The Lemon Fool

csearle wrote:

simoan wrote:
It doesn't matter what your investment approach is; income only, or much more sensibly, total return as practised by the majority of successful investors.

Thanks for the interesting link! I would say though that if one's approach is (almost) never to sell shares but to live from the dividend income then the effect of the share buyback is more tenuous than simply receiving a special dividend. C.

I could provide another link to Terry Smith's thoughts on income investing, if you like?

All the best, Si

simoan wrote:I could provide another link to Terry Smith's thoughts on income investing, if you like?

Go for it old bean! C.

scrumpyjack wrote:

TheMotorcycleBoy wrote:

scrumpyjack wrote:I would rather their scientists were thinking up and developing such products themselves rather than paying $7 bn in goodwill for someone else's unproven idea. Eventually that $7 bn has to be written off. They've already got 35 billion euros of goodwill and intangibles in their balance sheet because they have been doing far too much of that sort of thing in the past.

I would rather their scientists were thinking up and developing such products themselves rather than buying back their own shares!

I suspect the reason they are spending it on shares, at the current relatively low price, is that can't think of anything better to employ scientists on developing new products. If that is the case, I prefer buybacks, which makes each remaining share own a larger proportion of the existing business, to blowing it on value destructive acquisitions. Too often buybacks are made at prices which, a couple of years later, look absurdly high. Though that may turn out to the the case with these buybacks

I actually think buybacks are a dreadful idea. If ulvr and others genuinely have spare cash they wish to return, in my opinion, they should pay a dividend and the recipients should pay income tax if not in tax shelter.

The rationale (by ulvr and the others) for *preferring buybacks* over dividends is perfectly clear to me: 89% of UK share ownership is in large financial organisations which would have to pay income tax, and corporations typically organise this buyback campaigns via preferred brokers etc.

Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.

Not only do buybacks lack imagination, they are corrupt too. Furthermore since ulvr has debt too, all these buybacks are doing is value-extraction not creation by moving money hopefully borrowed at lower rate than their dividend yield, and using it to redistribute their liabilities, to the benefit of large financial institutions.

Sorry about slightly snappy reply - dayjob work is frantic!

Matt

TheMotorcycleBoy wrote:I actually think buybacks are a dreadful idea. If ulvr and others genuinely have spare cash they wish to return, in my opinion, they should pay a dividend and the recipients should pay income tax if not in tax shelter.

The rationale (by ulvr and the others) for *preferring buybacks* over dividends is perfectly clear to me: 89% of UK share ownership is in large financial organisations which would have to pay income tax, and corporations typically organise this buyback campaigns via preferred brokers etc.

Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.

Not only do buybacks lack imagination, they are corrupt too. Furthermore since ulvr has debt too, all these buybacks are doing is value-extraction not creation by moving money hopefully borrowed at lower rate than their dividend yield, and using it to redistribute their liabilities, to the benefit of large financial institutions.

Sorry about slightly snappy reply - dayjob work is frantic!

I have seen no evidence that share buybacks are corrupt. Undoubtedly share buybacks are a form of financial engineering but I am not in a position to judge what the optimum relationship between share capital and borrowings is to finance a business, certainly not one like Unilever. The share price is currently around £40 which seems to me to be a decent price to be buying in some shares. The effect is to give me a very modest increase in my economic interest in Unilever, gives Unilever fewer mouths to feed in respect of the dividend and so increases the dividend per share even if the amount they pay by way of dividend remains the same. Buybacks should in the longer term increase the value of the remaining shares.

I see nothing wrong with them if carried out at an optimal price.

Dod

Dod101 wrote:

TheMotorcycleBoy wrote:I actually think buybacks are a dreadful idea. If ulvr and others genuinely have spare cash they wish to return, in my opinion, they should pay a dividend and the recipients should pay income tax if not in tax shelter.

The rationale (by ulvr and the others) for *preferring buybacks* over dividends is perfectly clear to me: 89% of UK share ownership is in large financial organisations which would have to pay income tax, and corporations typically organise this buyback campaigns via preferred brokers etc.

Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.

Not only do buybacks lack imagination, they are corrupt too. Furthermore since ulvr has debt too, all these buybacks are doing is value-extraction not creation by moving money hopefully borrowed at lower rate than their dividend yield, and using it to redistribute their liabilities, to the benefit of large financial institutions.

Sorry about slightly snappy reply - dayjob work is frantic!

I have seen no evidence that share buybacks are corrupt.

Wow. Not even that the shares are purchase from large financial organisations, permitting them to avoid tax, and possibly choose a price?

Matt

TheMotorcycleBoy wrote:

Dod101 wrote:

TheMotorcycleBoy wrote:I actually think buybacks are a dreadful idea. If ulvr and others genuinely have spare cash they wish to return, in my opinion, they should pay a dividend and the recipients should pay income tax if not in tax shelter.

The rationale (by ulvr and the others) for *preferring buybacks* over dividends is perfectly clear to me: 89% of UK share ownership is in large financial organisations which would have to pay income tax, and corporations typically organise this buyback campaigns via preferred brokers etc.

Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.

Not only do buybacks lack imagination, they are corrupt too. Furthermore since ulvr has debt too, all these buybacks are doing is value-extraction not creation by moving money hopefully borrowed at lower rate than their dividend yield, and using it to redistribute their liabilities, to the benefit of large financial institutions.

Sorry about slightly snappy reply - dayjob work is frantic!

I have seen no evidence that share buybacks are corrupt.

Wow. Not even that the shares are purchase from large financial organisations, permitting them to avoid tax, and possibly choose a price?

Matt

How do you know? They are 'on market' purchases so neither they nor you know who did the selling. Frankly I think your comments are a nonsense. Unless they were buying the shares via a tender they have no idea who is doing the selling. Do you really think that a company like Unilever would in effect be greasing the palms of their mates? If you have evidence of that why not report it to the authorities?

Dod

Dod101 wrote:

TheMotorcycleBoy wrote:

Dod101 wrote:
I have seen no evidence that share buybacks are corrupt.

Wow. Not even that the shares are purchase from large financial organisations, permitting them to avoid tax, and possibly choose a price?

Matt

How do you know? They are 'on market' purchases so neither they nor you know who did the selling. Frankly I think your comments are a nonsense.

Really? Do you honestly think that all of my comments are nonsense, including that the shares are purchased from large financial organisations?

Unilever PLC has entered into non-discretionary instructions with UBS AG, London Branch to conduct the Second Tranche on its behalf and to make trading decisions under the Second Tranche independently of Unilever PLC.

https://www.investegate.co.uk/unilever- ... 00003638J/

UBS are hardly small fry are they? Oh and by the way regarding UBS.

https://www.reuters.com/article/us-ubs- ... 0020121219

thanks Matt

TheMotorcycleBoy wrote:

Dod101 wrote:

TheMotorcycleBoy wrote:Wow. Not even that the shares are purchase from large financial organisations, permitting them to avoid tax, and possibly choose a price?

Matt

How do you know? They are 'on market' purchases so neither they nor you know who did the selling. Frankly I think your comments are a nonsense.

Really? Do you honestly think that all of my comments are nonsense, including that the shares are purchased from large financial organisations?

Unilever PLC has entered into non-discretionary instructions with UBS AG, London Branch to conduct the Second Tranche on its behalf and to make trading decisions under the Second Tranche independently of Unilever PLC.

https://www.investegate.co.uk/unilever- ... 00003638J/

UBS are hardly small fry are they? Oh and by the way regarding UBS.

https://www.reuters.com/article/us-ubs- ... 0020121219

thanks Matt

UBS is the broker buying in shares on behalf of Unilever, they are not the party from whom Unilever is buying the shares. They stand in the market offering to buy Unilever shares within the price parameters that Unilever have instructed. They stand to gain brokerage fees of course but so does any broker. As for the LIBOR scandal apart from the fact that it is old news, many institutions had involvement in that matter. It was far from something to be proud of but UBS were certainly not alone in that.

Dod

scrumpyjack wrote:to blowing it on value destructive acquisitions.

Let's face it growth by acquisition is the modus operandi for ULVR and many others. Just a few choice ULVR brands and their histories I decided to investigate:

https://en.wikipedia.org/wiki/Magnum_(ice_cream)
https://en.wikipedia.org/wiki/Marmite#History
https://en.wikipedia.org/wiki/Horlicks
https://en.wikipedia.org/wiki/Ben_%26_Jerry%27s

thanks Matt

Dod101 wrote:

TheMotorcycleBoy wrote:

Dod101 wrote:
How do you know? They are 'on market' purchases so neither they nor you know who did the selling. Frankly I think your comments are a nonsense.

Really? Do you honestly think that all of my comments are nonsense, including that the shares are purchased from large financial organisations?

Unilever PLC has entered into non-discretionary instructions with UBS AG, London Branch to conduct the Second Tranche on its behalf and to make trading decisions under the Second Tranche independently of Unilever PLC.

https://www.investegate.co.uk/unilever- ... 00003638J/

UBS are hardly small fry are they? Oh and by the way regarding UBS.

https://www.reuters.com/article/us-ubs- ... 0020121219

thanks Matt

UBS is the broker buying in shares on behalf of Unilever, they are not the party from whom Unilever is buying the shares. They stand to gain brokerage fees of course but so does any broker. As for the LIBOR scandal apart from the fact that it is old news, many institutions had involvement in that matter. It was far from something to be proud of but UBS were certainly not alone in that.

Dod

I know of UBS and all the others involved in the LIBOR scandal from reading https://www.amazon.co.uk/Spider-Network ... 0753557517

Despite all of your previous replies, I stand by my earlier conviction, that share buybacks are mainly to advantage of large financial institutions and are of significantly less benefit, compared to dividends, for small time investors like me, and zero benefit to wider society due to income tax avoidance.

Matt

TheMotorcycleBoy wrote:

scrumpyjack wrote:to blowing it on value destructive acquisitions.

Let's face it growth by acquisition is the modus operandi for ULVR and many others. Just a few choice ULVR brands and their histories I decided to investigate:

https://en.wikipedia.org/wiki/Magnum_(ice_cream)
https://en.wikipedia.org/wiki/Marmite#History
https://en.wikipedia.org/wiki/Horlicks
https://en.wikipedia.org/wiki/Ben_%26_Jerry%27s

thanks Matt

Matt

There is nothing new about any of this and I do not know why you are getting so worked up about it all. Any large company with a portfolio of brands is buying and selling them all the time as they go in and out of fashion. They often buy small brands with a view to getting their marketing power behind them and make them into big brands. Commodities like tea production for instance become less attractive as fashions and demand changes so they will exit them. That is probably what you do with your share portfolio. It is certainly what I do.

Dod

Dod101 wrote:

TheMotorcycleBoy wrote:

scrumpyjack wrote:to blowing it on value destructive acquisitions.

Let's face it growth by acquisition is the modus operandi for ULVR and many others. Just a few choice ULVR brands and their histories I decided to investigate:

https://en.wikipedia.org/wiki/Magnum_(ice_cream)
https://en.wikipedia.org/wiki/Marmite#History
https://en.wikipedia.org/wiki/Horlicks
https://en.wikipedia.org/wiki/Ben_%26_Jerry%27s

thanks Matt

Matt

There is nothing new about any of this and I do not know why you are getting so worked up about it all. Any large company with a portfolio of brands is buying and selling them all the time as they go in and out of fashion. They often buy small brands with a view to getting their marketing power behind them and make them into big brands. Commodities like tea production for instance become less attractive as fashions and demand changes so they will exit them. That is probably what you do with your share portfolio. It is certainly what I do.

Dod

Hi Dod,

I'm not getting worked up, there's no need to translate my words into an interpretation of my current emotional state - in fact please don't! I was merely replying to one of scrumpys earlier comments

viewtopic.php?p=443642#p443642

thanks Matt

TheMotorcycleBoy wrote:

Dod101 wrote:

TheMotorcycleBoy wrote:Really? Do you honestly think that all of my comments are nonsense, including that the shares are purchased from large financial organisations?

Unilever PLC has entered into non-discretionary instructions with UBS AG, London Branch to conduct the Second Tranche on its behalf and to make trading decisions under the Second Tranche independently of Unilever PLC.

https://www.investegate.co.uk/unilever- ... 00003638J/

UBS are hardly small fry are they? Oh and by the way regarding UBS.

https://www.reuters.com/article/us-ubs- ... 0020121219

thanks Matt

UBS is the broker buying in shares on behalf of Unilever, they are not the party from whom Unilever is buying the shares. They stand to gain brokerage fees of course but so does any broker. As for the LIBOR scandal apart from the fact that it is old news, many institutions had involvement in that matter. It was far from something to be proud of but UBS were certainly not alone in that.

Dod

I know of UBS and all the others involved in the LIBOR scandal from reading https://www.amazon.co.uk/Spider-Network ... 0753557517

Despite all of your previous replies, I stand by my earlier conviction, that share buybacks are mainly to advantage of large financial institutions and are of significantly less benefit, compared to dividends, for small time investors like me, and zero benefit to wider society due to income tax avoidance.

Matt

Finally let's not forget that whilst UBS may acting "merely as a broker", by virtual of the fact that 89% of UK shares are owned by large financial institutions which would need to pay income tax on divs, ULVRs choice of preferring BBs is seems like a way of favouring the big boys over small time investors like myself.

I'm not worked up as such, just learning more and more about how our economy and large corporations actually function.

Out of interest I hold several firms which are far more cash generative than ULVR (e.g. GAW) that prefer special divs over BBs.

Matt

TheMotorcycleBoy wrote:Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.

How are they bypassed? You can sell your stock too (just like those nasty big influential shareholders).

TheMotorcycleBoy wrote:Finally let's not forget that whilst UBS may acting "merely as a broker", by virtual of the fact that 89% of UK shares are owned by large financial institutions which would need to pay income tax on divs

Financial Institutions don't pay income tax.

TheMotorcycleBoy wrote:

TheMotorcycleBoy wrote:

Dod101 wrote:
UBS is the broker buying in shares on behalf of Unilever, they are not the party from whom Unilever is buying the shares. They stand to gain brokerage fees of course but so does any broker. As for the LIBOR scandal apart from the fact that it is old news, many institutions had involvement in that matter. It was far from something to be proud of but UBS were certainly not alone in that.

Dod

I know of UBS and all the others involved in the LIBOR scandal from reading https://www.amazon.co.uk/Spider-Network ... 0753557517

Despite all of your previous replies, I stand by my earlier conviction, that share buybacks are mainly to advantage of large financial institutions and are of significantly less benefit, compared to dividends, for small time investors like me, and zero benefit to wider society due to income tax avoidance.

Matt

Finally let's not forget that whilst UBS may acting "merely as a broker", by virtual of the fact that 89% of UK shares are owned by large financial institutions which would need to pay income tax on divs, ULVRs choice of preferring BBs is seems like a way of favouring the big boys over small time investors like myself.

I'm not worked up as such, just learning more and more about how our economy and large corporations actually function.

Out of interest I hold several firms which are far more cash generative than ULVR (e.g. GAW) that prefer special divs over BBs.

Matt

Every business is different and at a different stage in their development so share buybacks will be more appropriate for one but not another or some may have a founding shareholder who can control what is going on and he/she prefers dividends to share buybacks. With respect you cannot lump them altogether. Shell is another which was into a massive share buyback but then along came COVID. That was a deliberate aim to reduce the number of shares in issue following the large number issued for British Gas a few years ago so you cannot just broadbrush the reasons. There is no question of favouring anyone that is why UBS have been given the authority they have to act quite independently of Unilever. They stand in the market and buy shares up to a given price and do not care and cannot know who the seller's were. It could be you, me , abrdn, HL or anyone.

Dod

Looking through the conspiracy theory “system-rigged-against-us noise”, the most important single issue with buybacks is whether they are conducted at a price which makes sense.

Personally I think ULVR is cheap and I applaud the company for buying back stock. Essentially they are saying that the expected return on capital of their existing portfolio of businesses is (i) higher than the new business opportunities they see (so don’t push that capital into the business) and (ii) higher than the likely market rate of return (so don’t pay special dividends). I agree with them.

As an aside, all the broker will be doing is buying shares in relatively small size on the exchange, in full view of all other market participants, passing the shares and costs to Unilever, and getting a small and fully disclosed (to Unilever’s management) fee for doing so.

Spet0789 wrote:
As an aside, all the broker will be doing is buying shares in relatively small size on the exchange, in full view of all other market participants, passing the shares and costs to Unilever, and getting a small and fully disclosed (to Unilever’s management) fee for doing so.

It has been known for the broker to do this for no fee also.

I found this link from SimplyWallStreet which is an assessment of the fair value of ULVR by discounted cash flow method. The assumptions made are discussed. It came up with a fair value of ~£46 per share.

https://simplywall.st/stocks/gb/househo ... -lonulvr-1

dealtn wrote:

TheMotorcycleBoy wrote:Buybacks, IMHO, just seem like a real nice cosy scheme in which big influential shareholders are relieved of stock at their preferred price by corporations, and the small shareholder's interest, i.e. mine, are completely bypassed.

How are they bypassed? You can sell your stock too (just like those nasty big influential shareholders).

Greetings,

There's no need to tease. However I don't want *particularly* want to sell dealtn. But if one of my holdings genuinely has oodles of excess cash, why don't they just straight up give me a special dividend? Pray tell. That's exactly what Games Workshop (GAW) do. They really do have lots of cash.

I've not run the numbers for ULVR for a while but I've just had a quick look at their AR2020. Just roughly

Cash=£5.5B
Gross Debt (current and LT)=£27B

that's not exactly cash rich is it?

What they are currently doing is questionable in my opinion firstly because they don't really have a stack of cash to throw around and secondly the way they very nicely decided to distribute this imaginary cash pile to their faithful long term shareholders is to approach big instis and say

"hey guys bunging our shareholders some real cash is a stupid idea, because the rich ones will get angry because they'll *shock horror* have to pay some income tax.....so how about we extend our overdraft pass you peeps a few 100 mil, and if we keep doing it for a bit, may be eventually the MMs will mark our SP, cos TBH it's looking really bad, yeah, don't laugh.....but actually we don't what else to do".

You can continue unpick my posts if you like, but I'm pretty convinced I know what's going on here. I just hope it works, they're my second largest holding.

Matt