Is now the time to buy stocks/shares??

IronWolf

gadgetmind wrote: »

True, but if a company has a decade plus history of reliable dividend payments, then it's a good candidate for future success.



Merged, demerged, rebranded, and in a small number of cases, totally gone.

However, I bought some PEPs a couple of decades ago and put in enough money into a carelessly chosen mix of funds to buy a tatty second hand car. These were in the high fee hands of St James Place for just over a decade and Skandia for the last seven years, with the move costing 5% in bid offer spread. No further money has been added, and the funds have gone through turbulent times, but there is now enough in there to buy a brand new 7 series BMW.

I'd call this keeping up with inflation, wouldn't you?

Exactly. A lot of old companies are either rebranded, or they were aquired by larger ones, which is why it appears that a lot of companies from the 80s etc aren't around anymore.

For example if you'd bought shares in Gillette in the 80's, those shares don't exist anymore, but you would now be a shareholder in Procter & Gamble, one of the largest companies in the world.

Hughesy84

EdGasket wrote: »

AZN have negative tangible assets :eek: If it looks too good to be true; it probably is !

:rotfl:Ok lets see who is right in the next few weeks/ months on this one then yeah?

gadgetmind

Hughesy84 wrote: »

:rotfl:Ok lets see who is right in the next few weeks/ months on this one then yeah?

No, let's give it a few decades, with dividends re-invested. Each to their own.

IronWolf

AZN is a pharmaceuticals company, hence to just consider tangible assets misses out and important part of the picture. Usually intangible assets of goodwill or computer software are good to ignore, but a pharmas intangibles are its drugs, and patent protection is what allows it to make large profit margins.

Saying that, I'm not a fan of AZN as I explained in another thread, I'm in GSK who have a stronger revenue and pipeline, but still good yield.

gadgetmind

IronWolf wrote: »

Saying that, I'm not a fan of AZN as I explained in another thread, I'm in GSK who have a stronger revenue and pipeline, but still good yield.

I'm in both and with yields today of 6.4% (AZN) and 5.5% (GSK) they are close to the top of my top-up list. At the top my spreadsheet has Aviva, but if I was going for more insurance, I'd probably go for Standard Life, but I don't like the price right now.

IronWolf

I considered Aviva but they make huge underwriting losses and very high debt. If you like insurers check out Amlin, a little beauty I found that make unbelievable underwriting profits, as well as good investment returns on the float. Share price is currently depressed due to small profits expected because of japanese earthquake and other big disasters.

Edit: there are also loads of re-insurers selling for below book value atm. Amlin doesn't but it has a much stronger underwriting profit, and book value growth of 20% p.a. compounded over last 10 years! which is why I chose it. Div yield is around 6% too.

gadgetmind

IronWolf wrote: »

Div yield is around 6% too.

Based on current price, and dividend estimates automatically scraped from Digital Look, Amlin are on a forward yield of 7.1%, which has already put them close to the top of my watchlist. Getting on the watchlist in the first place requires good size, good divi cover, low or justifiable gearing, and a good track record.

However, choosing between companies in the same sector requires a *lot* of research of a kind that causes me to wake up with my head on the desk in a puddle of drool, so it's always good to see opinions from those who understand the sector well.

Thanks.

IronWolf

I got into them a bit too soon, so my yields about 6% I think

I wouldn't say I understand the sector well

All I know about insurers is underwriting profit (making profit on premiums earned vs insurance payouts and admin costs) and the float which is the wad of premiums it holds until it needs to pay it out later.

The underwriting profit or loss is what the company in essence pays for its float. So if your making profit, people are effectively paying you to hold their money, and let you keep the investment returns! Sounds like a good situation, which is why a lot of insurers decide to cut premiums for more business, increase their float and get better investment returns. But then they are effectively loaning the money and reliant on the investment returns for profit.

There may be better insurers out there than Amlin, there are definitely cheaper ones, but I dont have the patience to analyse them all I just did a quick check of their main competitors and looked at their combined ratio (proxy for underwriting profit). Amlin's was way ahead of the rest so I was satisfied enough that they can at least survive another 20 years. With that kind of dividend yield even moderate growth will see a good return. If they continue their 20% p.a. growth thats just an added bonus

gadgetmind

IronWolf wrote: »

If they continue their 20% p.a. growth thats just an added bonus

They have had a bad year but seem to have reacted to it well. Thanks for all the info.

It does seem interesting that the top four slots in my yield table are Aviva, Standard Life, RSA and Amlin. I'll have to look at historic yields to see if this is normally a high yield sector or if these have dropped in capital value more than the rest of the market and represent a good value opportunity.

I got into them a bit too soon

There is an argument that the right time to buy a high yield portfolio is now, no matter when now is. If you like the yield versus risk, then push the button. If you like the yield even more later on, and your portfolio balance can take it, then buy more.

I try and wait for the bad weeks/days, but as it's impossible to call the bottom, you can't put it off forever. I tend to get twichy as XD approaches, which I know is unhealthy, but I tell myself that divis are good whereas capital gain is a two edged sword. If I can get more divi and less gain (in the eyes of HMRC) then can that really be a bad thing?

Thrugelmir

gadgetmind wrote: »

True, but if a company has a decade plus history of reliable dividend payments, then it's a good candidate for future success.

Just as the banks were, or thought to be.

In my investing life time a few companies that spring to mind.

GEC, Hawker Siddley, Marconi, BTR, Hanson, Lucas, Racal and Trafalagar House.

Business moves in cycles.