Yee Wo
11 Nov 2017
Reading this weeks Moneyweek, page 11, Three to sell: - "The influence of social media has made it easier for brands to target consumers without shelling out for advertising campaigns and WPP is losing out. Its share price is down 24% on the year as corporations cut back their spend and competitors slash prices. A 4.8% dividend yield may tempt some, but stagnant group revenues imply a difficult period ahead. 1295p"WPP is may second largest holding and I have been adding this year on weakness. I don't quite buy the above "structural" argument, I feel that WPP's SP weakness is "cyclical". Opinions gratefully received!!The issue(s) WPP has had in Japan and succession issues when Sir Martin goes remain a "worry" however I'm holding for the moment. Again, opinions gratefully received. GLA!!!
johnnygibber
07 Nov 2017
Its all relative.... Was a bit miffed being -7% since buying in early September 
Only consolation is Sir Sorrell maybe even miff..tier (?) as he has lost £21.5M in same timeframe (on paper anyway)...It's still early days...another 10 months until my rebalance....just keep repeating divi well covered/ divi well covered......GLAJG
EssentialInvestor
07 Nov 2017
Re: Horizontality Does that not make a similar point to LK ...a diverse collection of business acquired which may not work particularlywell as part of a larger group, come tougher business conditions..Apologies if I have misunderstood his view.
EssentialInvestor
07 Nov 2017
Horizontality It fills me with dread when I hear corporates use buzz words.Bought a very small amount with a view to adding lower, if available.
Johandesilva
07 Nov 2017
WPP Transformation [link] drop but the above could drive some cost cutting. In my opinion as long as it is back office cuts as the work these agencies do are already done by innovative creatives and any cuts to these have to be carefully done.
EssentialInvestor
07 Nov 2017
Re: Debt levels Hi Games, well I'm not quite brave enough to buy pre update!.May not be the right decision.
gamesinvestor
06 Nov 2017
Re: Debt levels "have put it on a watchlist along with SBRY."Essential - I trust you have set your entry price on SBRY below 150p?I think Morrisons is worth about the same.Games
EssentialInvestor
06 Nov 2017
Re: Debt levels Appreciate the views folks.And most definitely agree on the dangers of buying in to excitment.I'm almost tempted to buy a few, have put it on a watchlist along with SBRY.
Johandesilva
06 Nov 2017
Re: Debt levels "late in this cycle""low expectations"After the trading update I read articles that the market had been expecting broker downgrades. Because the share price had fall to lows ahead of the broker forcasts no SELL recommendations are given, usually I see this the other way round. Deutsche Bank went from 1750p to 1500p in a space of a week and 1500p appears to be the average of the forecasts in November.Forecasts for November:[link] wounder if the brokers will factor in major events next year. All the best events are earlier on the year:2018 FIFA World Cup2018 Olympic Winter Games [link]
Bill1703
06 Nov 2017
Re: Debt levels "I would say we are late in this cycle, on most measures... WPP has been hit during previous downturns, perhaps that is what the market is attempting to factor in..."Essential - WPP fwd P/E now a bit below 11x; FCF yield (last FY) above 8% now; prospective dividend yield now nearer 5% than 4%, against a track record of strong secular divi growth.And worth remembering, this sub-11x P/E rating is on already-reduced earnings expectations... just as the high yield is already based on moderated current year dividend forecasts.The Ad business is inevitably cyclical - a lead indicator, typically. And over time, the SP trajectory tends to reflect this... not sure what the cyclical lows have been in the past, in valuation, but we can't be far off there now? And WPP has broad geographical diversification, increasing economies of scale and at least the promise of continuing value-enhancing small-scale M&A (in unit size anyway, less so in overall M&A spend).To paraphrase Mr Woodford (and other "legendary" investors), you really don't (ever) want to buy stocks where both valuations and expectations are high... WPP increasingly looks to be sitting in the converse, the "sweet spot" of low valuation and lower expectations.
EssentialInvestor
06 Nov 2017
Re: Debt levels Interesting discussion.I would say we are late in this cycle, on most measures.WPP has been hit during previous downturns, perhaps that is whatthe market is attempting to factor in.
Johandesilva
02 Nov 2017
Re: Debt levels Personally I am in no way recommending Capita though I mentioned it as an extreme example. Capita tested my moral compass when I was invested as they represent everything that is bad about capitalism and in the end come back to bite them on the asp.WPP looks sound and good see our other O/T of AA recovering. A growth stock with debts that have been mainly eliminated that I am sure you may all like is to follow Redde PLC (LON:REDD) with holders including Invesco Perp 28.50%, Woodford 22.94% and Aviva 11.79%. It is also behaving like a traders dream.
Bill1703
02 Nov 2017
Re: Debt levels "Growth through M&A is only possible with debt, another such company to grow like this this include Capita and Staffline. I have never understood why the share price also grows with the increased Debt, but some one more knowledgeable (wish still Bill was here) maybe able to explain how this actually happens..."I think Games has already covered most of the bases... the increase in WPP debt is entirely due to M&A plus share buy-backs, underlying free cash generation remains strong. As such, increasing debt is "discretionary", and all balance sheet metrics remain within target (and pretty comfortable) levels... the market takes a very different view when rising debt is no longer under management control. It is all about "free" cash flow - and always will be!There is NO reason why a SP would grow with increased debt, all else equal... it's all about what is behind the increase. If it is acquisitions and they are expected to deliver value, with overall returns decently above WACC, then the SP should rise to reflect the enhancement to equity value. If it is buy-backs, then the same equation applies... buy-backs should always be benchmarked against the returns available from alternative investment, including M&A (and vice versa, of course).WPP's M&A record has been very good so the market generally takes a benign view of it... until they slip up (if they ever do). Capita was also well-regarded in this area, for a while at least... the key difference was the sheer scale of acquisition spend over several years, relative to WPP. This took the balance sheet to a point where it was vulnerable to even a moderate trading downturn, which then transpired... it also meant rapidly increasing complexity across an expanding Group, which management evidently struggled to keep on top of (with the give-away alert of multiple business reorganisations, etc).But Capita's FCF also remained strong throughout, and still is... will likely be the driver for decent recovery in the stock, as and when the market decides its current troubles are properly behind it. Maybe WPP becomes the next Capita, if Sorrell et al similarly lose control of the organisational structure and/or balance sheet... but little sign of this as yet.
gamesinvestor
01 Nov 2017
Re: Debt levels It's worth reading through this 139 page document "analyst presentation" in pdf form when you go to this link :-[link]
gamesinvestor
01 Nov 2017
Re: Debt levels "another such company to grow like this this include Capita and Staffline"I haven't looked at Staffline, but Capita was piling on debt at a much faster rate than WPP and at the same time the profits and revenues were not compensating for this. Capita always looked like a basket case to me even two years ago and again a year ago when I looked at it and I'm very surprised that someone like Neil Woodford and his team couldn't see it.I'm no longer surprised, however, as he has since been similarly caught out on 10 or more ocassions.Games
