Proverbs 26 vs 5
31 Jul 2017
Re: Correlation - Fundsmith Just on "tabs" sales JNJ are No. 6 worldwide ahead of GSK (7th) and AZN (8th)
LK Hyman
31 Jul 2017
Re: Correlation - Fundsmith Games,"the only example of misleading I have seen is his claim he [that boy Terry] doesn't invest in Pharmaceitical stocks (GSK-AZN article I previously posted), when he had J&J in his top 10."Hmmm, OK, J&J have a few tabs in their portfolio, but I think of 'em as more of a devices and consumer staples mob. For example they make ice cream for people who can't stomach dairy products and foam to make your bird's hair grow back ... presumably after it's been torn off after that burn-up on your bike.[link] point about Woody possibly indulgin' in a bit of fudging, m8. And that's on top of packing his portfolio with far more individual shares than he can possibly keep tabs on. It's just not cricket.LKH on the flybridge stout defender of Terry's reputatio
gamesinvestor
31 Jul 2017
Correlation - Fundsmith ""But I also think Tel Boy is (once again) guilty of somewhat misleading guidance when it comes to PIs... ""I guess the only example of misleading I have seen is his claim he doesn't invest in Pharmaceitical stocks (GSK-AZN article I previously posted), when he had J&J in his top 10.In terms of his 16-17 correlated stocks here they are -- it looks like 10 correlated areas to me :-1. Philip Morris ; IMB ------ Tobacco2. Microsoft ; Sage; Auto Data Processing --- Software3. Visa; MasterCard; PayPal; Amadeus -- Payments/Ticketing4. 3M; Kone --- Industrial5. Nestle; Unilever; Smucker; RB; Colgate -- Consumer staples (arguably discretionary as there is so much comp) - 6. Stryker; CR Bard; J&J; Novo Nordisk -- Medical eqiupment (pharma)7. Diageo; Pepsico; Dr Pepper -- Consumer Discretionary (drinks and snacks)8. L'Oreal; Estee Lauder -- Cosmetics (Consumer Discretionary really)9. Intercontinental Hotels - Entertainment??10: Idexx; Intertek; Waters -- Testing/AnalysisIt seems impossible to correlate Woody's list as there are just too many and most of them (43 in total) are not listed and have very little identifiable value.I think Woody fudges his monthly growth figures (for which he grows his fees from) by buying more unlisted shares in these 43 companies and revalueing the earlier investments in those companies -- a kind of self managed growth - when we all know that of those 43 companies the value is probably close to Jack Schizzer as LK would name it.Games - correlating the uncorrelatable !!
Bill1703
30 Jul 2017
Re: In praise of proper diversification "You mentioned oil stocks. I still have some exposure via Shell... and am very much in two minds what to do. The contrarian in me says that the day of the hydrocarbon is not nearly as dead as the cheerleaders for EVs and electric roof panels would have one believe, but the realist says that Big Oil may take a hit when institutional investors pile in to Aramco..."Yes, LKH, I always defer to you on all things oil, and I can see both the bull and the bear case. But in recent times I have had a front-row seat for the views of a number of oil analysts and otherwise specialists, and have been more convinced by the structurally negative view - on both a geopolitical and economic (supply/demand) perspective.I think people see an oil price around $50 and think it must be cheap, when it was up at $120 or whatever only relatively recently... but then, I am old enough to remember Oil trading pretty much steady around $20 for about 20 years, aside from an occasional - and invariably short-lived - spike. And in those days, no-one was talking electric cars, renewables and whatnot... Volvo not building any hydrocarbon cars after 2019?! They're not stupid, those Swedes...As for Aramco - we'll see if it comes, and where it comes. Disappointing - but not surprised - to see the UK listing authorities so evidently desperate to light a match to their rule book... but still, I can't see too many proper fund managers too enthusiastic about a tiny minority listing in such a corporate governance time bomb - whatever your view on the oil price. Not one I would touch myself, no matter the price (though I reserve the right to change my view, naturally!) "And yet, with a yield of around 7%, if Shell can sustain that for 10 years (and why shouldn't it be able to?) Shell shares could go to zero in 2027 and I'd be better than cash-neutral if I'd stuck them 10 years of divis in summat nice and safe like National Grid..."Yes, I can see the investment case... though your "if" is a big one IMHO. My correspondents tell me it needs an oil price at least $60 to keep the divi going... maybe the balance sheet can support it for a year or two, but for 10?? Though if they can keep reducing their cost base fast enough - much as the shale and similar guys have managed - then everything is possible...I am not ruling out dipping my toes in Oil (!) at some point - I never have, it's just that it's never been compelling whenever I've looked at it - and Shell has always been the most likely home for my hard-earned. But it might take another plunge towards $30 a barrel to get my 'value' instincts suitably lubricated...
LK Hyman
30 Jul 2017
Re: SP slump unwarranted - says Neil Woo... Bill,"our population is ageing, ageing people need more tabs"Now that's a nice theme for me to put alongside another theme that I think that my 16/17 shares are likely to be influenced by .... "the world needs to be greener and it needs to eat".Hmmm. Looks as if ULVR is gonnae be one of the 16/17! And Treatt, come to think of it.LKH etc
LK Hyman
30 Jul 2017
Re: In praise of proper diversification Bill,"I am sitting on quite a big cash buffer as it is"Bless!I have almost no cash buffer now so, if one of the twin Volvos needs expensive work, I shall have to sell one of my equities if the old pension isn't up to taking it on the chin."I probably should clean up the tail one of these days, but for various reasons (eg. I can't be bothered) I am in no rush"Yes, that was my position too. I can't be arsed to check what proportion of the wad is (or rather was LOL) represented by the 16/17 biggest stocks, but it was probably near 80%, so, as you imply, I was probably almost Terry-compliant as it was.It was always slightly irritating to have a tiddly bit of (for example) South 32 after BLT sloughed the rubbish of its portfolio off in the demerger, but the Scottish side of me refused to sell (until now) because the intermediary charges for doing so were so relatively (if not absolutely) high.You mentioned oil stocks. I still have some exposure via Shell (and, to a much lesser extent, BLT) and am very much in two minds what to do. The contrarian in me says that the day of the hydrocarbon is not nearly as dead as the cheerleaders for EVs and electric roof panels would have one believe, but the realist says that Big Oil may take a hit when institutional investors pile in to Aramco (if they do). What will they sell to accommodate Aramco? Logic suggests Shell and BP I dunno.And yet, with a yield of around 7%, if Shell can sustain that for 10 years (and why shouldn't it be able to?) Shell shares could go to zero in 2027 and I'd be better than cash-neutral if I'd stuck them 10 years of divis in summat nice and safe like National Grid .... assuming the klutz Corbyn hasn't nationalised it by then LOL.LKH on the flybridge
Bill1703
30 Jul 2017
Re: SP slump unwarranted - says Neil Woo... "I doubt that Woody knows any more about tabs than I do, quite frankly."I am pretty sure he doesn't LKH. He's not a doctor.... actually, he probably is, as doubtless some benighted red-brick poly has thrown a dubious honorary doctorate at him somewhere along the line, but that's beside the point...You are right, an unfortunate turn of phrase from Woody, if indeed he was correctly quoted (as I recall, he is no Stephen Fry when it comes to the English language), though I think I get what he meant. I think...Quite possibly, his insight into such things is no more sophisticated than my own... our population is ageing, ageing people need more tabs, AZN makes tabs - bingo bango bosh! And if you ask me, are AZN's tabs any better than GSK's, I will merely shrug... I just bought the cheaper of the stocks at the time.
Bill1703
30 Jul 2017
Re: In praise of proper diversification "Now you've gone and raised doubts in my mind about what I was intending to do, which was to hit Terry's 16 (or 17) using the excuse of having to sell off great gobs of the shrunken wad for IHT purposes as the lever to get down to 16/17 from the 30-odd I have now!"Well, if I am right LKH - that a "reasonable" range for a PI is perhaps 16 to 30 or so (and it's a big "if", let's face it) - then it is still a valid exercise, if you feel so inclined? FWIW I think 'materiality' is a big consideration... I am sure Tel's dictum only really holds if you have 16/17 uncorrelated stocks in some material size. I too have 30-odd stocks, overall (plus a few funds of long-standing), but a quick glance suggests only around 20 are what I would call "material" positions - so actually much nearer Terry's "target". I probably should clean up the tail one of these days, but for various reasons (eg. I can't be bothered) I am in no rush - I am sitting on quite a big cash buffer as it is, so no pressing need to "increase liquidity". "To further complicate the matter, sectoral asset allocation is FAR more important than individual stock picking. It's reasonably easy to pick the winners within any one sector ... a lot harder to decide whether, say, the mining sector will outperform real estate... over.. whatever period one likes to focus upon for the purposes of resetting one's own asset allocation."Yes, nail on head here, LKH (IMHO). It's broadly what I have tried to do for some time... maintain exposure across as wide a selection of sectors as possible, while retaining the option to build an "overweight" position (somewhat) in any sectors I feel particularly excited about - and likewise shun any that worry me. I am probably a bit overweight UK retail at the moment, but I think it's currently a compelling 'value' story (selectively, of course)... equally I don't hold any Oil stocks, as I am a structural bear of the Oil price... or at least, all the external, geopolitical shenanigans and so on that have undue influence thereof. And after that, I have always limited my exposure to individual stocks within sectors. I wanted Big Pharma, I bought AZN, not GSK (definitely the right choice at the time)... I wanted Big Tobacco, I bought Gallaher... it got taken away from me (at 3x my in-price!), so I bought IMB, not BATS. I probably would have bought DGE by now (but not today, no siree!) if I hadn't always had my Nichols... and so on. Opinions vary over how many "sectors" there are - anything from around 12 to nearer 30, depending on how narrowly you define them. But one approach for you would be to pick 16/17 sectors, on the same basis as above, then one stock from each... maybe 2 at most, on a slightly smaller sector selection? Or as you say, just take a purely bottom-up, individual stock-driven view.. pick the stocks you like the most, no matter where they sit. Though the risk there is you end up with excessively concentrated sector exposure (and conversely, the lack of it elsewhere, of course).... FWIW that is a risk that Tel Smith runs himself, or at least I thought so the last time I glanced down his list. It's served him well enough thus far, of course... but for how long? Sectors swing in and out of favour on a cyclical basis... maybe he'll be nimble enough in adjusting his exposure accordingly - but as always, only time will tell!
LK Hyman
30 Jul 2017
Re: SP slump unwarranted - says Neil Woodfor... Bill,"major shareholder Neil Woodford thinks the market reaction was unwarranted."Yeah, that was what he thought about Circassia too, the mup pet!""Star" fund manager Woodford, however, said the share price fall was not a reflection of the failure of the drug"Word of advice, Woody .... it defo WAS a reflection of the failure of the drug, m8! If it had been a gr8 success the share price would have risen. Because it was a failure (measured against chemotherapy) the share price fell ... and it fell a lot because Sorry Hat had previously said how important the Mystic trial was. I doubt that Woody knows any more about tabs than I do, quite frankly.LKH on the flybridge Nurse! The pills for Mr Woody!
LK Hyman
30 Jul 2017
Re: In praise of proper diversification Bill,"that Terry's "16 stocks" should be seen as a minimum target, if you want to avoid excessive specific risk, with around the 30 level probably at the other end of "reasonable"."Now you've gone and raised doubts in my mind about what I was intending to do, which was to hit Terry's 16 (or 17) using the excuse of having to sell off great gobs of the shrunken wad for IHT purposes as the lever to get down to 16/17 from the 30-odd I have now!Having said that, despite spending almost every waking hour not spent jockeying Vulganus through the ice-wracked waters of the Arctic faffing around with my equity portfolio, there is no doubt that it's quite hard for any one person to keep tabs on a large number of stocks, so 16/17 is a damn sight easier than 30 (let alone Woodentop's 135, which is just bonkersly over the, erm, top).To further complicate the matter, sectoral asset allocation is FAR more important than individual stock picking. It's reasonably easy to pick the winners within any one sector ... Shell is better than BP; IMB is better than BATS yadda yadda .... but a lot harder to decide whether, say, the mining sector will outperform real estate, or retailers will outperform forestry products, over the next year or decade or whatever period one likes to focus upon for the purposes of resetting one's own asset allocation.Unfortunately my own interests and expertise do not extend to close examination of why one sector might or might not outperform another, as I'm much more interested in the performance of individual companies and there are probably and fortuitously around 16 or 17 listed UK-based companies in which I'm particularly interested.So I shall stick with my intention to take that boy Terry's word for it, even if he doesn't follow his own mantra, and see if I can get down to 16 or 17, reporting them as and when on the various ii boards [pause for distant but subdued sounds of cheering and cries of "Tell us what they are now, LK. We can't wait!"]LKH on the flybridge AZN has already gone from the list
Bill1703
30 Jul 2017
SP slump unwarranted - says Neil Woodford Article from Proactive Investors, from Friday:"AstraZeneca has maintained that its Mystic lung cancer treatment could be positive on improving overall survival rates after a failed trial. AstraZeneca plc (LON:AZN) saw billions wiped off its value yesterday after the Mystic lung cancer trial suffered a serious setback but major shareholder Neil Woodford thinks the market reaction was unwarranted. Shares in the drugmaker fell 16% after saying that the Phase II trial of Mystic failed to meet the primary end point of improving progression-free survival compared to chemotherapy.Star fund manager Woodford, however, said the share price fall was not a reflection of the failure of the drug or AstraZeneca’s strategy. He added that the market had not put sufficient value on the company's cancer drugs, including Tagrisso and Lynparza."The investment case for AstraZeneca is about so much more than this one trial. Across a broad spread of disease areas, the company is developing new ground-breaking therapies which have significant commercial potential," he wrote in a blog posted on the company's website late Thursday.Liberum also remained positive on the stock, repeating a ‘buy’ rating but putting its target price under review. AstraZeneca chief executive Pascal Sorio held an analyst meeting this morning, outlining reasons why Mystic could be positive on improving overall survival rates.“Whilst we certainly don't think positive overall survival is a prudent base case, the current share price dismisses the entire opportunity,” Liberum said. “We and others have always pointed out the risk that Mystic could read out positive overall survival data but fail at progression-free survival.”The broker added that the company seems confident ahead of the full data presentations on studies for lung cancer drugs Tagrisso and Imfinzi, expected in September.Shares in AstraZeneca recovered today, rising 3.36% to 4,453.50p in afternoon trading."
Bill1703
30 Jul 2017
Re: In praise of proper diversification "I'm starting to adopt a more clinical approach. If I'm not happy to biy more of something, I feel it's actually a sell and that's what I want to do on all my positions now and either reinvest the money on the one's I am happy to buy more of, or do nothing and hold a portion of cash."Yes, I know a few other people who adopt a similar black-and-white approach, or have at least tried... and I admit it has a certain logical appeal, and self-imposed portfolio discipline.But I have specific reservations... I have learned, through experience, that I am just as likely to get a stock "wrong" on the upside as on the downside - there've been several that I've thought had run at least far enough, only to see them power ahead for a decent period yet... so I'd be risking cutting and running too early, a cardinal sin (IMHO) for a long term buy-and-holder. And then there is the issue of portfolio weightings... I can think of a few where I would consider buying more, but I already have decent sized holdings and any more would imply an uncomfortable level of exposure.And then there is my conviction on black-and-white arguments... the proponents of such being inevitably doomed to be wrong, most often, 'cos nothing in this world is really black and white!I suppose, on your "it's either a BUY or a SELL" basis, AZN definitely was a SELL up above £50... but now? Not so sure, could go either way... I hear the bullish case from several quarters, but much of it is wrapped up in the pipeline, and I have no particular insight into that - I am happy having some exposure to the upside case, but not feeling like I want any more!Equally... IMB would be a BUY on the same basis (I am already contemplating buying more), but BATS would have to be a SELL. But of course... I could well be wrong!!
Bill1703
30 Jul 2017
Re: In praise of proper diversification "There are 30 stocks in his fund and the correlation is open for conjecture, however, they are bar non - all quality companies and he holds non of the many munters that are scattered all over Woodford's list of 135 companies (105 more than Fundsmith)."Yes, Games, I wasn't necessarily holding out Woody as a paragon of diversification virtue in comparison! When it comes to private investment, 135 stocks is clearly too many to be practical - long before that point, the best advice would be to buy (very) low cost tracker funds and be done with it. But I also think Tel Boy is (once again) guilty of somewhat misleading guidance when it comes to PIs... for all the wisdom that often emerges, he is regularly guilty of overstating his case to hammer home the point. For any serious PI - such as the many that inhabit these boards - my take on it is that Terry's "16 stocks" should be seen as a minimum target, if you want to avoid excessive specific risk, with around the 30 level probably at the other end of "reasonable". So the pragmatic range is from Terry's theory and Terry's practice! "He does have IMB and Philip Morris -- these would be hit the least, as IMB is less exposed to the US, as is Philip Morris -- Altrea holds the lions share of the US."I thought PMI had NO exposure to the US - that was the whole point (and hence the name, Philip Morris International!) IMB used to have very little, but quite a bit more now... more's the pity! When I first bought into Big Tobacco (via Gallaher, nearly 20 yrs ago), I deliberately went for a stock with minimal US exposure... and then, when Gallaher was bought out (at a very nice price), I took on IMT (as was) on at least partly the same basis. And more than happy if the cycle now continues as before, of course... .That said... a fair amount of reading and reflection over the weekend suggests to me that the baccy stocks should rebound a bit further next week. There is nothing new here in the implied trajectory and key dynamics of one, particularly mature market - secular decline in traditional volumes, and ongoing downward pressure from proactive regulation... but good residual FCF generation in the meantime plus some upside in "next gen products". Sounds like this was widely expected and the industry will, I am sure, manage the timescale proactively over the several years in will doubtless take to implement any real change.
PrefInvestor1
29 Jul 2017
Re: Gains - Bill + Proverbs Hi Both,Yes I can see why brexit has been a major driver of gains for most portfolios. Perhaps I'm blinkered in that I only tend to look at YTD performance, so that I can compare it with my 8-10% target. I could calculate a trailing 12 month trailing figure pretty easily but my investment spreadsheet doesn't do that right now, it only does YTD.My biggest fear right now is an interest rate rise as this would drive pref prices down. I agree that I think that this is unlikely for the moment, but it will come sometime. When it does I may need to move more if my portfolio into equities - though they will doubtless fall on an interest rate rise as well.ATBPref
gamesinvestor
29 Jul 2017
Re: In praise of proper diversification " I am happy enough holding for the duration - then and now - but not seeing any compelling case to buy more. "Bill - I'm starting to adopt a more clinical approach. If I'm not happy to biy more of something, I feel it's actually a sell and that's what I want to do on all my positions now and either reinvest the money on the one's I am happy to buy more of, or do nothing and hold a portion of cash.Games - Buy-Add-Reduce-Hold-Accumulate-bla de bla -- you is either in it or not -- innit?
