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LWDB , Carillion, Interserve.

General discussions about equity high-yield income strategies
monabri
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LWDB , Carillion, Interserve.

#441225

Postby monabri » September 10th, 2021, 11:49 am

An article in the Telegraph today - an interview Laura Foll, co-manager of Law Debenture (LWDB).

https://www.telegraph.co.uk/investing/f ... -opposite/

The usual questions on what was your best investment(s), followed by

"And your worst?

The contractors Carillion and Interserve [both went into administration]. The margins contractors make are very low. If a contract goes badly wrong it can become substantially loss-­making."

I'm surprised that professional investment companies would invest in Carillion & Interserve in the first place. Did they learn that lesson post both crashes?

I'll admit being burned on both but I'm not a professional investor!

monabri
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Re: LWDB , Carillion, Interserve.

#441236

Postby monabri » September 10th, 2021, 12:16 pm

Oh, another snippet

"We’re very careful never to say “we won’t own a sector” so we still own contractors, such as Kier. But you have to be incredibly careful with firms that have thin margins without strong balance sheets."

Good job Kier's balance sheet is robust :o

Alaric
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Re: LWDB , Carillion, Interserve.

#441251

Postby Alaric » September 10th, 2021, 1:15 pm

Law Debenture (posted by monabri) wrote: But you have to be incredibly careful with firms that have thin margins without strong balance sheets."


Perhaps they should dig out the book by Terry Smith (later of Fundsmith) published in the 1990s in which he attempts to describe and document some of the trickery used by Companies, their accountants and auditors to window dress financial statements.

MDW1954
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Re: LWDB , Carillion, Interserve.

#441348

Postby MDW1954 » September 10th, 2021, 7:45 pm

Alaric wrote:
Law Debenture (posted by monabri) wrote: But you have to be incredibly careful with firms that have thin margins without strong balance sheets."


Perhaps they should dig out the book by Terry Smith (later of Fundsmith) published in the 1990s in which he attempts to describe and document some of the trickery used by Companies, their accountants and auditors to window dress financial statements.


Or perhaps they already have?

MDW1954

Arborbridge
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Re: LWDB , Carillion, Interserve.

#442106

Postby Arborbridge » September 14th, 2021, 12:03 pm

monabri wrote:I'm surprised that professional investment companies would invest in Carillion & Interserve in the first place. Did they learn that lesson post both crashes?

I'll admit being burned on both but I'm not a professional investor!


The fact that professional investors were deceived tells me that those of us who invested have nothing to be ashamed of. In the case of Carillion, no one outside the management knew the extent of the jiggery pokery at the time and later we found there was not only deception but - I seem to remember - some illegal practices.

It's not the first time moderately large companies have found things such as millions of poinds worth of stock missing or wrongly valued, or other black holes emerging. It has happened to me previously - one notable time with a share which Jim Slater was promoting (Surrey Free Inns) which later collapsed due to account problems. One wonders how the auditors can possibly get away with not noticing a £40 million black hole.

We are all prey to such false information from time to time, and anyone who avoids such occasional disasters should really not feel too smart, but say "there but for the grace of God, go I".


Note, however, that the performance of LWDB has been excellent: they win some and lose some. It's the net result of the risk game which counts.
Arb.

Dod101
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Re: LWDB , Carillion, Interserve.

#442112

Postby Dod101 » September 14th, 2021, 12:10 pm

Arborbridge wrote:
monabri wrote:I'm surprised that professional investment companies would invest in Carillion & Interserve in the first place. Did they learn that lesson post both crashes?

I'll admit being burned on both but I'm not a professional investor!


The fact that professional investors were deceived tells me that those of us who invested have nothing to be ashamed of. In the case of Carillion, no one outside the management knew the extent of the jiggery pokery at the time and later we found there was not only deception but - I seem to remember - some illegal practices.

It's not the first time moderately large companies have found things such as millions of poinds worth of stock missing or wrongly valued, or other black holes emerging. It has happened to me previously - one notable time with a share which Jim Slater was promoting (Surrey Free Inns) which later collapsed due to account problems. One wonders how the auditors can possibly get away with not noticing a £40 million black hole.

We are all prey to such false information from time to time, and anyone who avoids such occasional disasters should really not feel too smart, but say "there but for the grace of God, go I".


Note, however, that the performance of LWDB has been excellent: they win some and lose some. It's the net result of the risk game which counts.
Arb.


As far as Carillion is concerned, it just shows how useless some fund managers were (and probably still are). Carillion was pretty obviously one of the more egregious examples of incompetent contractors. The sector is bad enough in itself but Carillion was on another level. I am certain that I said that at the time when some were still busily buying it. I would be careful in taking any comfort from the incompetence of fund managers.

Dod

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Re: LWDB , Carillion, Interserve.

#442118

Postby Arborbridge » September 14th, 2021, 12:25 pm

Dod101 wrote:
As far as Carillion is concerned, it just shows how useless some fund managers were (and probably still are). Carillion was pretty obviously one of the more egregious examples of incompetent contractors. The sector is bad enough in itself but Carillion was on another level. I am certain that I said that at the time when some were still busily buying it. I would be careful in taking any comfort from the incompetence of fund managers.

Dod


The joy of hindsight :roll:

And I'm not going to be picky about a manager's error when that particular IT has return me 12% a year since 2011. If only I could do that well! Investment is all about risk and reward, and every manager has the occasional skeleton. Frankly, it has nothing to do with being a useless manager - otherwise the overall result would be useless too. I'd rather praise the manager who is honest about his disasters, rather than trying to obfuscate.

PS even Warren Buffett has pointed out that some years he would have done better to sit in the cinema all day and not bother.

Arb.

monabri
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Re: LWDB , Carillion, Interserve.

#442124

Postby monabri » September 14th, 2021, 12:32 pm

Dod101 wrote:
Arborbridge wrote:
monabri wrote:I'm surprised that professional investment companies would invest in Carillion & Interserve in the first place. Did they learn that lesson post both crashes?

I'll admit being burned on both but I'm not a professional investor!


The fact that professional investors were deceived tells me that those of us who invested have nothing to be ashamed of. In the case of Carillion, no one outside the management knew the extent of the jiggery pokery at the time and later we found there was not only deception but - I seem to remember - some illegal practices.

It's not the first time moderately large companies have found things such as millions of poinds worth of stock missing or wrongly valued, or other black holes emerging. It has happened to me previously - one notable time with a share which Jim Slater was promoting (Surrey Free Inns) which later collapsed due to account problems. One wonders how the auditors can possibly get away with not noticing a £40 million black hole.

We are all prey to such false information from time to time, and anyone who avoids such occasional disasters should really not feel too smart, but say "there but for the grace of God, go I".


Note, however, that the performance of LWDB has been excellent: they win some and lose some. It's the net result of the risk game which counts.
Arb.


As far as Carillion is concerned, it just shows how useless some fund managers were (and probably still are). Carillion was pretty obviously one of the more egregious examples of incompetent contractors. The sector is bad enough in itself but Carillion was on another level. I am certain that I said that at the time when some were still busily buying it. I would be careful in taking any comfort from the incompetence of fund managers.

Dod



Arb...thanks for the reminder about Carillion's practices - I guess if the auditors had the wool pulled over their eyes (seemingly not too difficult) then what chance does a retail investor have?

Dod - I remember that you (and a few others) did indeed flag up warning messages on Carillion and similar. Would I invest in low margin business' now ? - no chance, it's one of the first things I check (for free) using Morningstar and it takes a matter of a minute. A lesson learned the hard way - fortunately not too damaging but painful at the time.

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Re: LWDB , Carillion, Interserve.

#442130

Postby Arborbridge » September 14th, 2021, 12:37 pm

monabri wrote:
Dod - I remember that you (and a few others) did indeed flag up warning messages on Carillion and similar.


That was after the sxxx hit the fan. A warning years before might have been admirable, but not when the share price had already started its downtrend.

Arb.

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Re: LWDB , Carillion, Interserve.

#442132

Postby Dod101 » September 14th, 2021, 12:38 pm

No it is not hindsight if you are accusing me of that, Arb.

See the thread titled 'Views on Carillion' in 2017 and in particular my post of 31 January 2017, No 27889.

'A yield of 8% or more should put anyone off, especially with Carillion's history. There is no such thing as a free lunch. Do posters not understand that? Stand back and avoid.

Dod'

I posted again on 26 April along the same lines.

It is instructive to read that very long thread in full. Posters could learn a lot, not from me; I contributed very little to it since I had no interest in Carillion and had never held them, but to read how I suspect they read what they wanted into some of the company reports.

So I think I am entitled to be a little cynical of the fund manager from LWDB, by which I mean Law debenture Investment Trust.

Dod

Dod101
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Re: LWDB , Carillion, Interserve.

#442135

Postby Dod101 » September 14th, 2021, 12:45 pm

Arborbridge wrote:
monabri wrote:
Dod - I remember that you (and a few others) did indeed flag up warning messages on Carillion and similar.


That was after the sxxx hit the fan. A warning years before might have been admirable, but not when the share price had already started its downtrend.

Arb.


Come on, a warning years before ? What do you think I am? You will see that in the first half of 2017, some were still buying Carillion, (after my January post I may say! I am not a soothsayer nor a Nostrodamus. Just a simple guy who puts a lot of faith in his own judgement and relies to a large extent on culture as you know. I do not have all the answers or I would be a lot richer than I am. I am better at spotting problems than I am at big hitters.

Dod

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Re: LWDB , Carillion, Interserve.

#442138

Postby Alaric » September 14th, 2021, 12:59 pm

Dod101 wrote:See the thread titled 'Views on Carillion' in 2017 and in particular my post of 31 January 2017, No 27889.

'A yield of 8% or more should put anyone off, especially with Carillion's history. There is no such thing as a free lunch. Do posters not understand that? Stand back and avoid.


Those who didn't look much beyond the notional dividend yield presumably continued to pile in. That maybe encouraged the directors to think they should attempt to support the share price by maintaining the dividend, borrowing cash that wasn't otherwise in the business.

Arborbridge
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Re: LWDB , Carillion, Interserve.

#442147

Postby Arborbridge » September 14th, 2021, 1:17 pm

Dod101 wrote:No it is not hindsight if you are accusing me of that, Arb.

See the thread titled 'Views on Carillion' in 2017 and in particular my post of 31 January 2017, No 27889.

'A yield of 8% or more should put anyone off, especially with Carillion's history. There is no such thing as a free lunch. Do posters not understand that? Stand back and avoid.

Dod'

I posted again on 26 April along the same lines.

It is instructive to read that very long thread in full. Posters could learn a lot, not from me; I contributed very little to it since I had no interest in Carillion and had never held them, but to read how I suspect they read what they wanted into some of the company reports.

So I think I am entitled to be a little cynical of the fund manager from LWDB, by which I mean Law debenture Investment Trust.

Dod


Well, how many companies yield 8% at various times which have not collapsed in a pile due to management indulging in illegal or barely legal activities designed to obscure what was happening?

Anyone who looked at the chart from Jan-Apr 2017 would have concluded the same as you and sold.
Whether that's hindsight or just reacting to the moment, I'll leave others to judge. I'll give you credit for being right, but I'm not sure whether it was all that clever since at the time the writing was on the wall.

One thing is true: you were cleverer than I since I stuck to the HYP mantra for another few months, but I still reckon that one should judge the LWDB managers by their overall results. Cherrypicking (or the reverse, in this case) is never helpful in investment - it's the portfolio which counts.

Arb.

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Re: LWDB , Carillion, Interserve.

#442165

Postby Dod101 » September 14th, 2021, 1:57 pm

Arborbridge wrote:
Dod101 wrote:No it is not hindsight if you are accusing me of that, Arb.

See the thread titled 'Views on Carillion' in 2017 and in particular my post of 31 January 2017, No 27889.

'A yield of 8% or more should put anyone off, especially with Carillion's history. There is no such thing as a free lunch. Do posters not understand that? Stand back and avoid.

Dod'

I posted again on 26 April along the same lines.

It is instructive to read that very long thread in full. Posters could learn a lot, not from me; I contributed very little to it since I had no interest in Carillion and had never held them, but to read how I suspect they read what they wanted into some of the company reports.

So I think I am entitled to be a little cynical of the fund manager from LWDB, by which I mean Law debenture Investment Trust.

Dod


Well, how many companies yield 8% at various times which have not collapsed in a pile due to management indulging in illegal or barely legal activities designed to obscure what was happening?

Anyone who looked at the chart from Jan-Apr 2017 would have concluded the same as you and sold.
Whether that's hindsight or just reacting to the moment, I'll leave others to judge. I'll give you credit for being right, but I'm not sure whether it was all that clever since at the time the writing was on the wall.

One thing is true: you were cleverer than I since I stuck to the HYP mantra for another few months, but I still reckon that one should judge the LWDB managers by their overall results. Cherrypicking (or the reverse, in this case) is never helpful in investment - it's the portfolio which counts.

I have said it before but I cannot help thinking that Covid has a lot to answer for. That statement is so unlike the Arb of old! If you read the thread that I highlighted you and others discussed still buying into Carillion in mid 2017, whether you did so I do not know. I am not trying to show that I was clever or not, simply that my views and comments on Carillion were well before it collapsed. It was not only the 8% yield, but the industry that it was in. If the writing was on the wall when I wrote that in January 2017, why did you not agree and get out? 'Tis you who are now indulging in hindsight. I do not want to rake over old ground but it just shows how even what are regarded as half decent investment managers can get things horribly wrong.

To heap coals on the fire, Carillion was to me like RBS, a disaster waiting to happen.

Dod

Arb.

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Re: LWDB , Carillion, Interserve.

#442181

Postby Dod101 » September 14th, 2021, 2:20 pm

I have said it before but I cannot help thinking that Covid has a lot to answer for. That statement is so unlike the Arb of old! If you read the thread that I highlighted you and others discussed still buying into Carillion in mid 2017, whether you did so I do not know. I am not trying to show that I was clever or not, simply that my views and comments on Carillion were well before it collapsed. It was not only the 8% yield, but the industry that it was in. If the writing was on the wall when I wrote that in January 2017, why did you not agree and get out? 'Tis you who are now indulging in hindsight. I do not want to rake over old ground but it just shows how even what are regarded as half decent investment managers can get things horribly wrong.

To heap coals on the fire, Carillion was to me like RBS, a disaster waiting to happen.

Dod

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Re: LWDB , Carillion, Interserve.

#442237

Postby Arborbridge » September 14th, 2021, 4:41 pm

Dod101 wrote:I have said it before but I cannot help thinking that Covid has a lot to answer for. That statement is so unlike the Arb of old! If you read the thread that I highlighted you and others discussed still buying into Carillion in mid 2017, whether you did so I do not know. I am not trying to show that I was clever or not, simply that my views and comments on Carillion were well before it collapsed. It was not only the 8% yield, but the industry that it was in. If the writing was on the wall when I wrote that in January 2017, why did you not agree and get out? 'Tis you who are now indulging in hindsight. I do not want to rake over old ground but it just shows how even what are regarded as half decent investment managers can get things horribly wrong.

To heap coals on the fire, Carillion was to me like RBS, a disaster waiting to happen.

Dod


I apologise and withdraw. Perhaps I got out the wrong side of bed, and agree it was a bit low of me to make an argument out of nothing with someone I have great regard for.

Arb.

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Re: LWDB , Carillion, Interserve.

#442239

Postby Dod101 » September 14th, 2021, 4:48 pm

Arborbridge wrote:
Dod101 wrote:I have said it before but I cannot help thinking that Covid has a lot to answer for. That statement is so unlike the Arb of old! If you read the thread that I highlighted you and others discussed still buying into Carillion in mid 2017, whether you did so I do not know. I am not trying to show that I was clever or not, simply that my views and comments on Carillion were well before it collapsed. It was not only the 8% yield, but the industry that it was in. If the writing was on the wall when I wrote that in January 2017, why did you not agree and get out? 'Tis you who are now indulging in hindsight. I do not want to rake over old ground but it just shows how even what are regarded as half decent investment managers can get things horribly wrong.

To heap coals on the fire, Carillion was to me like RBS, a disaster waiting to happen.

Dod


I apologise and withdraw. Perhaps I got out the wrong side of bed, and agree it was a bit low of me to make an argument out of nothing with someone I have great regard for.

Arb.


O dear Arb. I was not needing that but thanks anyway. I suppose what we can take from the discussion is that even professional investment managers can get it wrong so we all need to be on our guard. But I do not see this as quite the same as say Scottish Mortgage losing out on some early tech start up as was raised yesterday. They acknowledge that not all their early investment will be successful but that is the price for some great successes. I do not think that the same can be said for LWDB hanging on to Carillion.

Dod


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