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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

#22516

Postby idpickering » January 12th, 2017, 3:26 pm

Arborbridge wrote:
With my forecast of similar earnings as above the yield at £2.58 is 4.7%.


Well, Mr Blobby, I wish I had the confidence to make my own forecasts. I wouldn't presume to have more information than the various brokers who are forecasting a cut in eps. How could I?

Incidentally, the statement on dividend being determined by the cover, seems eminently sensible to me. I wouldn't want a company to pay out too much, perhaps borrowing to do so. The obsession with rising dividends encourages some directors to take more risk than they should.


Arb.



I think blobby put it very well and tend to agree with his view on this. I/m happy to let the management do their thing, and beyond that SI applies for me.

Regards,

Ian.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22540

Postby blobby » January 12th, 2017, 4:01 pm

Arborbridge wrote: I wish I had the confidence to make my own forecasts.


Arb,

Sorry to hear that.

Blobby

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Re: Sainsbury's 3rd Quarter Trading Statement

#22557

Postby funduffer » January 12th, 2017, 4:42 pm

blobby wrote:It is worth reminding ourselves what the J Sainsbury dividend policy is. They said in the last annual report:

Sainsbury Annual Report 2015 wrote:We are also committed to ensuring we pay an affordable dividend and are fixing our dividend policy to two times cover over the next three years.




This is a sensible policy from a business point of view, but is it what a HYPer would want? It is likely to lead to erratic dividend payments.

You may argue that in a well diversified portfolio this does not matter, but it is certainly out of step with other HYP companies, so it puts it out on a limb.

I hold SBRY, but not wanting to sell or top-up currently.

FD

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Re: Sainsbury's 3rd Quarter Trading Statement

#22563

Postby Arborbridge » January 12th, 2017, 4:55 pm

blobby wrote:
Arborbridge wrote: I wish I had the confidence to make my own forecasts.


Arb,

Sorry to hear that.

Blobby


I'm not quite sure what you're sorry about :) You're sorry that "I wish I had confidence" doesn't make sense.

I think the point is: why are you confident that you have better information than people who spend their professional lives making forecasts, some of whom will know Sainsbury's better than either of us?

I'm happy to take the forecasts most of the time, because in general they have served me well.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22566

Postby Arborbridge » January 12th, 2017, 5:00 pm

This is a sensible policy from a business point of view,


Funduffer, the corollary is that to do the opposite is not so sensible. So one could argue that neither is it sensible for the HYPer's future needs. To pay out a dividend that isn't covered for long is folly, and as we know, the margins in supermarkets are slender. One could argue that the cover they've nominated is generous, but that's a different discussion.
A cover a 2 is what many HYPers have said they want: here is a company offering it. It's something to be praised, in my view, and if the resulting dividends are not rising, at least that is reflection of reality and not cloud cuckoo land.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22582

Postby CryptoPlankton » January 12th, 2017, 5:59 pm

Arborbridge wrote:
With my forecast of similar earnings as above the yield at £2.58 is 4.7%.


Well, Mr Blobby, I wish I had the confidence to make my own forecasts. I wouldn't presume to have more information than the various brokers who are forecasting a cut in eps. How could I?

Arb.


Actually, HSBC updated (raised) their pre-tax forecast for 2017 to £570m (£548m in 2016) on the back of today's statement.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22589

Postby Arborbridge » January 12th, 2017, 6:13 pm

Actually, HSBC updated (raised) their pre-tax forecast for 2017 to £570m (£548m in 2016) on the back of today's statement.


I meant to add in my original that forecasts are likely to rise, so let's wait and see. But that is rather different from my having any clue as to why, or what any rise should be - I wouldn't be so presumptuous as I have no special knowledge.

Arb.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22616

Postby blobby » January 12th, 2017, 8:23 pm

Arborbridge wrote:
Actually, HSBC updated (raised) their pre-tax forecast for 2017 to £570m (£548m in 2016) on the back of today's statement.


I meant to add in my original that forecasts are likely to rise, so let's wait and see. But that is rather different from my having any clue as to why, or what any rise should be - I wouldn't be so presumptuous as I have no special knowledge.

Arb.


Arb,

I've formed the impression that you don't like to see posters here making their own forecasts. Is that correct and have I broken the rules by doing so? If so I apologise.

I quite like to form my own opinion on companies that interest me and as I said before that I was sorry that you didn't feel confident to make your own forecasts. I would be interested to read them if you did.

I agree that it is nice to look at the work of the professionals but that is often not available to me. When it is available it is usually out of date or just a summary rather than the details which as I understand it is often where the value is.

If personal forecasts (with or without special knowledge) are not welcome here then just say and I'll shut up or go somewhere else.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22687

Postby Gengulphus » January 12th, 2017, 11:18 pm

Bouleversee wrote:Apologies, Geng. It's Horizon Discovery Group which is LSE but on the AIM register, though you'd never know the latter from the contract note, which imo is an omission. Actually, thinking about the complexities of IHT, I think it would be useful if one's portfolio list at brokers indicated which were AIM shares to alert heirs to check whether IHT is payable on them. Horizon's qualifies for the exemption, after 2 yrs ownership,of course.

I should perhaps also have said that things can also be different for smallcaps, basically because there will tend to be far fewer buy and sell orders around at any one time - which means that what happens to the share price becomes much more likely to be affected by the essentially random decisions of single investors. Horizon Discovery Group isn't so small that that's likely to be a major effect - but it's small enough that just one investor deciding to make a fairly large sale could affect the price fairly noticeably...

Also, another thing that's caught me out on a number of occasions: I'm thinking of buying or selling a share, look at the broker's general price quote for the share and decide it's acceptable. So I start the process of buying or selling - and when the system offers me a deal to accept within 15 seconds, it's noticeably less favourable and I decide to reject it. And I look again at the general price quote and it's back at the more favourable level that I would accept... And I think "What's the market got against me today???".

And then I remember that the broker's general price quote is a 15-minutes-delayed one, but the deal offered when I try to trade is of course at an up-to-the-minute price. The market has moved the price against me in the last 15 minutes, but it isn't jiggling the price up and down depending on whether I'm trying to do a trade - my view of the price is instead effectively travelling backwards and forwards in time! ;-}

On brokers saying whether a holding is an AIM share, I sympathise - but frankly, whether a share qualifies for the exemption is a matter of advice/ opinion (specifically about the point of whether the company meets the "trading company" test), not of information/fact. Or at least, that's the case until HMRC rule on the question, but they only ever do so for a specific company on a specific date (and don't AFAIAA publish those rulings), and might rule differently for the same company on a different date... And cheap online brokers are execution-only brokers, specifically forbidden by regulations from giving any sort of financial advice to their clients. So if I were such a broker, I would steer well clear of saying anything about the question unless regulations required me to - and if any regulations were proposed to require me to supply it, I would make a fuss about it being unreasonable for regulations both to require me not to give advice and to give it!

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#22690

Postby Gengulphus » January 12th, 2017, 11:35 pm

funduffer wrote:
blobby wrote:It is worth reminding ourselves what the J Sainsbury dividend policy is. They said in the last annual report:

Sainsbury Annual Report 2015 wrote:We are also committed to ensuring we pay an affordable dividend and are fixing our dividend policy to two times cover over the next three years.




This is a sensible policy from a business point of view, but is it what a HYPer would want? It is likely to lead to erratic dividend payments.


It isn't what a HYPer ideally wants, but very few (if any) HYP candidates are that! The real question is basically how major a flaw it is - and that's likely to be HYPer-dependent.

E.g. I have no problem about it being in my main HYP (i.e. the one that provides me with the income I live on). That HYP contains 40+ holdings and it has a big safety margin - i.e. it supplies me with a lot more income than I actually need - and so it can easily cope with Sainsbury's dividend having a much bigger chance of being reduced than most of its holdings.

Were it instead a 15-share HYP with a barely-adequate safety margin, the possibility of any one holding's income being reduced is much more serious - and I doubt that I would consider Sainsbury at all suitable for such a HYP.

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#22695

Postby 77ss » January 12th, 2017, 11:48 pm

blobby wrote: I quite like to form my own opinion on companies that interest me


Quite right!

Take forecasts into account by all means, but they can vary so wildly, that it is only sensible to take them with a huge pinch of salt. As an example, the 12 month share price for SBRY varies between 200p and 309p! (https://markets.ft.com/data/equities/te ... s=SBRY:LSE)

When it comes to SBRY, rightly or wrongly, I would avoid (as with all supermarkets).

I note a substantial fall in share price over the past 15 years and I do not believe that its dividend record in any way compensates for this. Capital does matter - you never know when you might be a forced seller. It may, of course, come good, but I see no reason for any particular optimism other perhaps than the potential of the Argos asquisition. There is no compelling need to be exposed to this sector at all.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22714

Postby Gengulphus » January 13th, 2017, 2:16 am

77ss wrote:Take forecasts into account by all means, but they can vary so wildly, that it is only sensible to take them with a huge pinch of salt. As an example, the 12 month share price for SBRY varies between 200p and 309p! (https://markets.ft.com/data/equities/te ... s=SBRY:LSE)

There's a difference between forecasts about what the market will do (e.g. what price it will place on the shares) and those about what the company will do (e.g. what earnings it will make, and what dividends it will pay). And from a HYP perspective and IMHO:

* what the market will do to prices is more unpredictable and so less forecastable than what earnings HYP companies will make and what dividends they will pay;

* what the market will do to prices only affects the secondary goal of capital growth, while what earnings companies will make and what dividends they will pay affects the primary goal of generating income.

Between them, those make earnings and dividend forecasts much more useful in my view than price forecasts - and so I use the former frequently in my HYP investing, while I don't recall ever having used a price forecast, not just in my HYP investing but in any of my equity investing at all.

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#22737

Postby Wizard » January 13th, 2017, 8:53 am

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.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22753

Postby idpickering » January 13th, 2017, 9:21 am

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.


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

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Re: Sainsbury's 3rd Quarter Trading Statement

#22774

Postby 77ss » January 13th, 2017, 10:20 am

Gengulphus wrote:There's a difference between forecasts about what the market will do (e.g. what price it will place on the shares) and those about what the company will do (e.g. what earnings it will make, and what dividends it will pay). And from a HYP perspective and IMHO:

* what the market will do to prices is more unpredictable and so less forecastable than what earnings HYP companies will make and what dividends they will pay;

* what the market will do to prices only affects the secondary goal of capital growth, while what earnings companies will make and what dividends they will pay affects the primary goal of generating income.

Between them, those make earnings and dividend forecasts much more useful in my view than price forecasts - and so I use the former frequently in my HYP investing, while I don't recall ever having used a price forecast, not just in my HYP investing but in any of my equity investing at all.

Gengulphus


Fair points. Perhaps I should have just pointed to the (smaller) range of eps forecasts:

For 2017 - 18.57p to 22p.

Take your pick! Hypothetical for me, when it comes to SBRY.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22777

Postby blobby » January 13th, 2017, 10:26 am

77ss wrote:When it comes to SBRY, rightly or wrongly, I would avoid (as with all supermarkets).

I note a substantial fall in share price over the past 15 years and I do not believe that its dividend record in any way compensates for this. Capital does matter - you never know when you might be a forced seller. It may, of course, come good, but I see no reason for any particular optimism other perhaps than the potential of the Argos asquisition. There is no compelling need to be exposed to this sector at all.


77ss,

Thanks for that, you make a very good point and challenge my reasons for in holding, so I've taken a look at the Annual Report from 2000 to see what might have happened.

Shares in issue are about the same 1,918 million vs 1,911 million (this has changed recently with the Argos acquisition)

Sales go from 17,414 million to 23,775 million (annual change of 2.1% compared with 2.8% inflation)

Net assets go from 4,791 million to 5,539 million (annual change 0.9%)

Average dividend over the period 13.5p

The markets view of the Company has been reflected in a share price ranging from about 220p to almost 600p (in 2007).

So my further conclusions are...

1. It's not been a great investment over the last 15 years. In fact I can see a chart back to 1986 and that tells the same story.

2. This is looking like a particularly depressed share price at the moment and this is what has attracted me into the company.

3. I can see how people would regard this has not been a share/sector to hold forever and hence perhaps not ticking all boxes for HYP shares as I understand it.

4. I'm sticking to the view that this is comparatively safe as an investment from this point with good asset backing.

4. I still think it is good value at the price. But I'm possibly less convinced than I was yesterday.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22819

Postby Gengulphus » January 13th, 2017, 11:42 am

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".

Gengulphus

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Re: Sainsbury's 3rd Quarter Trading Statement

#22830

Postby Arborbridge » January 13th, 2017, 11:59 am

I've formed the impression that you don't like to see posters here making their own forecasts. Is that correct and have I broken the rules by doing so? If so I apologise.

Mr Blobby:
Goodness, no - I did not mean that. It was genuinely that I cannot see how I could make a more reliable forecast than people who are in the industry. Presumably, they have the chance to talk with companies, receive guidance and do some added research. At any rate, it seems reasonable to think the have more knowledge and expertise than I do.

That scepticism about my own ability does read across to other amateur forecasts. So, you might well be right - indeed I hope you are - and if you are confident there is no reason why you shouldn't say it. No, you've broken no rules at all 8-)

I'm sorry if I gave you the wonrg impression.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22844

Postby Wizard » January 13th, 2017, 1:02 pm

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".

Gengulphus

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:

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. Maybe this diverges from SI or maybe not if you say the feared cut could come before we get to a point in time considered to be in the long term. 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.

Please don't take this as argumentative, just genuinely trying to unpick the thinking of others here.

Terry.

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Re: Sainsbury's 3rd Quarter Trading Statement

#22845

Postby Wizard » January 13th, 2017, 1:09 pm

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.


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