Impact of virus on IT - good time to buy

[Paul1384]

Hi All,

Obviously seen the markets take a downturn over the last few weeks. This due to the slow down in China and the impact to the world economy.

That said obviously there are opportunities to pick up some IT shares at lower costs.

Do people think it is a good idea to purchase 'JPMorgan Global Growth & Income' now? I know there's a risk but do we think the prices will stabilise and begin to go back up, or is this slump here until at least Summer - and could get worse?

Thank you,
PD

[kempiejon]

Well Paul1384 if you ask me it's more likely there could be further to fall and it'll be a while until that trend changes. In a few months perhaps things will be different I know I don't know. In the meantime there might be bargains and probably some ups and downs in the market. I've not investigated JPMorgan Global Growth & Income but I like the global trust Scottish Mortgage, though not for income, for that I hold Murray Income trust and Murray international both offering me over 4% yield the first UK centric and guess what the other not so.

[XFool]

In a sea of red today my only riser was Ruffer Investment Co (RICA) at +3.7%

So finally, it does seem to be doing what it says on the tin.

[monabri]

Good time to buy? Well, it's certainly a better time than say 2 weeks ago.

[Peter1B1]

I bought CoLondon, European Assets and Invesco Income Growth on Monday 9th. Prices looked attractive but then there was yesterday! So I am holding off further purchases towards our planned higher yield pf for a little.

Market is coming back a bit this morning but far from clear that there is not another leg down or so. The pandemic has a long way to run and is seriously gumming up global GDP. Risk of major corporate failures is evident so 1) thank goodness for diversification but 2) this may not be accounted for in prices/net assets for some time - a lengthy work-through.

That said, it is tempting to nibble and my remaining prospects (yesterday closing yields) are:

JPM Global Growth & Income 4.67%
Murray Income 4.94%
Securities Trust of Scotland 3.94%
Temple Bar 5.68%
SL Property Income 5.88% - this now on a 21% discount reflecting the torrid retail outlook, i guess.

Views of course very welcome.

[monabri]

I wonder if Merchants (MRCH) might be a substitute for Murray (MUT)? It has a higher yield and is more geared. Hopefully it will bounce back more when Coro 19 issue is resolved due to the gearing. MRCH also is one of the dividend aristocrats on the AIC website with 37 years of consecutive divi increases.

https://www.theaic.co.uk/sites/default/ ... sMar20.pdf


EAT - will/might struggle next year as it bases the dividend on a percentage of the Net Asset Value...and these have been shrinking. If share prices don;t bounce back then the dividend will be lower than this year.

https://www.theaic.co.uk/companydata/0P00008ZMY

I'd use the AIC website to see if divis are paid from "income" or from "capital"

JGGI - check it's income reserves - I would go to the Annual Report but there is a flag on the AIC webpage which suggest no cover (it might not be correct - hence go to the AR)
https://www.theaic.co.uk/companydata/0P00008ZO6

[DavidM13]

JGGI - check it's income reserves - I would go to the Annual Report but there is a flag on the AIC webpage which suggest no cover (it might not be correct - hence go to the AR)
https://www.theaic.co.uk/companydata/0P00008ZO6

Page 50 of the June 2019 annual report suggests that Morningstar data of 0p revenue reserves is accurate.

[monabri]

Thank you David . The divi cover for Merchants is 0.91 years (AIC reported value). I take this to mean that they could cover a divi of 90% of the current pay out even if they were to receive zero income from the 46 or so companies in the trust...

[Itsallaguess]

The divi cover for Merchants is 0.91 years (AIC value).

I take this to mean that they could cover a divi of 90% of the current pay out even if they were to receive zero income from the 46 or so companies in the trust...

Which makes the case for taking advantage of income-related Investment Trust income reserves so compelling...

If we assume that the likelihood of 'zero income' from a wide group of underlying holdings is almost nil, then we can start to make a judgement as to just how long an income-reserve of 0.91 years might actually last.

During a long, multi-year recession, of course things will eventually come under strain, but it's likely that there are some systemic shocks that can largely be ridden out by the judicious use of such reserves...

Of course it also helps immensely to have some sort of income-reserve ourselves, and it's during these turbulent times that I'd be glad not to have to be a forced-seller to generate any much-needed capital...

Cheers,

Itsallaguess

[monabri]

Itsallaguess

Exactly, I topped up MRCH yesterday with some available funds ...my thoughts were the same as you mention ( I didn't copy the body of the text). I also made a LGEN top up.

[DavidM13]

The divi cover for Merchants is 0.91 years (AIC value).

I take this to mean that they could cover a divi of 90% of the current pay out even if they were to receive zero income from the 46 or so companies in the trust...

Which makes the case for taking advantage of income-related Investment Trust income reserves so compelling...

If we assume that the likelihood of 'zero income' from a wide group of underlying holdings is almost nil, then we can start to make a judgement as to just how long an income-reserve of 0.91 years might actually last.

During a long, multi-year recession, of course things will eventually come under strain, but it's likely that there are some systemic shocks that can largely be ridden out by the judicious use of such reserves...

Of course it also helps immensely to have some sort of income-reserve ourselves, and it's during these turbulent times that I'd be glad not to have to be a forced-seller to generate any much-needed capital...

Cheers,

Itsallaguess

Yes. Is one way of doing that may be to look at Earnings per share vs dividends per share in previous bad years. So looking at an old Merchants annual report I see the worst year between 2002 and 2011 was in 2010 where there was a short fall of 3.59p per share between DPS and EPS. 103m shares means about £3.7m was taken out of reserves that year. Currently dividend costs around £30m a year and reserves are £28m (hence the 0.91 years cover)

[DavidM13]

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

EPS 16.70p 17.26p 17.34p 17.58p 19.44p 22.17p 22.86p 27.25p 18.91p 21.22p
DPS 16.80p 17.20p 17.60p 18.00p 18.90p 20.00p 21.60p 22.80p 22.50p 22.80p

[monabri]

Good to see as the range covers the GFC era.

[JuanDB]

The other factor for MRCH specifically is their cost of debt. Last year they made early repayments on debentures from the 90s with an interest rate somewhere in the 9% region. I recall calculating the boost to EPS to be 2-3p at the time; a meaningful increase.

The MRCH dividend growth rate has ticked up encouragingly since that repayment.

Cheers,

Juan.

[forrado]

While personally I’m neither a buyer or a seller (I’m just a watcher). My active investing days are over, having well passed the point where I am now more concerned to efficiently spend rather than accumulate.

However, I do have a younger sibling presently sitting on the sidelines with a sizeable chunk of cash at his disposal. My advice to him has been to hang back and wait. Nobody has any idea of the lifespan of the Coronavirus or the impact it will have, just that at some point it will have run its course.

By all means draw up a shopping list of possible buys, just don’t be in a rush to snap up what appear at first sight to be bargains, but later prove to be falling knives.

[88V8]

By all means draw up a shopping list of possible buys, just don’t be in a rush to snap up what appear at first sight to be bargains, but later prove to be falling knives.

I agree, mostly, but given the minimal death rates I still think this is all madly overblown and sooner or later markets will realise and we will see a steep rise. So for all we know this may be near the bottom.
Therefore I've been trickling in for the last few days, ITs, bonds, equities, £5k here £5k there. Falling knife? Sure, but I reckon the average will look nice a year hence.

V8

[monabri]

HFEL at 262p...yld of over 8.5%.

[mike]

Last week I was away. Heard the news of course, but only updated my portfolio on Friday night. A whole week of losses

But my ITs had fallen less than my HYP shares last week. Today though - at 11:46 - my shares are down 6.9%, ITs down 11.2%. (for reference, FTSE 100 down 7.3%, and FTSE250 ex-ITs off 13.8%)

My biggest fallers are JETI at nearly 15% down from Friday, HINT at 12.6% down and MRCH 12.3%. Will this be their clients, us, the private investors, selling out after the weekend's doom and gloom, or the MMs revaluing ?

[StanBowles]

It is difficult to time the bottom but pound cost averaging could be a good strategy. Merryn Somerset-Webb makes the point in the FT that "it is an awful lot easier to buy value slowly on the way to the bottom than to try to chase markets back up." I've been eyeing ITs that have minimal or relatively little exposure to high street retail, travel and O&G and have a shortlist to drip feed into. I made my first moves earlier today with purchases of Scottish Mortgage Trust and Brunner. I wonder whether I have waited too long to start as there was quite a bounce today. I would have like to have bought a tech trust as well but the pure techs had already bounced back up a lot in the first hour of trading.

[DavidM13]

It is difficult to time the bottom but pound cost averaging could be a good strategy. Merryn Somerset-Webb makes the point in the FT that "it is an awful lot easier to buy value slowly on the way to the bottom than to try to chase markets back up." I've been eyeing ITs that have minimal or relatively little exposure to high street retail, travel and O&G and have a shortlist to drip feed into. I made my first moves earlier today with purchases of Scottish Mortgage Trust and Brunner. I wonder whether I have waited too long to start as there was quite a bounce today. I would have like to have bought a tech trust as well but the pure techs had already bounced back up a lot in the first hour of trading.

You are not THE Stan Bowles are you? QPR and Brentford legend.

I got lucky and bought PIN, SMT, WWH and LWDB. BRSC and FGT two days ago so have enjoyed a nice bounce today. Its going to be a bumpy ride I am sure but its good to get some green on the board early!