Fear in Europe overdone?

Reaper

I can't help feeling the fear over Europe might be creating some opportunities.

During the first crash I bought Alpha Pyrenees Trust (ALPH). They buy shops in France (and Spain in a small way) and rent them to top tier tennants like supermarkets and banks.

After I bought them they shot up in value nicely, but today I see they are almost back to the level I first bought them at. That means the yield on them is now once again in excess of 14%!

I realise they are a risky bet as an economic downturn can hit the shops and they are already have some empty properties they have not been able to rent out, but I can't find anything to justify such a fall in their last update.

At the moment I am tempted to up my small stake, particularly if they go on falling tomorrow. Or do you think European Retail really is just too risky at the moment? I have had my fingers burnt on risky shares in the past.

Linton

IMHO it is a little risky for the whole of your life savings! But for a small part of a much more stable portfolio it looks a reasonable bet to me. I've been thinking of buying it as I rather like the dividend.

Edit after rethink - if you are looking for capital growth then I would see it as a pure gamble, but for dividend income it looks tempting (in small quantities).

pqrdef

Reaper wrote: »

but today I see they are almost back to the level I first bought them at. That means the yield on them is now once again in excess of 14%!

Why?

(And why won't the site allow me to post a message that just says Why?)

Thrugelmir

Reaper wrote: »

After I bought them they shot up in value nicely, but today I see they are almost back to the level I first bought them at. That means the yield on them is now once again in excess of 14%!

A fair indication that the dividend is unsustainable and therefore going to be cut.

I realise they are a risky bet as an economic downturn can hit the shops and they are already have some empty properties they have not been able to rent out, but I can't find anything to justify such a fall in their last update.

Was in central rural Spain in September. Spanish towns in general appear to be suffering like the UK. Lots of retail shops are empty and for sale/rent. Even businesses currently trading have a for sale on their doors. Trading times are tough.

Ark_Welder

Check the premium. Check the gearing...

Reaper

Ark_Welder wrote: »

Check the premium. Check the gearing...

The discount according to the FT they have a discount of 0.43%, though according to Digital Look it is +16.35%. I suspect the difference is whether they use last published or currently estimated NAVs.

Yes the Gearing is very high, but that is because of their business model which is to borrow to buy properties which they then hope to rent out for more than the cost of borrowing. "Buy to let" mortgages if you like. There may come a bit of a crunch moment in Feb 2014 whe the first of the borrowing reviews comes round and the lenders re-test their loan-to-value criteria. If property values have fallen that may be a sticky moment.

OK so it's not a fund for widows and orphans but if it falls any further I may not be able to resist.

Thanks for all your thoughts.

atush

If I was buying european shares, I think that retail would be the bottom of my list. Good luck ;-)

Ark_Welder

Reaper wrote: »

The discount according to the FT they have a discount of 0.43%, though according to Digital Look it is +16.35%. I suspect the difference is whether they use last published or currently estimated NAVs.

Interesting. I looked at the FT to get the figures! The premium was closer to the Digital Look figure. Some of the other Alpha trusts that are highly geared have cut their dividends in the past - they did get hammered by the credit crunch when they were still under the Close Brothers name.

Perhaps a good read of the latest interim report and the annual reports for the last few years would be in good order.