Calculating value

MaxiRobriguez

There's not a lot of 'value' in a 23 ratio either, but I'm not planning to sell when it potentially reaches that as my expectations are for more growth in the years further ahead.

coastline

Apodemus said:

While I would be relaxed about basing investment decisions on anticipated future earnings, and hence future profitability and potential dividend, it's surely a bit of a leap to calculate a future share price and hence a future p/e?  Indeed, if anything, does the AZN p/e forecasts in your link not suggest a return to a more normal sector p/e ratio and hence less of an upside to share price - just as might be predicted from the current high p/e?

In the case of AZN I would agree a return to normal but there's still a bit of growth forecast in there. In the case of GSK growth is forecast slightly negative but as you say a reasonable PE. GSK has fallen pretty hard this year much more than AZN and is also on my watchlist. The last few posts from Maxi have provided a good summary of the complications of buying single stocks. General market direction appears to account for a fair bit of movement and the shares growth story the rest. When the growth story slows or ends you normally see a downturn on the chart of the stock. I tend to look at charts and the growth story and buy when they are off the boil. It's been my most rewarding method including buy and hold with funds. Not for everyone I understand that. You can study accounts and think you've bought winners then other beaten down stocks can outperform your chosen stocks. Look no further than MKS of late but there again forecasts are improving and single figure PE. Could say cheap ?
GlaxoSmithKline (GSK) | The Share Centre
Marks & Spencer (MKS) | The Share Centre
There's been a bit of a turnaround of late with value gaining ground.
EqZcCVnXMAI_1rM (900×676) (twimg.com)
The market itself well who knows but not exactly the value we talk about ?
EqZY0buXAAEeeCe (900×398) (twimg.com)
I also look at this as a guide especially the sectors. I often see on other forums posters wondering why their stocks are going in reverse when they can be linked to general sectors even in the US.
Market Summary | StockCharts.com

Bobziz

Many thanks for all of your responses to this question. Some really helpful thoughts and links to some good reading/watching. I've learnt lots about things that I thought I knew a bit about, but should have known more.

On reflection, I feel that I neither have the time nor the inclination at the moment to do the leg work that appears to be necessary. Even once that is done, there still seems to be a lot about luck, opinion etc. Consequently, for the time being I think I'll stick with my small portfolio consisting of a global tracker, a couple of BG funds and the INRG ETF. On the later, it instinctively feels over priced at the moment, but I base that view purely on the extent and speed to which it has risen recently. I could do the leg work and look at a number of the companies held, but I'm not sure that would change my long term view, which is that this fund or similar funds need to grow significantly over the next 10 years, because if they don't, then many other sectors, with the possible exception of defence, will suffer. 

This thread seems to have moved on to the subject of value investing, and on this, not that I'll be buying, but I wonder what members think of Severn Trent Water and WH Smiths ? I know a little about the former sector, and SvTW seem to be a well run company with a great CEO. On the latter, I've never been a fan of WH Smiths myself and I'm surprised it's still in existence, but it's been hammered by COVID and if it survives, may represent good value going forward ?

Thanks again all.

Sue58

Bcoastline said:

Apodemus said:

While I would be relaxed about basing investment decisions on anticipated future earnings, and hence future profitability and potential dividend, it's surely a bit of a leap to calculate a future share price and hence a future p/e?  Indeed, if anything, does the AZN p/e forecasts in your link not suggest a return to a more normal sector p/e ratio and hence less of an upside to share price - just as might be predicted from the current high p/e?

In the case of AZN I would agree a return to normal but there's still a bit of growth forecast in there. In the case of GSK growth is forecast slightly negative but as you say a reasonable PE. GSK has fallen pretty hard this year much more than AZN and is also on my watchlist. The last few posts from Maxi have provided a good summary of the complications of buying single stocks. General market direction appears to account for a fair bit of movement and the shares growth story the rest. When the growth story slows or ends you normally see a downturn on the chart of the stock. I tend to look at charts and the growth story and buy when they are off the boil. It's been my most rewarding method including buy and hold with funds. Not for everyone I understand that. You can study accounts and think you've bought winners then other beaten down stocks can outperform your chosen stocks. Look no further than MKS of late but there again forecasts are improving and single figure PE. Could say cheap ?
GlaxoSmithKline (GSK) | The Share Centre
Marks & Spencer (MKS) | The Share Centre
There's been a bit of a turnaround of late with value gaining ground.
EqZcCVnXMAI_1rM (900×676) (twimg.com)
The market itself well who knows but not exactly the value we talk about ?
EqZY0buXAAEeeCe (900×398) (twimg.com)
I also look at this as a guide especially the sectors. I often see on other forums posters wondering why their stocks are going in reverse when they can be linked to general sectors even in the US.
Market Summary | StockCharts.com

I actually bought both GSK and AZN recently at the share prices of 1440 and 7530 respectively. I personally believe there is still value to be had at these ‘buy in’ prices as well as the dividends for reinvestment. GSK in particular is priced fairly low in my opinion. I already hold ULVR as well (bought in at 4320).

MPN

Sue58 said:

Bcoastline said:

Apodemus said:

While I would be relaxed about basing investment decisions on anticipated future earnings, and hence future profitability and potential dividend, it's surely a bit of a leap to calculate a future share price and hence a future p/e?  Indeed, if anything, does the AZN p/e forecasts in your link not suggest a return to a more normal sector p/e ratio and hence less of an upside to share price - just as might be predicted from the current high p/e?

In the case of AZN I would agree a return to normal but there's still a bit of growth forecast in there. In the case of GSK growth is forecast slightly negative but as you say a reasonable PE. GSK has fallen pretty hard this year much more than AZN and is also on my watchlist. The last few posts from Maxi have provided a good summary of the complications of buying single stocks. General market direction appears to account for a fair bit of movement and the shares growth story the rest. When the growth story slows or ends you normally see a downturn on the chart of the stock. I tend to look at charts and the growth story and buy when they are off the boil. It's been my most rewarding method including buy and hold with funds. Not for everyone I understand that. You can study accounts and think you've bought winners then other beaten down stocks can outperform your chosen stocks. Look no further than MKS of late but there again forecasts are improving and single figure PE. Could say cheap ?
GlaxoSmithKline (GSK) | The Share Centre
Marks & Spencer (MKS) | The Share Centre
There's been a bit of a turnaround of late with value gaining ground.
EqZcCVnXMAI_1rM (900×676) (twimg.com)
The market itself well who knows but not exactly the value we talk about ?
EqZY0buXAAEeeCe (900×398) (twimg.com)
I also look at this as a guide especially the sectors. I often see on other forums posters wondering why their stocks are going in reverse when they can be linked to general sectors even in the US.
Market Summary | StockCharts.com

I actually bought both GSK and AZN recently at the share prices of 1440 and 7530 respectively. I personally believe there is still value to be had at these ‘buy in’ prices as well as the dividends for reinvestment. GSK in particular is priced fairly low in my opinion. I already hold ULVR as well.

Like coastline ULVR, AZN and GSK are on my watchlist, however I’m looking to buy at a lower entry price than you, if of course that ever occurs - we shall see.

MaxiRobriguez

Bobziz said:

Many thanks for all of your responses to this question. Some really helpful thoughts and links to some good reading/watching. I've learnt lots about things that I thought I knew a bit about, but should have known more.

On reflection, I feel that I neither have the time nor the inclination at the moment to do the leg work that appears to be necessary. Even once that is done, there still seems to be a lot about luck, opinion etc. Consequently, for the time being I think I'll stick with my small portfolio consisting of a global tracker, a couple of BG funds and the INRG ETF. On the later, it instinctively feels over priced at the moment, but I base that view purely on the extent and speed to which it has risen recently. I could do the leg work and look at a number of the companies held, but I'm not sure that would change my long term view, which is that this fund or similar funds need to grow significantly over the next 10 years, because if they don't, then many other sectors, with the possible exception of defence, will suffer. 

This thread seems to have moved on to the subject of value investing, and on this, not that I'll be buying, but I wonder what members think of Severn Trent Water and WH Smiths ? I know a little about the former sector, and SvTW seem to be a well run company with a great CEO. On the latter, I've never been a fan of WH Smiths myself and I'm surprised it's still in existence, but it's been hammered by COVID and if it survives, may represent good value going forward ?

Thanks again all.

I think you've made a very sensible decision. There should be absolutely no embarrassment or regret at what you feel is a lack of understanding or ability to put in the leg work. Passive index investing is the right answer for the majority of people.

In regards to STW and WH Smiths: I wouldn't buy either. STW is a defensive stock, limited growth, reliant on dividend for returns. The dividend yield is decent but not wonderful and prospects for growth are very limited. There are many companies which have better and likely equally safe dividend yields, or alternatively there are many companies with a lower dividend yield currently but much better growth prospects, with probability of increasing payouts faster overtime.

WH Smiths I expect to go bankrupt in the next few years. Off the top of my head I can't think of any company I'd want to invest less in than WHS. 

MaxiRobriguez

Sue58 said:

Bcoastline said:

Apodemus said:

While I would be relaxed about basing investment decisions on anticipated future earnings, and hence future profitability and potential dividend, it's surely a bit of a leap to calculate a future share price and hence a future p/e?  Indeed, if anything, does the AZN p/e forecasts in your link not suggest a return to a more normal sector p/e ratio and hence less of an upside to share price - just as might be predicted from the current high p/e?

In the case of AZN I would agree a return to normal but there's still a bit of growth forecast in there. In the case of GSK growth is forecast slightly negative but as you say a reasonable PE. GSK has fallen pretty hard this year much more than AZN and is also on my watchlist. The last few posts from Maxi have provided a good summary of the complications of buying single stocks. General market direction appears to account for a fair bit of movement and the shares growth story the rest. When the growth story slows or ends you normally see a downturn on the chart of the stock. I tend to look at charts and the growth story and buy when they are off the boil. It's been my most rewarding method including buy and hold with funds. Not for everyone I understand that. You can study accounts and think you've bought winners then other beaten down stocks can outperform your chosen stocks. Look no further than MKS of late but there again forecasts are improving and single figure PE. Could say cheap ?
GlaxoSmithKline (GSK) | The Share Centre
Marks & Spencer (MKS) | The Share Centre
There's been a bit of a turnaround of late with value gaining ground.
EqZcCVnXMAI_1rM (900×676) (twimg.com)
The market itself well who knows but not exactly the value we talk about ?
EqZY0buXAAEeeCe (900×398) (twimg.com)
I also look at this as a guide especially the sectors. I often see on other forums posters wondering why their stocks are going in reverse when they can be linked to general sectors even in the US.
Market Summary | StockCharts.com

I actually bought both GSK and AZN recently at the share prices of 1440 and 7530 respectively. I personally believe there is still value to be had at these ‘buy in’ prices as well as the dividends for reinvestment. GSK in particular is priced fairly low in my opinion. I already hold ULVR as well (bought in at 4320).

Sounds like we made similar moves. I took bought GSK at 1440 (on average anyway, bought three times between 1500 and 1380) and I also bought ULVR, albeit slighlty cheaper at 4100.

Sue58

MPN said:

Sue58 said:

Bcoastline said:

Apodemus said:

While I would be relaxed about basing investment decisions on anticipated future earnings, and hence future profitability and potential dividend, it's surely a bit of a leap to calculate a future share price and hence a future p/e?  Indeed, if anything, does the AZN p/e forecasts in your link not suggest a return to a more normal sector p/e ratio and hence less of an upside to share price - just as might be predicted from the current high p/e?

In the case of AZN I would agree a return to normal but there's still a bit of growth forecast in there. In the case of GSK growth is forecast slightly negative but as you say a reasonable PE. GSK has fallen pretty hard this year much more than AZN and is also on my watchlist. The last few posts from Maxi have provided a good summary of the complications of buying single stocks. General market direction appears to account for a fair bit of movement and the shares growth story the rest. When the growth story slows or ends you normally see a downturn on the chart of the stock. I tend to look at charts and the growth story and buy when they are off the boil. It's been my most rewarding method including buy and hold with funds. Not for everyone I understand that. You can study accounts and think you've bought winners then other beaten down stocks can outperform your chosen stocks. Look no further than MKS of late but there again forecasts are improving and single figure PE. Could say cheap ?
GlaxoSmithKline (GSK) | The Share Centre
Marks & Spencer (MKS) | The Share Centre
There's been a bit of a turnaround of late with value gaining ground.
EqZcCVnXMAI_1rM (900×676) (twimg.com)
The market itself well who knows but not exactly the value we talk about ?
EqZY0buXAAEeeCe (900×398) (twimg.com)
I also look at this as a guide especially the sectors. I often see on other forums posters wondering why their stocks are going in reverse when they can be linked to general sectors even in the US.
Market Summary | StockCharts.com

I actually bought both GSK and AZN recently at the share prices of 1440 and 7530 respectively. I personally believe there is still value to be had at these ‘buy in’ prices as well as the dividends for reinvestment. GSK in particular is priced fairly low in my opinion. I already hold ULVR as well.

Like coastline ULVR, AZN and GSK are on my watchlist, however I’m looking to buy at a lower entry price than you, if of course that ever occurs - we shall see.

It’s not easy to buy at the bottom of the market but I wish you the best of luck. I bought in at what I thought was a reasonable price. Maybe not but who knows?

NedS

I'm late to this thread so haven't fully read through, but I did find this video insightful:

https://www.youtube.com/watch?v=bO_JqQzn1lU

Thrugelmir

coastline said:

Bobziz said:

Another_Saver said:

Bobziz said:

A fundamental question for those in the know, how do you go about calculating the value of an individual stock or fund etc ? 

For example, I've read posters recently stating that renewables are currently trading at a premium/high, and are therefore not an attractive option in the short term. Obviously if you look at the share prices of most of the companies in the sector, you can see that prices are at all time highs and have got there in a short space of time. However, how do you go about determining that the market price is high or low relative to what would be considered fair value (par?) ? 

I appreciate that value is not the only thing that drives share/fund prices, but I'd like to understand how members go about making their stock/fund picks when looking to buy low sell high. Any thoughts would be much appreciated.

I think what you're asking is about premiums/discounts in relation to investment trusts that hold renewable energy assets (e.g. Greencoat UK Wind plc etc.). In general, there are any number of ways to calculate the "value" of an asset. With this specific asset class, a "premium" is probably the price relative to the book value of the assets. Greencoat is priced based on what is shareholders think its wind turbines can earn in future (just google discounted cash flow model, or watch a video of Warren Buffett explaining it), which tends to be higher than the book value of the wind turbines. This is true of most companies - if wind turbines "market value" as an investment asset was less than their cost to build or buy one, such a business would not be viable, they would not have been able to raise the capital to buy the wind turbines in the first place.

Thanks. It was Thrugelmir's comment about the sector that provoked my question about valuation, but I'm interested in learning more about valuing stocks and funds more widely.

I own a few units of INRG and there are few reasons why I choose to buy it, but it struck me that I have no idea what a premium or high price looks like for the fund other than knowing it's at an all time high. This feels far from satisfactory.  I'll likely hold it or similar for a good 10 years or more, so it doesn't really matter, but I'm keen to understand what overvalued looks like and why.

As chart patterns go the performance of INRG this year can only be described as parabolic. Google " parabolic chart " to see images. Who knows what happens next .
Forget tech, solar and clean energy is the hot sector in 2020 | Shares Magazine

Vestas Wind Systems is a great company in many respects. I had no regrets in liquidating my entire holding at an average gain of 94% after holding for for just 8 months. Sometimes it's just to good to be true. Likewise Orsted. Which faces some challenges despite it's well founded status.