Carillion Share Discussion Threads

[rcturner2] 02/2/2017 19:24

you guys are having a giraffe if you think the shorters are "hurting" or "demoralised"

they have made 10s of millions so far

[edmundshaw] 02/2/2017 19:02

A yield of 4% is really not going to support a rally in the shares in my view. A yield of 6% might work though medium term... but there is already a cover of 1.8+ for the dividend; whatever, I'd prefer debt to be payed down to buying back shares. That would address worries about rising interest rates. Buying back shares almost never seems to help for some reason.

[spoole5] 02/2/2017 18:21

Halve the divi and buy back the shares. Would still yield 4.3% at this level.

[linton5] 02/2/2017 14:50

Pass the dynamite cecil

[edmundshaw] 02/2/2017 14:08

Also demoralizing for the shorters if they have to add to their position just to keep the price down, and with a 5.75% final dividend payment due in just over 3 months time. Plus stock loan costs...

[linton5] 02/2/2017 14:01

Demoralising one can say about this stock,even if I wasn't in it I want Clln to win this battle against the shorters

[redartbmud] 02/2/2017 11:39

The Company did tell me that 14 of them are US Hedge Funds based in New York.
From memory, they only have to make a declaration if their net position reaches .5% of the issued share capital.
They obviously have reasons for their actions and I assume that they will continue to operate in the same way until their opinion changes.

The contract extension with Openreach was good news, but has done little to help the share price recovery.

[jimbo44] 02/2/2017 11:20

At the moment the news flow is broadly positive with indication that results will be in-line so no reason the dividend should be cut. Results are due to be released 1st March so bring on the 8+%. The company appears sound so stuff the shorters, stuff the debt, stuff it all. Take the yield and run if share price fails to hold. If the dividend is cut then what the hell there is always the bottle (Again) Buying more to seal my doom. Here's to a good drink.

[warranty] 02/2/2017 10:49

Hi Kiwi, there's no doubt high debt is always a concern and it's something I always look at when I invest but as long as it's manageable it shouldn't be a major problem, as I feel is the case with CLLN. I think sometimes as amateur investors we frighten ourselves too much on things that we shouldn't. Interest rates could rise, but then in all probability they won't. Brexit may be more of a worry than necessary and the oil price could well rise as the majors stat to expand again after the recent cost cutting. Essentially CLLN seems to me a solid and well run company so there is much to like, not least the dividend. It's always a gamble when to buy and for now I'm still not one but certainly if you have confidence for the longer term, it could as you say prove to be a bargain. Good luck on your recent purchase anyway and if it is the bottom and you've caught it, then brilliant. I'll just wait a little longer until I see a change in fortunes, I'm not as brave as you 😀.

[essentialinvestor] 02/2/2017 10:17

Not convinced those short necessarily know more, they are making assumptions
on information most will have access to.
This sector has, in general terms, seen a huge destruction in shareholder value
over the last few years, we are all aware of the companies that have disappointed.

There are exceptions, KEIR appears a quality play, and the share price performance reflects
that.

From memory Odey is short Lookers where I made some nice returns recently,
sometimes it pays taking the opposite position.

[jaf1948] 02/2/2017 10:16

staylow1,

I totally agree with you. If you look at the average size of transaction, it is tiny (hundreds of shares) compared with, say, Vodafone which is around the same £2 share price but average transaction is in the thousands.

What they do is legal but unfortunately there is very little the average PI can do about it.

[jaf1948] 02/2/2017 10:10

RCTurner, apologies - it was redartbmud. I have changed the above post.

[staylow1] 02/2/2017 10:10

I think things are a little more complicated (in my mind)Big shorters use algos to efficiently keep the price low, when low. If buying power starts to return the algos can knock out the bids and quickly change sentiment. And it's done efficiently not by huge numbers, just continuity knocking out the bid. Ensuring it stays at an ideal level. Big campaigns I imagine carry such strategies.

[rcturner2] 02/2/2017 10:05

JAF, I have no idea who the shorters are, never said anything about that.

[jaf1948] 02/2/2017 10:04

RCTurner keeps stating that the shorters have better knowledge of what is happening than the rest of us. Redartbmud also states that all the shorts are US companies, and posts a story of how another company was targeted by shorters.

CLLN talk to the shorters to try to understand their reasons, although not all shorters are prepared to talk to the company (the company told me this). The company cannot give them any information which is not already in the public domain so either the company is in collusion with the shorters or the basic premise is untrue. Therefore if the shorters have this extra knowledge a la Barratt above, and given the shorters are all US companies, they would have to employ people here to get that knowledge for them - not only expensive but unlikely.

Shorting can often be self-fulfilling as had been pointed out before. And as others have pointed out, shorting has been going on for a couple of years now, and the company is still running profitably and paying a good dividend. It is therefore much more likely that the shorters have been gambling that CLLN will have a bad time like most of the other companies in this sector have had during that time. They are not superhuman beings with knowledge beyond our comprehension - they are just gamblers.

[kiwihope] 02/2/2017 09:58

red,

Don't worry, I've been investing for nearly 20 years and I still make big mistakes and have lots to learn! The latest mistake (well, a year or so ago) was buying Billiton and Fenner as they were very cheap, but bottling out when all the news about commodities was relentlessly bad. I made the right initial decisions but didn't have the courage to stay the course. Could have more than doubled my money in 12-months!

Regarding your question, the share price is simply the balance between buyers and sellers. Shorters are just sellers. So the reason the price has dropped is because shorters plus other normal sellers outweigh the buyers. So the price can continue to drop even if the % short isn't increasing because 'normal' selling is still outweighing buying.

This is why I think shorters are only part of the problem.

[m4rtinu] 02/2/2017 09:55

RCT - thanks, I think :(

[w1ndjammer] 02/2/2017 09:49

red

with such a large short position buyers are deterred from buying , and then a few
panic and sell. new buyers will wait for the share price to get cheaper before buying
and so the process carries on, plus the volume is small so firing a few sells
off can cause adverse reactions.

as long as the company does not drop the ball it has to correct eventually
plus the divi is nice

WJ.

[kiwihope] 02/2/2017 09:45

Hi warranty,

I agree with your comments. Regarding what is "the issue", as I posted earlier I think it is mainly high debt. Presently about 1/4 of profits are needed to pay the annual interest bill. In the current environment they can cope OK. But what happens if interest rates rise and they don't manage to sustain profits? If the cost of borrowing rises too much then there may not be enough profit to cover the dividend. This won't help the share price.

I don't think any of this will happen quickly, if indeed it does. Management have had no trouble refinancing at low rates for longer terms. But difficulties MAY happen. Carillion are exposed and I think the shorters are betting that a combination of Brexit, low oil price (hitting Middle East business) and slowly rising rates is going to cause trouble.

Now even though Carillion are vulnerable if management are good to their word and do manage to reduce debt over the next 2-3 years, it may turn out OK. Then in hindsight this will look like a great buying opportunity. But if they waste these years and we hit a downturn...

I hold shares but because of this analysis I won't buy any more at the moment. I will have a good look at the final results on 1 March and may reconsider then. This really is on a knife edge as to which way it goes.

[bookbroker] 02/2/2017 09:42

Regulation, red tape and H&S. the biggest bug bears! If China and Mid-East had these same costs then they would all be losing money, it's just that over there the empolyees are expendable!

[m4rtinu] 02/2/2017 09:40

RCT - I expect you are right re: shorters knowledge. However, given the length of time shorting has been a problem (2 years), any issues should be in the annual report(s).

JAF - ta.

[bookbroker] 02/2/2017 09:40

But I imagine those working on less are practically on life support, it's a crazy business for the companies, the biggest beneficiaries are the employees, off course without their skills it is a non-starter, but as a PLC with shareholders the vagaries of the economic cycles and the costs that these companies have to bear makes them uninvestable.!

[red_shed2000] 02/2/2017 09:37

I've been investing in stocks for approx 5 years and would like to think I have a pretty decent handle on the market and it's dynamics but one thing I hope someone can explain to me......

I understand how shorting can depress a share price, the constant selling obviously depresses the price as it happens, HOWEVER, what I can't understand is how a heavily shorted share such as Carillon can have its share price depressed on a longer time scale even though, relatively speaking, there have been no additional shorts. You can only sell the shares once, so there is in effect only one "hit", after that it's a level market again so unless the shorts are consistently adding then although they may be responsible for the original depression in share price, I don't see how they can be responsible for long term depression. Give or take, the short position in Carillion has been 20% for a while so that damage is done, anything else is market dynamics i.e supply/demand.

Can someone tell me where I'm wrong?

Thanks and good luck!