Buying Opportunities or Falling Knives

[PrefInvestor]

Those are, however, an exposure to property and an extended no deal will I think hit property reasonably hard.

Well maybe. REITs own property and rent it out for the income 90% of which they are required to distribute to shareholders. If property values fall or tenants can’t afford their rents then a REIT will be in trouble. SWEF makes loans to companies that are building properties, the companies that they loan to are carefully vetted and two thirds of their loans are in Europe/Euros spread across a diverse range of industries. If the companies that they lend to default then they might be in trouble, but SWEF do not own or operate the properties and so are not exposed to the same risks as REITs IMV.

ATB

Pref

[Alaric]

Actually the number of FTSE350 shares yielding 6%+ is remarkable

The dividenddata site lists them. It subdivides between the FTSE 100 and the FTSE 250.

Currently it gives a yield of 4.53% for the FTSE 100, but only 3.10% for the FTSE 250.

https://www.dividenddata.co.uk/dividend ... et=ftse100
https://www.dividenddata.co.uk/dividend ... et=ftse250

[PrefInvestor]

?...IUKD is a basket of the top 50 and is yielding 7% but has jagged down in value.

HI marktime (assume its the marktime from ii ?). I held IUKD for a while, I would say that it’s more of a “basket case” than a basket. It rebalances fairly often to hold the 50 highest yielders and when I took a close look at what it was holding I found that it was full of things that I wouldn’t want to touch with a barge pole eg VOD, SLA, PLUS, SSE, WPP...just my opinion obviously. Has dropped a good 100p in the last 12 months and the total return is at least negative 5% and has been worse. When the market is going well it typically does well, when it’s going badly it seems to me to do very badly ie it appears to magnify the market swings.

No longer on my shopping list !.

ATB

Pref

And welcome to the LF, hope you are enjoying it...much bigger pool of experienced investors here I think. Just don’t put your foot in the HYP mantrap !.

[tjh290633]

The original IUKD had a disastrous start, as it was heavily into financial shares when the 2008 crash occurred. Originally rebalanced annually, then changed to trimonthly, limiting the number of changes to 5 at a time.

In my view they make the mistake of getting rid of recovering shares and replacing them with the so-called falling knives. Also of paying insufficient attention to diversity.

I did follow its fortunes for some time, but gave up when I decided that it was a lost cause.

TJH

[PrefInvestor]

In my view they make the mistake of getting rid of recovering shares and replacing them with the so-called falling knives. Also of paying insufficient attention to diversity.

TJH

Yes I agree IUKD isn’t great IMV. This article might be of interest https://monevator.com/can-etfs-dependab ... nt-page-1/

Seems to me that their technique of picking the top 50 yielders equates, in most cases, to picking stocks whose price has dropped because they are troubled and what you can end up with is an ETF holding lots of disasters or potential disasters. And if any of them start to recover then they tend to drop out as their yield then drops and get replaced with some new troubled stock. Not exactly a mode of operation that I consider beneficial.....

As I say when the market is going well it tends to do well but when the markets are doing badly seems to me it does even worse. Just a personal opinion formed from holding it for a while.....

ATB

Pref

[Alaric]

So is IUKD by its very construct the natural place to gather falling HYP knives ... and the killer questions of this topic, which are the knives and which are the bargains. How do you tell.

One key feature of Companies that totally collapse like Carillion and Thomas Cook, is that when you look very carefully at their balance sheet, a lot of their stated asset value consists of that rather nebulous accounting concept, goodwill. That can arise when they have grown by acquisition, paid a premium for control and left it as a stated asset in their balance sheet, rather than writing down the purchased assets to more realistic values. If in addition there's massive pile of debt, that's a risk factor as well.

The point being that if a Company has a balance sheet with assets that in extremis could be sold, that gives it a floor value. REITs should be a an example, provided the properties could be sold for their supposed valuation,

[BusyBumbleBee]

Today VPC SPECIALTY LENDING INVESTMENTS PLC (VSL) posted very creditable results. See https://vpcspecialtylending.com/documen ... -report-5/

What is interesting is how the share buy back programme has affected NAV. Added just over 2% as a one off contribution. Since the period end they have continued this and bought in shares that should add more.

They noted this in particular

On 30 April 2019, Woodford notified the Company that it intended selling the shares under its control in the Company. We worked with the Company’s broker, Jefferies, to place substantially all of the shares with a mix of existing and new shareholders as well as to repurchase a tranche of shares using the buyback. Woodford had been a supportive shareholder in the Company prior to the sale.

[johnhemming]

I have had a little time to look at GPH and it looks to be quite marginal at the moment. I haven't tried to get into the figures, but the forecasts seem excessively optimistic compared to the history.

VSL is a different sort of situation and deserves a further look.

[colin]

Actually the number of FTSE350 shares yielding 6%+ is remarkable

The dividenddata site lists them. It subdivides between the FTSE 100 and the FTSE 250.

Currently it gives a yield of 4.53% for the FTSE 100, but only 3.10% for the FTSE 250.

Only 3.1% for FTSE? Maybe It's because I'm getting old but it seems that it was only yesterday when it was yielding not much more than 2%!

[BusyBumbleBee]

I started this thread on mid September with this information

Always on the lookout for shares to buy I have come across these unloved stocks.

AEW UK Reit (AEWU) - Yield 8.55%
Global Ports (GPH) - Yield 13.9%
Gore Street Energy Storage GSF - Yield 7.49%
New River REIT (NRR) - Yield 11.09%
Regional Reit (RGL) - Yield 7.83%
SQN Asset Finance (SQN and SQNX) - Yield 8.5%
VPC specialty lending (VSL) Yield 9.98%

All with what appears to be a sustainable yield of more than 7% and a series of quietly confident RNS's. All appear comfortable within their chosen niche and the annual reports appear to show that the board and/or manager are doing things right and building a business for the long term.

These were on mid prices I think.

So here's where we are today (on offer prices and with unchanged dividends)?

AEW UK Reit (AEWU) - Yield 8.11%
Global Ports (GPH) - Yield 16.95% {but seem to have cut their dividend by 25% ish}
Gore Street Energy Storage GSF - Yield 7.18%
New River REIT (NRR) - Yield 10.56%
Regional Reit (RGL) - Yield 7.15%
SQN Asset Finance (SQN and SQNX) - Yield 8.75% {blended}
VPC specialty lending (VSL) Yield 10.39%

Note : a indicates SP rise and a a share price fall - roughly half and half

So apart from Global Ports they haven't done too badly and have thrown off massive dividends along the way.

In my experimental porfolio I didn't buy Global Ports (too risky even for me!) and have sold my Gore Street at a high and reinvested the proceeds into VPC at a low. Leaving me only with REITS and money lenders.

Global Ports continues to puzzle me. They have a good niche and the RNS's continue to be upbeat but there is a steady chipping away of their share price so until I know why that is, I am keeping out.

It's a bit of fun for me but is not a recommendation to others. - hope you found it interesting - regards - BBB

[dealtn]

I started this thread on mid September with this information

Always on the lookout for shares to buy I have come across these unloved stocks.

AEW UK Reit (AEWU) - Yield 8.55%
Global Ports (GPH) - Yield 13.9%
Gore Street Energy Storage GSF - Yield 7.49%
New River REIT (NRR) - Yield 11.09%
Regional Reit (RGL) - Yield 7.83%
SQN Asset Finance (SQN and SQNX) - Yield 8.5%
VPC specialty lending (VSL) Yield 9.98%

All with what appears to be a sustainable yield of more than 7% and a series of quietly confident RNS's. All appear comfortable within their chosen niche and the annual reports appear to show that the board and/or manager are doing things right and building a business for the long term.

These were on mid prices I think.

So here's where we are today (on offer prices and with unchanged dividends)?

AEW UK Reit (AEWU) - Yield 8.11%
Global Ports (GPH) - Yield 16.95% {but seem to have cut their dividend by 25% ish}
Gore Street Energy Storage GSF - Yield 7.18%
New River REIT (NRR) - Yield 10.56%
Regional Reit (RGL) - Yield 7.15%
SQN Asset Finance (SQN and SQNX) - Yield 8.75% {blended}
VPC specialty lending (VSL) Yield 10.39%

Why not just quote prices, rather than yields? Much simply to see returns surely, and less need to investigate changes in dividends past, and declared but not yet paid, to interpret I would think.

NRR the only one here I was vaguely interested in, rising about 10% over the period, plus a 5.4p dividend. I stayed invested elsewhere though.

[colin]

Global Ports continues to puzzle me. They have a good niche and the RNS's continue to be upbeat but there is a steady chipping away of their share price so until I know why that is, I am keeping out.

There might be a correlation with the Baltic Dry Goods index which itself is correlated to world trade and so I would guess Trump's tarrif tantrums.

[BusyBumbleBee]

Why not just quote prices, rather than yields? Much simply to see returns surely, and less need to investigate changes in dividends past, and declared but not yet paid, to interpret I would think.

NRR the only one here I was vaguely interested in, rising about 10% over the period, plus a 5.4p dividend. I stayed invested elsewhere though.

Sorry - dealtn - but you can easily do that yourself - and this was set up to ask the question - are these falling knives or buying opportunitiess? Which no one has answered. I think they were buying opportunities - so I had bought them for fun to see what happened believing that the dividends (apart from GPH) were pretty secure actually and the price would 'right itself in due course. Over the quarter all have paid out or gone ex-div on one quarter of the running yield.

You mention NRR as one that went up 10% over the period - however the one that has so far done best for me is RGL which has gone up 16+% since purchase. Looking for another one to swap into, as I think it is fair value now.

Still keen on VSL and hope that the SQN twins' problems will be resolved early in the New Year - regards - BBB

[dealtn]

Why not just quote prices, rather than yields? Much simply to see returns surely, and less need to investigate changes in dividends past, and declared but not yet paid, to interpret I would think.

NRR the only one here I was vaguely interested in, rising about 10% over the period, plus a 5.4p dividend. I stayed invested elsewhere though.

Sorry - dealtn - but you can easily do that yourself ...

So let's take GPH as an example.

Looking at yields. I look up Sep 13th and see a share price mid of 298p, and note the 2 dividends rec'd in the last 12 months were 22p (Oct 18) and 21.2p (July 19). If I use these I get a yield of 43.2p/298p, or 14.5%. But, we already knew at that point of a "new" dividend, announced in $, that turned out at 15.5p when paid in Nov 19. It went ex-div 31st Oct, so was cum-div on Sep 13th. So we could use 36.7p/298p (ignoring the complication of the unknown FX rate at that time) and get a yield of 12.3%. Or we could use combined broker forecasts of prospective dividends of 15.5p + ?p/298p to get another yield.

We would need to do a similar calculation on the "now" date, using not just the "now" price but the equivalent dividends. On method one presumably you would lose the 22p (Oct 18) and use 15.5p (Nov 19), making the yields different, even for the same share price, with no new dividend information released by the company. On method three you would have updated broker forecasts to deal with, even with the same share price.

Looking at prices you could see a start price of 298p, a "now" price of 240p, and see a loss of 58p. With compensating 15.5p dividend received.

Which method of return do you see as one that "you can easily do..."?

[BusyBumbleBee]

Dealtn said this - my comments {*-- like this --*}

So let's take GPH as an example. {*-- a good example - well chosen for two reasons
a) it the only one I excluded for the reason that I didn't understand why it was falling and
b) it is the only one that does't pay monthly or quarterly dividends - so well spotted.
The others all pay monthly (the SQN twins) or quarterly so in any given quarter they will go ex-div once or three (SQN)times and pay a dividend three(SQN) times or once.and they will all have had the same time to accrue income as they had at the end of the last quarter --*}.

Looking at yields. I look up Sep 13th and see a share price mid of 298p, and note the 2 dividends rec'd in the last 12 months were 22p (Oct 18) and 21.2p (July 19). If I use these I get a yield of 43.2p/298p, or 14.5%. But, we already knew at that point of a "new" dividend, announced in $, that turned out at 15.5p when paid in Nov 19. It went ex-div 31st Oct, so was cum-div on Sep 13th. So we could use 36.7p/298p (ignoring the complication of the unknown FX rate at that time) and get a yield of 12.3%. Or we could use combined broker forecasts of prospective dividends of 15.5p + ?p/298p to get another yield.

We would need to do a similar calculation on the "now" date, using not just the "now" price but the equivalent dividends. On method one presumably you would lose the 22p (Oct 18) and use 15.5p (Nov 19), making the yields different, even for the same share price, with no new dividend information released by the company. On method three you would have updated broker forecasts to deal with, even with the same share price.

Looking at prices you could see a start price of 298p, a "now" price of 240p, and see a loss of 58p. With compensating 15.5p dividend received.

Which method of return do you see as one that "you can easily do..."? {*-- well: you have easily done it --*}

Have a look at a more interesting and much fuller way of showing what is happening with a niche set of shares (Green Infrastructure Funds) here: viewtopic.php?p=216655#p216655 and the next five posts - but I do not intend to go into that detail here, over what was meant to be a bit of fun. And - by the way - no-one has yet answered the question as to whether they are falling knives or not..

[dealtn]

Dealtn said this - my comments {*-- like this --*}

So let's take GPH as an example. {*-- a good example - well chosen for two reasons
a) it the only one I excluded for the reason that I didn't understand why it was falling and
b) it is the only one that does't pay monthly or quarterly dividends - so well spotted.
The others all pay monthly (the SQN twins) or quarterly so in any given quarter they will go ex-div once or three (SQN)times and pay a dividend three(SQN) times or once.and they will all have had the same time to accrue income as they had at the end of the last quarter --*}.

Looking at yields. I look up Sep 13th and see a share price mid of 298p, and note the 2 dividends rec'd in the last 12 months were 22p (Oct 18) and 21.2p (July 19). If I use these I get a yield of 43.2p/298p, or 14.5%. But, we already knew at that point of a "new" dividend, announced in $, that turned out at 15.5p when paid in Nov 19. It went ex-div 31st Oct, so was cum-div on Sep 13th. So we could use 36.7p/298p (ignoring the complication of the unknown FX rate at that time) and get a yield of 12.3%. Or we could use combined broker forecasts of prospective dividends of 15.5p + ?p/298p to get another yield.

We would need to do a similar calculation on the "now" date, using not just the "now" price but the equivalent dividends. On method one presumably you would lose the 22p (Oct 18) and use 15.5p (Nov 19), making the yields different, even for the same share price, with no new dividend information released by the company. On method three you would have updated broker forecasts to deal with, even with the same share price.

Looking at prices you could see a start price of 298p, a "now" price of 240p, and see a loss of 58p. With compensating 15.5p dividend received.

Which method of return do you see as one that "you can easily do..."? {*-- well: you have easily done it --*}

Have a look at a more interesting and much fuller way of showing what is happening with a niche set of shares (Green Infrastructure Funds) here: viewtopic.php?p=216655#p216655 and the next five posts - but I do not intend to go into that detail here, over what was meant to be a bit of fun. And - by the way - no-one has yet answered the question as to whether they are falling knives or not..

Well I haven't done it!

There are ways of having falling yields and positive returns, rising yields and positive returns, falling yields and negative returns, and rising yields and negative returns. Simply looking at yield change isn't enough, I need to look at prices, or valuations.

I have no interest in funds I'm afraid and can't imagine ever owning one except in what I might describe as a "special situation" (it hasn't happened yet in over 30 years of investing). Good luck though in whatever works for you.

[Gerry557]

Could have been both really. Generally if the market is on a downer and all shares are depressed then usually a better time to buy then when markets are hitting a high. Of your list, I'd looked at the REITs.

Looking at the stocks on an individual basis I discounted NRR due to too much retail and that appears to be a drag, leaving AEWU and RGL.

The latter I had already been invested in, so better the devil you know. They also did a placement at 106p a couple of months prior, which I took part in pushing up my average and I remember thinking when they dropped if I should average down that tranche and if the placement was the wrong thing have done.

Currently with hindsight things look ok and even the expensive buy has risen. Still its the income they were purchased for and so far are delivering. I suspect that buying a basket of knives in a downturn will work out longer term.

Still RGL could look good for a good while yet but next recession and or property downturn might make these look like a terrible buy. A couple of property companies have closed cos they cant sell fast enough to meet redemption's. So maybe bigger isnt better and why RGL being smaller and a bit more agile is snapping up bits the others need to sell. Still next time they ask for cash I will think twice and only top up on the dips.

[SKYSHIP]

Gerry - the difference between the buyers and the forced sellers is that the latter are open funds seeking cash to satisfy redemptions.

All the closed funds (REITs) can benefit from liquidations by their slightly larger cousins; but some managements are more active than others. RGL is a classic case in point and they have been positioning themselves and their shareholders to profit from the unfortunate financial models of the open funds.

With RGL there is perhaps no reason why they should not soon trade at a premium to NAV, after all CREI trade at a 10% premium but yield less at 5.8% versus the 7.3% at RGL.

As for the two AEWs (AEWL & AEWU) I believe AEWL to be the better buy at the moment in view of the 22% discount v. 1.7% premium. The yield is slightly lower at 7.5% v. 8.1%....but not much in that. Of course AEWL could cut the next dividend so as not to be uncovered; but that is a very temporary matter possibly covering just one dividend, as the revenue shortfall is now being rectified.

[SKYSHIP]

I’ve decided to give investment company Tetragon Financial (TFG) another go following their superb NAV performance last year, especially in December following a revaluation of their Private Equity book.

TFG is a bit of an oddball, but its long-term investment performance is incontrovertible:

hTTps://www.trustnet.com/news/7457648/t ... ast-decade

Edison is a good source of information:

https://www.edisongroup.com/publication ... wide/24842

As they say in the above report:
Why consider investing in Tetragon?
■ Diversified alternative asset portfolio has demonstrated ability to deliver uncorrelated positive returns in challenging market conditions.
■ Brisk pace of third-party asset growth at TFG Asset Management.
■ Robust near- and long-term NAV total return performance track record.
■ Strong net returns mitigate above average ongoing charges.
■ Progressive quarterly dividend and regular capital returns via tender offer.

I would add to that and take comfort from the fact that TFG is one of AVI Global’s (AGT) largest holdings - 11th at 3.6% of portfolio.

However, the key reasons for the timing of this purchase at the current 1215c are the discount of 50.9% (yes, true!) & the yield of 6.1%.

[monabri]

I’ve decided to give investment company Tetragon Financial (TFG) another go following their superb NAV performance last year, especially in December following a revaluation of their Private Equity book.

I went for the TFGS version. (Sterling version).