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Sainsbury's 3rd Quarter Trading Statement

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idpickering
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Re: Sainsbury's 3rd Quarter Trading Statement

#22862

Postby idpickering » January 13th, 2017, 2:04 pm

Wizard wrote:
idpickering wrote:Hi Terry. I tend to ignore all the fluff surrounding my holdings once I've bought a holding. The only time that I may notice such things would be when I was investigating one of my holdings with a view to topping up.

We talk about Strategic Ignorance (SI) a lot here, but I'm of a mind to put up a reminder of this here in order to refresh the seasoned hands here, and to educate any newbies in our midst.

How To Pick A High Yield Portfolio

"I follow the concept of what I call 'strategic ignorance'. This means that I do not take the slightest notice of any perceived long-term trends that some consider important in share selection. This applies to the macro picture of the economy, the sector and the micro situation of the share itself. Despite the fact that the share is intended to be held for many years, I studiously ignore anything which tries to inform me of its long-term future. My reasons are that nobody knows and that those who think they know, know even less. Attempts to forecast the future are worse than useless because they may well lead you into inferior selection decisions than those made by accepting that you don't know. Strategic ignorance however actually capitalises on the acceptance of not knowing. I believe that long-term shares chosen on the basis of some kind of futurising will tend to do worse than those picked using strategic ignorance, such is the fallibility of long-term forecasting."

http://news.fool.co.uk//valueinvesting/ ... 050304.htm


Thanks for the post, reading the source of the concept is always instructive.

My problem is I can't wholly buy into SI. I am more than ready to admit it may be rooted in inherent arrogance but I just struggle with the idea of buying a share that I think has issues. Those concerns may be unfounded or based on a lack of knowledge and for those reasons turn out to be just plain wrong, but even so I will sleep sounder if I do not buy shares I believe face issues. I am sure it means I will miss out on shares I should have bought, I will still make bad picks but if it means an internal 'I told you so' dialogue that is a price worth paying for me. A psychological flaw maybe, but I am too old to try and unpick that now :lol:

Terry.


Thanks for your post Terry. I think the crux of it is, we all have our own 'being able to sleep' sounder points. Ultimately we're all different and can run our HYPs as we each see fit. In fact, in another thread, I mentioned that I'm adding three newbies to my HYP over the coming months, ADM, GNK and UU.. This is because, if my Wife's 'let's move to Orkney' thing does happen, and we do end up living on the HYP, I want to feel it's complete. At 24 holdings it doesn't seem quite done. It's that sleeping soundly point again.

Regards,

Ian.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22863

Postby Arborbridge » January 13th, 2017, 2:09 pm

I just struggle with the idea of buying a share that I think has issues.


Terrym

You aren't meant to buy a share which has issues :)
The problem isn't so much the initial buying, but the continued holding, of a share with issues. So here we get to that part where we are supposed to have faith that things will - on average across a portfolio - turn out OK in the long run. And it is important to remember that the "ok" gambit is also relative to what might have happened if you cash out and buy another share.
Essentially, Stephen Bland is saying that for most investors, across a HYP, trusting the managements collectively to produce the goods, is on average better than selling and then facing potentially the same set of problem with another share.

It's difficult to prove, and difficult to disprove, unfortunately - but as an assertion, I'd say it has "legs".

Arb.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22869

Postby idpickering » January 13th, 2017, 2:18 pm

Arborbridge wrote:
I just struggle with the idea of buying a share that I think has issues.


Terrym

You aren't meant to buy a share which has issues :)
The problem isn't so much the initial buying, but the continued holding, of a share with issues. So here we get to that part where we are supposed to have faith that things will - on average across a portfolio - turn out OK in the long run. And it is important to remember that the "ok" gambit is also relative to what might have happened if you cash out and buy another share.
Essentially, Stephen Bland is saying that for most investors, across a HYP, trusting the managements collectively to produce the goods, is on average better than selling and then facing potentially the same set of problem with another share.

It's difficult to prove, and difficult to disprove, unfortunately - but as an assertion, I'd say it has "legs".

Arb.


I agree with your post Arb. Have yet another virtual rec. I'm off to set up a counselling service for shares with an issue. :lol:

Ian.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22888

Postby Wizard » January 13th, 2017, 2:46 pm

idpickering wrote:
Arborbridge wrote:
I just struggle with the idea of buying a share that I think has issues.


Terrym

You aren't meant to buy a share which has issues :)
The problem isn't so much the initial buying, but the continued holding, of a share with issues. So here we get to that part where we are supposed to have faith that things will - on average across a portfolio - turn out OK in the long run. And it is important to remember that the "ok" gambit is also relative to what might have happened if you cash out and buy another share.
Essentially, Stephen Bland is saying that for most investors, across a HYP, trusting the managements collectively to produce the goods, is on average better than selling and then facing potentially the same set of problem with another share.

It's difficult to prove, and difficult to disprove, unfortunately - but as an assertion, I'd say it has "legs".

Arb.


I agree with your post Arb. Have yet another virtual rec. I'm off to set up a counselling service for shares with an issue. :lol:

Ian.


Thanks guys, both for your tolerance of possibly uninformed questions and your most helpful answers. I can completely see the point about second guessing everything in a portfolio of maybe 20-30 holdings, if nothing else the costs of buying and selling everytime a share sneezes would have a drag on income.

Again, many thanks,
Terry.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22907

Postby idpickering » January 13th, 2017, 4:11 pm

Wizard wrote:
idpickering wrote:
Arborbridge wrote:
Terrym

You aren't meant to buy a share which has issues :)
The problem isn't so much the initial buying, but the continued holding, of a share with issues. So here we get to that part where we are supposed to have faith that things will - on average across a portfolio - turn out OK in the long run. And it is important to remember that the "ok" gambit is also relative to what might have happened if you cash out and buy another share.
Essentially, Stephen Bland is saying that for most investors, across a HYP, trusting the managements collectively to produce the goods, is on average better than selling and then facing potentially the same set of problem with another share.

It's difficult to prove, and difficult to disprove, unfortunately - but as an assertion, I'd say it has "legs".

Arb.


I agree with your post Arb. Have yet another virtual rec. I'm off to set up a counselling service for shares with an issue. :lol:

Ian.


Thanks guys, both for your tolerance of possibly uninformed questions and your most helpful answers. I can completely see the point about second guessing everything in a portfolio of maybe 20-30 holdings, if nothing else the costs of buying and selling everytime a share sneezes would have a drag on income.

Again, many thanks,
Terry.


You're most welcome Terry. I'm from the school that we're all still learning, and nobody knows everything.

Ian.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22947

Postby Gengulphus » January 13th, 2017, 6:29 pm

Wizard wrote:
Gengulphus wrote:
Wizard wrote:Unless somebody practices SI in a very purest way then when selecting purchases I think we all take a view on the shares we buy.

I think we all take a view on the shares we buy - full stop! Even practicing "SI in a very purest way", e.g. as pyad explained it in the quote idpickering has dug out, doesn't prevent one taking a view - it just prevents one basing that view on long-term forecasting. One can still take the view e.g. that "this company has consistently grown its dividend over the last 5 years and is forecast to do so again this year - that's good enough for me", or (more appropriately for this thread) "this company has shrunk its dividend over the last 3 years and is forecast to do so again this year - no need for me to waste any more time on it".

Well then I guess we could get into debates aout what is "long term", I seem to recall that the view of the economists is something along the lines of "in the long term we are all dead" :lol:

Well, it was pyad who wrote the quote about SI meaning ignoring long-term forecasting - so probably best to ask him what it means in that quote...

But in the version of SI that I use, it means further into the future than I think it's possible to forecast the fortunes of the company reasonably reliably, which depending on the company means 1-5 years, with most companies being 1-2 years and very few getting up to 5.

Note that that's not the fortunes of the company's business, but of the company. In particular, it's often the case that a business can clearly be seen to be in long-term decline: what isn't anything like as foreseeable is how successfully companies in that business will move on from it. E.g. there's no real doubt in my mind that shopping in physical supermarkets is slowly becoming less important and will continue to do so, and all of the supermarket companies are producing internet shopping alternatives in various different ways. But which of them is going to do best at that and find the best uses for the physical supermarket properties as they are slowly released from the business are crucial questions when looking at the long-term futures of the companies, and I don't think that is very forecastable at all.

Wizard wrote:What puzzles me a little then is what IIRC was a concept used by Luniversal, that of a "danger zone", where a yield was too high to be believed to be sustainable. ...

Well, it doesn't puzzle me - but that's only because I quite simply don't believe in the concept at all!

What I do believe in is that a high yield can be, and quite often is, associated with an unsustainable dividend. But there are two crucial differences from Luniversal's "zones": firstly, I believe that's true of any high yield, and secondly, I don't believe it's automatic. I.e. the "zones" concept essentially says that a moderately high yield implies the share's dividend can be treated as sustainable and a very high yield implies that it should be treated as unsustainable, while I believe that both moderately high and very high yields imply that the sustainability of the share's dividend should be investigated and a decision made based on what the investigations reveal.

Suitable investigations (or "dividend safety factors") are things like dividend cover, debt levels and how they're changing, the management's record at setting dividend levels sensibly, looking for foreseeable events that are big enough to significantly affect the company's ability to pay dividends, and company size relative to the plausible size of less foreseeable events. E.g. both Shell and Unilever are megacaps and both could suffer all sorts of unforeseeable problems - but it's much more imaginable that Shell might suffer a tens-of-billions disaster (as BP did in 2010) than that Unilever might. All of those can be considered without doing long-term forecasting, and so are compatible with SI.

Wizard wrote:As an example TalkTalk has a very attractive yield (well into the "danger zone" I believe) at present because of a significant fall in share price, but I do not think there is any concrete statement or forecast of a dividend cut. How does a share like that fit? As it happens it is off my list for reasons of the level of gearing so I have not considered whether I think this is a long the share price or the market signalling a reduction in dividend.

It's off mine as well, in my case because with BT and Vodafone already in my HYP, I'm not looking for any more telecoms companies. But if it were on my list, I would basically be doing investigations as described above to try to see how easily the company is currently / in the near future paying its dividends, not thinking in terms of the market 'signalling' things.

Or at least, not in terms of it 'signalling' useful things. The yield being high does mean that the price is low relative to what the company is paying out to its shareholders, and the price being low does indicate that something about the opinions of market participants who are actively considering buying or selling the share. And some of those market participants base their opinions on what the company is paying out to its shareholders - but a lot are basing them on other things entirely, such as trying to analyse the behaviour of other market participants to work out where they're taking the share price in the short term. That leads to positive feedback loops like share prices rise => those shareholders see other market participants as mainly buying => those shareholders think the price is likely to rise => those shareholders buy => share prices rise because of the extra buying pressure, and the corresponding one with "rise" and "buy" replaced throughout by "fall" and "sell". And those feedback loops can lead to prices becoming irrationally high or low - with the tech boom at the turn of the century being an extreme example of the irrationally-high case, and the example tjh290633 gives from time to time of Stagecoach in late 2002 being a pretty clear example of the irrationally-low case IMHO.

So I could think of a high yield 'signalling' that one of a number of things is happening, with one of them being that the dividend really is likely to be cut, another being that the share price is being driven irrationally low by such feedback, and there may well be others I haven't thought of for this post. But with the first indicating that it's a poor HYP purchase and the second that it's an excellent one, that 'signal' isn't very useful! I need instead to look for things that should help me to distinguish between them, such as the sorts of "dividend safety factors" that I mention above to see if they indicate that the dividend is unlikely to be cut.

Or something that indicates that the share price is being driven irrationally low might be used, such as the contrarian indicator of observing large numbers of people saying they think retailers are an uninvestable sector... But I have to admit I mostly don't dare act on such indicators, and very possibly am missing out as a result. For instance, I was getting that impression about resources stocks around a year ago, but basically didn't act on it - and in retrospect it would have been an absolutely brilliant time to have loaded up on them! Though that may well be drifting off-topic, being more of a capital-oriented verdict than an income-oriented one, and so I'll leave it at that...

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#22969

Postby tjh290633 » January 13th, 2017, 10:18 pm

Wizard wrote:Unless somebody practices SI in a very purest way then when selecting purchases I think we all take a view on the shares we buy. It may take the form of a simple veto of a share which otherwise passes all a HYPer's objective selection tests right through to a quantified earnings forecast. I am in the process of buying a couple of new holdings for my new HYP, on objective selection criteria Pearson is one of the two top candidates, but concerns about future earnings given the necessity of a change in their business model is likely to mean I will not purchase Pearson (not looking to divert the thread on to a discussion of Pearson, it is merely an example). I wouldn't call it a forecast as I am not going to try and turn it into numbers, but I am taking a view on future prospects and therefore future dividends. So I see it as a sliding scale rather than a fundamentally different approach.

Terry.


As far as I can recall, the concept of Strategic Ignorance only applies once you are holding a share. To buy one when there is something about to happen, which has been announced, yet you have not bothered to look at recent RNS posts, could be a recipe for disaster.

I recall buying Cattles rather than Provident Financial, purely because PFG was about to spin off the international arm, and I didn't want to have that share as a small rump holding. It turned out to be a mistake, but that could not have been foreseen.

And as I have said before, I don't believe in forecasts.

TJH

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Re: Sainsbury's 3rd Quarter Trading Statement

#23004

Postby blobby » January 14th, 2017, 10:25 am

Many thanks to idpickering for the link back to Stephen Bland's article "How To Pick A High Yield Portfolio" http://news.fool.co.uk//valueinvesting/2005/vi050304.htm I'm not (yet) a true disciple but I'd like to relate Stephen's criteria to the subject of this thread - J Sainsbury and whether Stephen would include it as a selection for purchase now. As I own shares already, readers will realise I am not and independent observer.

Stephen said:

I follow the concept of what I call 'strategic ignorance'. This means that I do not take the slightest notice of any perceived long-term trends that some consider important in share selection. This applies to the macro picture of the economy, the sector and the micro situation of the share itself. Despite the fact that the share is intended to be held for many years, I studiously ignore anything which tries to inform me of its long-term future. My reasons are that nobody knows and that those who think they know, know even less. Attempts to forecast the future are worse than useless because they may well lead you into inferior selection decisions than those made by accepting that you don't know. Strategic ignorance however actually capitalises on the acceptance of not knowing. I believe that long-term shares chosen on the basis of some kind of futurising will tend to do worse than those picked using strategic ignorance, such is the fallibility of long-term forecasting.


Picking the bones out of this I get:

Trends: We have discussed above how Sainsbury has been a poor investment over the last 20 years with the sales and profits barely keeping pace with inflation. So the trend has been a bit rubbish which I would argue is due to all of: the macro picture of the economy; the supermarket sector; and occasional failings of the company. But Stephen says not to take the slightest notice of this and be strategically ignorant.

In the next paragraph Stephen said:

Bearing the above things in mind, the selection process is then fairly simple. Rank the FTSE100 or maybe the 350 shares by descending yield then work your way down, picking a share from each sector. Then do a quick check on the share to make sure that at least in the very near future the yield appears sustainable, preferably rising. If so, then go for it. Ideally you want very low borrowings, high cover and so on but almost certainly you will have to give up on a lot of that for the sake of essential sector diversification. This process of using the index ranked by descending yield automatically finds the largest cap highest yielders at that time.


So if you follow this guidance and take the sector including supermarkets, you should find J Sainsbury at the top of the list. You have to take a view on whether the yield is sustainable in the very near future and preferably rising (ticks in my view). Ideally you want very low borrowings (tick) and high cover (tick).

So I'm interested to have that reassurance from others ;-) Would J Sainsbury come top of your list of Supermarkets at this point as well?

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Re: Sainsbury's 3rd Quarter Trading Statement

#23008

Postby kempiejon » January 14th, 2017, 11:07 am

2005 to 2014 Sainsbury had a rising dividend, I bought in 2010 and added in 2011 and 2014. It's ruled out for now poor recent dividend history.
Compound Annual dividend Growth Rate
5 Yr -5.2%
10 Yr +3.65
15 Yr -1.34
http://www.dividenddata.co.uk/dividend- ... ?epic=SBRY

One might struggle to find a supermarket with a positive long term dividend history but you don't have to buy a supermarket. From here on Sainsbury might be able to offer an increasing income over the next decade, (digital look forecasts suggest not for a couple of years yet http://www.digitallook.com/equity/Sainsbury_J ) but it's not a buy or top up in my opinion - SI doesn't come into my thoughts on that choice.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23015

Postby blobby » January 14th, 2017, 12:13 pm

Thanks for the response kempiejon,

It looks like I have missed the Stephen Bland concept of a history of rising dividends. I've found this from Stephen Bland in 2001 Value Investing

http://news.fool.co.uk//valueinvesting/ ... 011123.htm

Where he says:

Secondly, look for an increasing dividend history for as far back as you can find records. The idea here is to locate shares that are more likely to deliver the required income growth even in years when profits may fall temporarily.


Perhaps I don't understood his concept of strategic ignorance, unless it is ignore trends EXCEPT dividends.

J Sainsbury have a long history of dividends (average at about 13p from 2000 I think I calculated) but it is certainly not a rising history and this is a reflection of the profits history.

So Stephen would ignore the supermarkets sector altogether?

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Re: Sainsbury's 3rd Quarter Trading Statement

#23019

Postby tjh290633 » January 14th, 2017, 12:25 pm

blobby, perhaps you missed this bit from an earlier post, where you quoted from a PYAD post:

Despite the fact that the share is intended to be held for many years, I studiously ignore anything which tries to inform me of its long-term future. My reasons are that nobody knows and that those who think they know, know even less. Attempts to forecast the future are worse than useless


It is forecasts the he ignores.

TJH

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Re: Sainsbury's 3rd Quarter Trading Statement

#23024

Postby Arborbridge » January 14th, 2017, 12:46 pm

Secondly, look for an increasing dividend history for as far back as you can find records. The idea here is to locate shares that are more likely to deliver the required income growth even in years when profits may fall temporarily.


Mr Blobby, this has usual been interpreted as "check for a rising history over the past five years" - or at least no cuts. I think five years was probably mooted because it is reasonably long and also easy to verify on free websites.

This would rule out SBRY as a new share in your HYP.
What about the case of a "topup" where SBRY already exists in an established HYP? It gets a little muddier here, I'd suggest. Stephen Bland said of top ups (in a reply to me on TMF) words to the effect that one should use the normal safety criteria. I take that to mean rule out a share which has cut within, say, five years.
Other people, including me, tend to be a bit soft on this one, and would buy if they can reasonably argue that the dividends will rise in the next year. In other words, the strict criteria should apply, but people often rationalise their own preferences and do something slightly different!

The sections about SI are largely relevant to reasons for holding on to existing shares, rather than concerned with crtieria for buying new shares. Once you have a share, SI tempers your desire to jump out of it some time later if that company is going through a bad patch.

Arb.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23027

Postby idpickering » January 14th, 2017, 1:22 pm

blobby wrote:Many thanks to idpickering for the link back to Stephen Bland's article "How To Pick A High Yield Portfolio" http://news.fool.co.uk//valueinvesting/2005/vi050304.htm I'm not (yet) a true disciple but I'd like to relate Stephen's criteria to the subject of this thread - J Sainsbury and whether Stephen would include it as a selection for purchase now. As I own shares already, readers will realise I am not and independent observer.

Stephen said:

I follow the concept of what I call 'strategic ignorance'. This means that I do not take the slightest notice of any perceived long-term trends that some consider important in share selection. This applies to the macro picture of the economy, the sector and the micro situation of the share itself. Despite the fact that the share is intended to be held for many years, I studiously ignore anything which tries to inform me of its long-term future. My reasons are that nobody knows and that those who think they know, know even less. Attempts to forecast the future are worse than useless because they may well lead you into inferior selection decisions than those made by accepting that you don't know. Strategic ignorance however actually capitalises on the acceptance of not knowing. I believe that long-term shares chosen on the basis of some kind of futurising will tend to do worse than those picked using strategic ignorance, such is the fallibility of long-term forecasting.


Picking the bones out of this I get:

Trends: We have discussed above how Sainsbury has been a poor investment over the last 20 years with the sales and profits barely keeping pace with inflation. So the trend has been a bit rubbish which I would argue is due to all of: the macro picture of the economy; the supermarket sector; and occasional failings of the company. But Stephen says not to take the slightest notice of this and be strategically ignorant.

In the next paragraph Stephen said:

Bearing the above things in mind, the selection process is then fairly simple. Rank the FTSE100 or maybe the 350 shares by descending yield then work your way down, picking a share from each sector. Then do a quick check on the share to make sure that at least in the very near future the yield appears sustainable, preferably rising. If so, then go for it. Ideally you want very low borrowings, high cover and so on but almost certainly you will have to give up on a lot of that for the sake of essential sector diversification. This process of using the index ranked by descending yield automatically finds the largest cap highest yielders at that time.


So if you follow this guidance and take the sector including supermarkets, you should find J Sainsbury at the top of the list. You have to take a view on whether the yield is sustainable in the very near future and preferably rising (ticks in my view). Ideally you want very low borrowings (tick) and high cover (tick).

So I'm interested to have that reassurance from others ;-) Would J Sainsbury come top of your list of Supermarkets at this point as well?


Thank you for your kind comment Blobby, you're more than welcome. I find it handy to refer back to Stephen's articles every now and again, and hope they'll be available for some time to come.

In relation to your last point above, most definitely would Sainsbury be my pick of the big three. It has the highest yield, and the other metrics I can give some leeway to. I intend holding them 'forever' to quote Warren B. Should the others improve, I'd not worry about picking them up too, bearing in mind diversification/sector spread.

Regards,

Ian.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23028

Postby Gengulphus » January 14th, 2017, 1:25 pm

tjh290633 wrote:As far as I can recall, the concept of Strategic Ignorance only applies once you are holding a share. ...

No, at least pyad's version of SI applies both when you're buying and when you're already holding - or indeed in his strongly-preferred untinkered HYPs, mainly when you're buying, because you have very few decisions to make about shares you already hold that aren't buying decisions (e.g. topping up a holding) or near-equivalents (e.g. whether to take up rights in a rights issue).

tjh290633 wrote:... To buy one when there is something about to happen, which has been announced, yet you have not bothered to look at recent RNS posts, could be a recipe for disaster.

But pyad's version of SI doesn't say to ignore recent RNSes or things that are about to happen, only to ignore long-term forecasting. There might be a little bit of that in an RNS, e.g. in a statement that "the Directors have every confidence in the long-term future of the Company", in which case it says to ignore that statement - but not the rest of the RNS.

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#23030

Postby idpickering » January 14th, 2017, 1:31 pm

Arborbridge wrote:

The sections about SI are largely relevant to reasons for holding on to existing shares, rather than concerned with crtieria for buying new shares. Once you have a share, SI tempers your desire to jump out of it some time later if that company is going through a bad patch.

Arb.


Hi Arb. I agree with you on that aspect. It is very liberating, and it ties in with ignoring the share's capital performance to me. It's about the income after all.

Regards,

Ian.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23052

Postby Gengulphus » January 14th, 2017, 3:46 pm

blobby wrote:Stephen said:

I follow the concept of what I call 'strategic ignorance'. This means that I do not take the slightest notice of any perceived long-term trends that some consider important in share selection. This applies to the macro picture of the economy, the sector and the micro situation of the share itself. Despite the fact that the share is intended to be held for many years, I studiously ignore anything which tries to inform me of its long-term future. My reasons are that nobody knows and that those who think they know, know even less. Attempts to forecast the future are worse than useless because they may well lead you into inferior selection decisions than those made by accepting that you don't know. Strategic ignorance however actually capitalises on the acceptance of not knowing. I believe that long-term shares chosen on the basis of some kind of futurising will tend to do worse than those picked using strategic ignorance, such is the fallibility of long-term forecasting.


Picking the bones out of this I get:

Trends: We have discussed above how Sainsbury has been a poor investment over the last 20 years with the sales and profits barely keeping pace with inflation. So the trend has been a bit rubbish which I would argue is due to all of: the macro picture of the economy; the supermarket sector; and occasional failings of the company. But Stephen says not to take the slightest notice of this and be strategically ignorant.

Careful - Stephen says to ignore long-term forecasts about the future. The company record you've observed is entirely in the past, and he doesn't say anything about ignoring that. What he does say is to ignore forecasts that any observed trend in it will continue into the long-term future - including any such forecast that you yourself are making, quite possibly just as an unconscious association with the word "trend".

Using short-term forecasts doesn't conflict with that - indeed he used forecast dividend yields in the initial construction of HYP1 (see http://news.fool.co.uk//news/foolseyeview/2000/fev001113c.htm.

Neither does using information one can glean from the observed company record - to take two of your points, about how lucrative the supermarket sector is at producing investment returns, and how good the company's managers and management processes are at avoiding major failings. These are information about the current state of the company, not forecasts about its future state, and so again don't conflict with his version of SI.

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#23054

Postby Wizard » January 14th, 2017, 4:00 pm

Blobby

I just stumbled on this page on TMF which appears to give a link to a large number of the original articles, may prove useful.

http://www.fool.co.uk/investing-basics/ ... portfolio/

Terry.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23076

Postby blobby » January 14th, 2017, 5:16 pm

Gengulphus,

What he does say is to ignore forecasts that any observed trend in it will continue into the long-term future - including any such forecast that you yourself are making, quite possibly just as an unconscious association with the word "trend".


I think you have put your finder on the problem I am wrestling with. I am finding it difficult to separate trend from record. They seem linked to me however I look at it.

The trend I observe with J Sainsbury over the last 20 years is that there has been flat profitability in real terms. I view the reasons for this being changes in our shopping habits with the rise in internet shopping, new competitors and a generally rubbish UK macro economic performance with little increase in the disposable income of the population in general. If the trend continues into the future and Sainsbury stays the same, then it will be a poor investment. If I choose not make this assumption, as it is almost impossible to predict, then there is more chance of a recovery. My instinct is to ignore what I see as a trend in this case and I'm thinking that this is how Stephen might view it as well.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23085

Postby Wizard » January 14th, 2017, 5:29 pm

blobby wrote:The trend I observe with J Sainsbury over the last 20 years is that there has been flat profitability in real terms. I view the reasons for this being changes in our shopping habits with the rise in internet shopping, new competitors and a generally rubbish UK macro economic performance with little increase in the disposable income of the population in general. If the trend continues into the future and Sainsbury stays the same, then it will be a poor investment.


I don't think I agree Blobby. I presume the reason for needing rising dividends is that the real world will experience inflation. If Sainsbury's earnings are flat in real terms and their dividend is as well surely it is a perfectly good investment for income purposes if my costs also remain flat in real terms? In other words I think looking at it in real terms is not helpful, I want to know what is happening after inflation as that same inflation will impact how much income I need.

Terry.

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Re: Sainsbury's 3rd Quarter Trading Statement

#23172

Postby Arborbridge » January 15th, 2017, 7:40 am

I think looking at it in real terms is not helpful, I want to know what is happening after inflation as that same inflation will impact how much income I need.


Wizard - is that what you really mean? Normally, we refer to looking at something in "real terms" meaning "after inflation", so surely that is helpful? - in fact it's what one needs.

it is a perfectly good investment for income purposes if my costs also remain flat in real terms?


I'd say that's a really big IF :) My costs are surely rising faster than Sainsburys dividend and probably faster than the "official" CPI.

This isn't to take side on whether SBRY is a good investment or not - although it certainly hasn't been great for me up to now!


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