Back into this for similar reasons as my recent BATS purchase. It’s currently yielding 7.4% so a nice steady earner. It’s also even smaller than BATS – Philip Morris is 8x the size so arguably even more ripe for a takeover.
Buy price: £18.83
Dividend yield: 7.4%
Portfolio %: 2.7%
Total Portfolio holdings: 2.7%
IG Group is a Business that facilitates the buying and selling of shares and other financial instruments by private investors (PIs). PIs cannot buy and sell directly, they have to go through a Regulated Broker (such as IGG).
It started off as a spread bet firm. Here investors don’t buy the underlying shares, but just bet whether they are going to go up or down.
The two main advantages of spread betting are firstly that it is classed as gambling, so there is no tax for PIs to pay on profits (you can’t reclaim taxes on losses either, obviously – and it’s estimated that 80% of private investors lose money. I’ve got better over the years, but early doors I can attest to that).
The second advantage is that you don’t have to pay all the money. If you buy (say) £10,000 of shares you have to spend £10,000 plus costs. If you are betting on £10,000 of shares you only have to put down (say) 20%, so £2,000. That way you can bet on more share value than you have in cash. This is known as gearing (or leverage in the US). If the price movement goes against you, you have to add to this cash to protect IG (or its equivalent).
A similar concept is when buying a house. If you want to buy a £500,000 house you have to spend £500,000. If you don’t have that you might put up £100,000 and borrow £400,000. If the house price rose 10% to £550,000, your £100,000 is worth £150,000 (on paper at least) – a 50% gain. On the other hand, if it dropped by 10% it is only worth £450,000 – your £100,000 is only worth half what it was. This could even be wiped out – in the 1980’s housing crash a lot of people bought overpriced (at the time) properties with high value mortgages, only to find the house worth less than the mortgage (negative equity) when house prices plummeted.
IGG won’t let that happen. They make you top up their investment to cover themselves. If that is not possible they ‘close your position’, realising any losses before you run out of buffer cash (you are still liable for any losses if they don’t close in time). This is why PIs lose money as they overextend themselves and don’t have the resources when they need to top up, and close out at a loss instead. Rinse and repeat.
Anyway, IGG takes a cut whether PIs bet on an increase or a decrease, so make a profit whatever the price is doing *. It’s a numbers game. The margins are small, so lots of investors trading more = more profit. Market volatility is good, and we certainly have that at the moment. I’ve bought some for the portfolio.
* If you have watched “Trading Places” this is exactly how Duke and Duke (IG Group equivalent) make all their money, then lose it when a massive bet (based on false insider information) goes horribly wrong. If they had stuck to taking a commission they would have been fine. Towards the beginning of the film Eddie Murphy’s character gets a schooling on how Brokers make their money.
Buy price: £6.64
Dividend Yield: 7%
For the record I have added some cash to top up my ISA before the Allowance disappears at the end of the Tax year. This has funded some of the recent purchases.
One of the sinful Companies (Tobacco, gambling, Oil etc.). I’ve held Imperial Brands in the past.
BATS latest financial report was slightly gloomy and this has hit the shares a bit, however although tobacco is on the decline, there are plenty of smokers out there and all manufacturers are developing vaping products. The jury is out on whether or not these are harmful.
In the meantime, the cigarettes are being churned out in a highly efficient manner. With a sustainable Dividend yield of 8% this will be a nice steady earner.
Philip Morris, the largest cigarette manufacturer in the world is just under twice as big. A takeover / merger is not entirely out of the question, too.
Buy price: £30.08
Current yield: 8%
Owner of the Primark Brand. It’s had a good run and the dividend yield is not particularly appealing, so have sold for now. Bricks and mortar shops are still finding it tough, although Primark does seem to defy the odds with its rock-bottom prices. Held for approximately 1 year for a 17.5% gain.
Sell price: £19.45
Average Buy price: £16.80
Dividend income: Circa 2.5% total
Gain: 17.5% total (2.5% + 15%), 17.5%pa
Back in again after a 20% drop from when I last sold…
In a downturn, it’s the expensive meals out that goes, not so much the takeaway end and perhaps even a boost as people downgrade their treat spend.
I’ve held HSBC since 2019. Since then, obviously, we’ve had the COVID crisis and at one point the shareholding had halved in price. It has now made that back, and then some. Whilst its latest report was very positive, there are headwinds with Russia and China. China’s intentions towards Taiwan may also be a concern.
At the moment, China is treading a fine line between trading with Europe, but also refusing to condemn Russia. If Putin decides to accelerate action, we might see China’s true colours forced out into the open.
After its recent run, the shares are looking a bit toppy with a ‘nothing special’ dividend yield. Sold for a 12% return over 3 years. Not planning on doing anything with the cash as yet but will keep an eye on markets, especially with the ongoing downbeat housing results (My Persimmon holdings took a 10% beating today after downbeat results).
Portfolio allocation report not yet updated so still shows HSBC.
Sell price: £6.37
Average Buy price: £6.18
Dividend income: Circa 10% total
Gain: 12% total (2% + 10%), 4%pa
888 has been hit hard by its high debt and a Compliance issue.
With a Market value of 4.5x earnings and solid margins it is one to tuck away.
LSL is one of the largest providers of services to mortgage intermediaries and mortgage and protection advice to estate agency customers, completing around GBP41bn of mortgages in 2021. It represents around 10% of the total purchase and re-mortgage market with around 2,900 financial advisers. PRIMIS was named Best Network by Money Marketing in their 2021 awards and Best Network, 300+ appointed representatives at the 2022 Mortgage Strategy Awards.
LSL is one of the UK’s largest providers of surveying and valuation services, supplying seven out of the ten largest lenders in the UK, employing around 500 operational surveyors, and performing over 500,000 valuations and surveys per annum for key lender clients. It was named Best Surveying Firm at the 2022 Mortgage Finance Gazette Awards and Best Surveyor at the 2022 Equity Release Awards with Mortgage Solutions.
LSL also operates a network of 225 owned and 128 franchised estate agency branches.
“As reported in our Interim Results, LSL traded strongly in the first half of the year, with our Surveying & Valuation and Financial Services businesses achieving record revenues. The Estate Agency Division retained the substantial market share gains made in 2021, in doing so building a strong sales pipeline as significant profits were delayed by the continuing slow speed of exchanges across the market. This meant that the Group entered the second half of 2022 well placed to deliver a strong H2 profit performance, ahead of the equivalent period in 2021.
“Since that time, market conditions have been more challenging than previously expected, with the mortgage and housing markets being disrupted by political uncertainty and sharply increasing interest rates. Across the market, this has given rise to a reduction in mortgage activity and new house sales, and an increase in fall-throughs of previously agreed sales.
“This challenging background means that there is a wider range of potential outcomes for the full year than previously expected.
“I am pleased to confirm that LSL’s performance has remained resilient, and we are confident that Underlying Group Operating Profit in the second half of 2022 will at least be broadly in line with the second half of 2021, with the possibility of a stronger performance depending on the volume of valuation instructions received from lenders. This includes additional costs incurred due to discretionary payments to over 2,000 colleagues to help alleviate the impact of significant increases in living costs. Around GBP0.6m of these costs will be reflected in 2022, with a further GBP0.8m to be paid in 2023 to cover the winter months.”
Trading update 25 November 2022
I have owned LSL before. It provides ancillary services to buying a house. Whilst the Housing Market is in a downturn, I do feel that falls are overdone and LSL is in a good position to capitalise as the Market Recovers, without tying up capital in actually building the properties. As long as properties are being bought and sold to some extent there will be a demand for its services – and it is one of the bigger players. With a yield of 4% or so, it’s one to tuck away.
Founded in 1995 and listed on AIM in 2012 (BLV.L), Belvoir operates a nationwide property franchise Group with 463 offices across seven brands specialising in residential lettings, property management, residential sales and property-related financial services. With its Central Office in Grantham, Lincolnshire, the Group manages 72,900 properties and reported record revenues of GBP29.6m in 2021 marking Belvoir’s 25(th) year of unbroken profit growth.
Like LSL, I have owned this before. It is strongly into its franchising model, which spreads risks and also incentivises local owners.
Latest pre-close update was very positive:
Group revenue increased to a record level, up 13% to GBP33.5m* (2021: GBP29.6m). The housing sector performed better in 2022 than many commentators had forecast at the start of the year, with UK residential sales transactions down 15% on 2021, but around 6% ahead of pre-pandemic levels, and rents on new tenancies increasing by 10.8% during the year. Consequently, Belvoir’s financial performance for the year, including profit before tax, is anticipated to be slightly ahead of managements’ expectations
A sustainable 5% dividend, PE of 8 and net cash works for me.
Crest Nicholson builds homes. My existing holding was bought June 2018, since when it has lost 40% of its value – D’Oh, although this has been mitigated by dividends, reducing that to a 25% loss. Still painful, but shows the power of Dividends over time. As per my doubling up methodology I have finally got round to averaging down. This makes the overall loss figures now 19% / 13%. On a 7% yield, that will do.
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