Burford Capital Share Discussion Threads

[galatea99] 10/6/2019 16:27

Investors Chronicle article on Woodford's travails:

"Litigation finance specialist Burford Capital (BUR), which at the time of writing had not disclosed a decrease in the 9.5 per cent of its shares WIM owns, nonetheless saw its shares fall on the news of the Equity Income Fund suspension.

However, there could be good reason for holding on to the Alternative Investment Market darling, whose market value has trebled in value over the past three years. In that time pre-tax profits have risen by around the same proportion, as management has demonstrated a canny ability for backing cases that have generated impressive returns, coming in at 85 per cent in 2018."

[dekle] 10/6/2019 15:29

Wonder if we have any involvement with the Grenfell suit since it's in the US they are probably best placed to provide the support.

[slaccs] 10/6/2019 13:11

WC104 - I have no interest in prolonging this discussion, suffice to say that 'long term' is a relative concept and is age dependent.

[williamcooper104] 10/6/2019 12:29

You can make a little money by trading in and out

Makes little sense in a growth company though where there is no mean reversion

But you can make a ton of money by long term holding the right stick

[slaccs] 10/6/2019 11:48

jonwig - Totally disagree. Volatility is movement in both directions. There is a lot of movement between two exact prices. You are talking about a period of 8 months. I'm not a day trader but I very rarely hold a share for more than 6 months without a little buying and selling. How else am I going to make any money?

[jonwig] 10/6/2019 11:35

slaccs - volatility isn't movement.

A share price which rises in a straight line from 100 to 500 has zero volatility. Look at the BUR chart: from Oct '18 to today the share price has hardly moved, but volatility has been high (zig-zagging about).

If you're a short-term trader, maybe you welcome this sort of volatility. I guess most of us here aren't, and don't.

[slaccs] 10/6/2019 11:28

The only way to make money is through volatility. A company with little movement in the share price is not going to provide the buy/sell opportunities to profit from.

[maiken] 10/6/2019 11:26

trident5,
what makes you say realised gains come largely from 2 cases?
I note final results for 2018 say 26 cases contributed to realised gains,20 in 2017

[djderry] 10/6/2019 11:19

Agreed.Although I'm fully invested I wouldn't be surprised by volatility , particularly with the background fund manager's travails.But that's all just noise.Over time,its earnings,cold hard cash that will drive the results.I think the other catalyst will be the volatility in earnings,this company does not fit into predictable annual results.(Although,with the law of large numbers and 'other strategies' it should become less so.)The results will vary from year to year and give those who understand the business a clear advantage.Right,I'm leaving the interweb for now!

[jonwig] 10/6/2019 10:48

djd - of course IFRS (13 I think) demands revaluation of assets, they can't just sit on the books at cost. They do have latitude to interpret and, as you say, are very cautious.

Another thing: they write off costs associated with the cases they are funding. They could, if they wished, capitalise them onto the balance sheet. Now that would be a red flag!

[djderry] 10/6/2019 10:36

But the process is the same.If you go back to the first or second 'vintage' or year ,you can go through the process and see,that year by year,as cases progress and come to fruition,the 'write up/ unrealised gain is always under reported.Time and time again they have proved their mettle.Are you suggesting that when objective tangible decisions are taken in cases that the co.should blithely ignore them? Or,if a tranche of the investment is sold for a much higher value that this should be ignored? I hope not.I think it is right to be sceptical until we have evidence.We have (almost) ten years evidence and the co.has come through with flying colours.A bull? Yes.Bedazzled? No.

[trident5] 10/6/2019 10:16

DJD - there are a lot of unrealised gains in their accounts. And the realised gains from the last 2 years appear to largely relate to sales in the secondary market of just two cases.

[djderry] 10/6/2019 09:53

I am disappointed with the FT,'beddazled bulls'?The writer talk about how the accounts depend on ' writing up' ,ie,unrealised gains.We've been through this time and time again,there is no write up without concrete and objective courtroom /arbitral decisions and they are almost always erring on the conservative side.This isn't just words,look at their record,almost all 'write ups' made in final year or two,and always less than the final outcome.Go back over the ten years of cases.As has been stated,they could run the business without recourse to borrowing or,for that matter,the SWF.It's just that they would be unable to pursue many of the cases that come through their extensive due diligence process.

[minerve 2] 10/6/2019 09:44

Good article by Lex.

Sort of confirms what I have been saying.

You need consistent and recurring injections of capital to reach critical mass which generally tend to further dilute return.

In order to attract further capital, when cash flow is poor, directors of companies are under pressure to inflate opportunity. Whether that be explicit or implicit.

I am not saying that is what is happening here, but cashflows are everything. Profits are only an opinion.

[jonwig] 10/6/2019 09:16

winsome - The ordinary FT subscription is expensive enough, but that was 'premium' which I don't subscribe to. I'm a bit surprised it still exists, as very few articles are actually marked up.

[truthteller3] 10/6/2019 08:20

You don't like it when the FT dishes it out to you, do you, jonwig? We all notice that if that had been a similar piece about WPCT you would have immediately copied and pasted it. That's what you do. Very little else!

But you were not honest enough to do it in this case, were you? Somebody else had to do it.


You are sooo lacking in integrity.

[lomax99] 10/6/2019 08:11

There’s always the caveat, happy to back Bogart and his team.

All we need now is the SWF to make a direct investment by buying W's holding.

[jonwig] 10/6/2019 08:05

ali - it's trying to elide two stories, the main one being that BUR is a seemingly a great business, despite Woodford investing in it (ages ago, before he went doolally).

We've read this bit before, "... bedazzled bulls are ignoring a simple rule: a business with rising profits but operating cash outflows may be heading for trouble."

- which misses the point that the cash generated is recycled by choice into new investments. Comparing it to say Carillion where profits weren't real, is inappropriate. In fact, the concept of free cash flow isn't suited to financial businesses.

The last paragraph seems to warn it against Woodford-style hubris which is fair enough.

But the article is a mish-mash, and that's a 'premium level' piece!

[ali47fish] 10/6/2019 07:53

lomax-i don't know what to make of the ft' lex article- what conclusion to draw!

[lomax99] 10/6/2019 07:33

From today's FT's Lex:Neil Woodford's portfolio companies have been accident prone. If that is the rule, illustrated by the shambolic likes of Kier, Provident and Purplebricks, what is the exception? Could Burford be an example of the struggling UK fund manager getting it right? He is a long-term backer of the UK-listed litigation funding business. An 11 per cent drop in Burford shares last week after Mr Woodford gated his fund followed a 10-fold rise over five years. Investing in courtroom dramas - or settlements that forestall them - is an unusual way to make a living. But it is a booming business in the UK and US. A company is more likely to sue over a commercial dispute when a litigation funder bears some of the risk for a share of any rewards. These can be tidy in our low-yield world.Litigation funders are nearly as chic and savvy as the lawyers they finance. Perhaps that is why bedazzled bulls are ignoring a simple rule: a business with rising profits but operating cash outflows may be heading for trouble.Burford's accounts are as eye-popping as its share price growth. Operating income rose to $345m last year, according to S&P Global, ten times higher than in 2013. Operating cash flow dropped from $42m to a negative $233m. The group is borrowing to fill the gap. Net debts have tripled in two years to $331m. Fans will riposte that this is chicken feed compared with investments in legal cases valued by Burford at $1.9bn. However, that figure depends in part on the company writing up the value of legal tussles that have not finished. These non-cash gains accounted for 54 per cent of revenues in 2018. Most of the rest came from concluded cases.In fairness, Burford's accounting policies are conservative by the racy standards of litigation funding. It has a good investment record. According to Jefferies analysts, it has been on the winning side in two-thirds of cases and four-fifths by value. But as Mr Woodford's downfall has shown, a rush of hot money can skew decision-making and erode returns.

[syoun11] 09/6/2019 19:02

No but if invesco and Woodford sites are correct then £200 million in sales since they last reported to burford must effect share price.

[rar100] 09/6/2019 17:45

Hi all,

Has anyone seen anything specific in recent press reports re: Woodford affecting BUR. I haven't seen anything specific but haven't got access to everything (or the time to read it all!).

Hopefully the imminent interims will be better than last finals in terms of profit and hopefully also mitigate ferocious selling, I think over one year BUR is down 6% compared to FTSE.

[brexitplus] 08/6/2019 20:04

I’m with HL. Excellent service.