Provident Financial - Woodford, Barnett & Darwall

Malthusian

Sally57 wrote: »

In some ways I agree but there has been major warning signals on Provident and he has a huge amount of money invested in them across his funds and via SJP so you would have thought he would have monitored the company's structure etc

Monitored the company's structure and realised that there was a certainty that their debt collection rate would plummet, and consequently that they were going to announce losses of £80m to £120m? He'd have to declare that knowledge to the market before acting on it, at which point the shares would have plummeted, and he would have made the same losses as he has anyway.

There's no way round the Efficient Market Hypothesis. If you think you have one, the Efficient Market Hypothesis has already got there first.

JohnRo

I took a punt on PFG earlier today fwiw.

The new management will hopefully realise it wasn't broken and didn't need fixing.

Sally57

JohnRo wrote: »

I took a punt on PFG earlier today fwiw.

The new management will hopefully realise it wasn't broken and didn't need fixing.

Your punt may pay big dividends, who knows but good luck.

Please excuse my ignorance but why is the company not broken or doesn't need fixing? I don't really understand your view on this.

JohnRo

The issues it has relate to the manner in which loans were/are generated and collected. (jimjames mentions it above)

They recently changed the system from using autonomous agents to some peculiar in house set up which caused a lot of anger, upheaval and clearly hasn't paid off..

Malthusian

So you're hoping the new management sacks all the new salaried collectors and re-contracts the old self-employed collectors? Sounds expensive. And judging by the BBC News article, the ex-collectors are unlikely to want to rush back.

Obviously if you make a mistake there is no shame in doing a volte-face rather than plowing onwards into the mire. But I somewhat doubt that this is a decision that can easily be reversed.

In any case, the concept of relying on "self-employed collectors" sounds dubious from an HMRC point of view. How many other firms did these "self-employed collectors" contract for? Is the real reason they moved to salaried employees the possibility that HMRC might deem the previous arrangement artificial and require them to give their de facto employees employment rights anyway?

JohnRo

I'm hoping the new management identify the error of their ways, there's clearly a market for their business, they just need to get it's operation sorted.

Malthusian

The BBC article suggests that Provident Financial's previous system of using self-employed agents worked because the agents had "strong relationships" with the people they were collecting debts from and so could "ensure affordable appropriate borrowing" (i.e. they knew who could afford to pay them back better than a computer relying on credit records). This is why the self-employed agents managed to collect 90% of debts whereas the salaried employees relying on phone apps are only managing 57%.

The problem with the idea that Provident can simply return to using self-employed agents is this: why would that 33% who have stopped paying their debts under the new system start paying up again? "Come on Edna, I know what your Darren makes from his "car wash" and I know you can pay it." "Yeah, well, while you were gone it turned out the computer doesn't know that and the computer says no." "But I thought we were friends." "!!!! off Sharon, you're not my friend, you're a debt collector."

The cat's already out of the bag, the horse has bolted.

digannio

According to Woodford, JohnRo's going to be quids in. He says the company started the day under-valued and is even more so now after an "over-reaction" by the markets. He says it'll get back on track.

I'm no expert, but when you look at the percentages of the holdings he has for his various funds in one company like this, is he guilty of a lack of judicial diversification? He also got bitten on the !!!! by the AstraZeneca slump as he had nearly 9% of his Equity Income Fund in that one company. Too concentrated in certain areas?

Then again, he probably doesn't drive around in an owld Ford Focus like me:o

jennyjj

coastline wrote: »

Charts can be very handy...

http://www.iii.co.uk/sites/default/files/provident.png

Holy !!!!,

charoniv

You pay him to do a lot better than a tracker and he can't do that by diversifying (ending up as tracker like). The problem is that he has such a reputation that not getting stellar returns would be considered a failure.

Maybe it shows that managed funds beating trackers is mainly a matter of luck - or maybe that going on his own has left him out of control or without the necessary team.

I'm guessing there will be some sort of bounce.