhat as Britain returns to an ever ageing population with population static or slowly decreasing.
It may be that enough young, vigorous people who have started families here, or brought them with them, over the last dozen years do stay. Some will, obviously.
I live in Poland though, much of the year, and what I am seeing is more and more people either returning to Poland where the economy is booming, not slowing, or choosing to work in Germany, Italy, France, Belgium, Netherlands, Norway, Denmark just to name those places actually mentioned to me by people in the last few months.
I also see recruiters saying that they cannot fill job positions with employment levels high and little interest from EU persons to come to work here now. People from outside the EU similarly tend not to want to take a cut in wages or have the option to work in an ever growing Eurozone where wages are growing at a rate higher than inflation, despite the much higher unemployment rate.
If there is a slow down in demand numbers, and that comes together with an increasing tendency to rent being met by 'Build-to-rent' providers and the possibility of a sudden glut of student properties being converted to housing if P.M. May gets her way and slashes foreign student numbers, then house prices will slow quite sharply while the market adjusts.
If and when that happens, my first choice for re-buying house-builders is PSN, hopefully at the point the market over-reacts.
Meanwhile, I'm diversifying a little into Build-to-rent, social and affordable housing specialists and some specialist commercial properties. I'm slowly divesting myself of student accommodation specialists (builders and renters) and general housebuilders. Overall, I'm still heavily invested in UK property which ultimately has never let me down over the last 20 years or so.
Nice dividends in housebuilders, but I'm after a much bigger return than that and I can't see too much growth left here now at the recent highs. I could have timed my sale better, of course, but that is why we sell in tranches. We can't time the tops just like we can't time the bottoms.
I do NOT see a house sector crash coming, although each rise in interest rates will hit stock prices and I do think inflation is more stubborn than the B of E believes it is, so there may be more rises than they are anticipating, despite a failing economy. Not a good scenario.
I DO see a market correction sooner or later, of probably 20%-40%, if history is anything to go by. I want enough cash on hand to take advantage of that and now have over 20% of my portfolio in cash (being eaten away at over 3% p.a. by inflation).
I can't wait for the ii account changes when I can convert some of my cash into other currencies, frankly.
So, rambled on a bit, but you get the picture. Sorry for the late reply, I didn't see the quustion until this morning.
I still hold a small tranche of PSN, by the way, which is worth about as much as my whole position was when I finished building it in 2011.
I believe it was flat sales that caused today's sell off. Lot of profit taking going on I expect as SP may have got ahead of real valuation. IMO SP will recover over following months.
From News tab:
Flat sales at Persimmon weigh on housebuilders
By StockMarketWire | Wed, 8th November 2017 - 12:04
Bad news from housebuilder Persimmon (PSN) had a negative read across for the sector, helping to keep the FTSE weighed down at around its opening level of 7,509 by midday.
Persimmon said third quarter sales were flat year-on-year, causing the stock to fall 3.9% to £27.61.
Its peers Barratt Development (BDEV) and Taylor Wimpey (TW.) fell 2.3% and 2.2% to 636.5p and 196.5p, respectively.
almost 4% for saying the business was doing alright, trading in line with expectations.
Glad there was no bad news to report....
I see Barratt also got some stick today so maybe a general housebuilder thing.
Maybe rumours that this Govt. has come to its senses and is going to dump Help to Buy. (or help to stupidly inflate house prices out of reach using taxpayer subsidy, as I prefer to call it).
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