Lancashire Share Discussion Threads

[effortless cool] 28/11/2014 13:06

jonwig,

Hello again. Yes, Brit has gone and come back again since our paths last crossed.

With regard to LRE:
- Performance has been miles better than everyone else; too much better?
- There does not seem to be any meaningful infrastructure behind the underwriting.
- Brindle was very dominant, and now he is gone in rather odd circumstances.
- What are the implications of Brindle potentially starting up again?

There has always seemed to me to be something a bit "off" about this company. Maybe I have just got that wrong, but this seems like a good time to put some effort into finding out.

I have opened up a small short today, just to incentivise myself to put the work in.

[jonwig] 28/11/2014 12:08

EC - I'm wondering what possible handle there could be here to make it a short.

Debt? No.
High premium to net assets? It looks about in line with the sector.
Improbably low CR? Independent Insurance again - that was a fraud, of course!
As you say, keep us posted!

By the way, it's years since I've seen any posts from you: the "old" BRIT Insurance, I think.

[hooley] 28/11/2014 11:09

Ursus 449: Life's too short to wait for a catastrophe. Buy on a cyclical recovery, when you've seen the share price has fallen over 40% from its peak. Coy has paid back in special divs when business available isn't worth having. Odey have a short of over 3%? which has yet to be closed. It is probable that the risk exposure is carefully managed.

[effortless cool] 28/11/2014 10:32

I'll keep you posted ....

[speedsgh] 28/11/2014 10:31

Woodcutter - Thanks for your extensive reply in post 446. Great detail which is much appreciated.

Much like yourself, fundamentals always come first for me when assessing any investment. I merely tend to try + use some simple TA to assist in timing entry/exit points. However it would appear that my TA knowledge is at this stage sadly lacking in comparison to your own!

LRE very much a long term hold for me. Re resource/miners, agree that the cycle will turn at some point although it feels like the tide has been against them for a long time now. Have to admit that I much prefer the comfort of reasonable income while waiting for sentiment in a sector to turn so resource stocks are generally less attractive to me.

Thanks again.

[ursus] 28/11/2014 10:16

Coolie - some worries I've had here are -- 1) why did Brindle leave? 2) I don't understand Kinesis.

[effortless cool] 28/11/2014 10:09

ursus,

I think you are wise to be careful of LRE. It has certainly rewarded long-term holders exceptionally well to date, but I have always been suspicious of it. I have just started having a look to see if there is a short here (but I'm far from certain yet).

As and aside, those of you that think that rising interest rates are going to have any impact on capacity are quite simply wrong. The only thing that will impact capacity materially is a major catastrophe.

[ursus] 28/11/2014 09:54

Hooley - I agree with the general drift of what you say, but in the long wait for the interest rate cycle to turn, you risk capital loss through cats/attritional losses. I still remember what happened to my insurance investments when those psychopaths flew into the wtc, for instance. Similarly katrina, christchurch, jap tsunami (yes, I know, shd not have been dabbling in nuclear u/w). Traditionally, the best time to buy is after those sorts of casualties. That said I'm still keeping what I've got in LRE, but will wait to buy more....

[jgoold] 28/11/2014 07:40

I bought more yesterday to make this my largest individual holding. I see this as a company with top class management, a very clear strategy and a strong regard for shareholder returns. The Cathedral purchase was a very good fit and will prove to be an astute move.

[hooley] 27/11/2014 22:15

With 30 years as a professional research analyst, now long-retired, this counter has scope to at least double when the cycle turns. Tightening capacity, signalled by rising interest rates, will ring the bell. Patience will bring its reward.

[woodcutter] 27/11/2014 19:39

speedsgh your post 414

I don't use charts to predict forward price action so where the share price will move to is purely speculation. However i try to invest in sound businesses with good fundamentals that i believe over the longer term with reward me with a decent return.

I use the TA to determine trend position and reversals for buy and sell points. Prior to the xd date the down trend had broken but more laterly resumed. My definition of the trend is based on where the share price resides relative to the simple 20MA and the uppper lower bollinger bands.

The chart below will help


free stock charts from uk.advfn.com


From january to june price tagged the bottom bollinger band and continued to bounce down off the 20 day SMA. In june and july price broke through the 20 day SMA and held above it for a while, a clear signal that there may be a move to an uptrend.From august to the beginning of november price tagged the upper bollinger band and bounced up off the 20day SMA confirming the uptrend. And as you can see it has since reverted to a downtrend as price broke the bollinger band 20 day SMA and a number of indicators confirmed the break.

I use 9 indicators/oscillators and usually need to see six aligned before i trade.
Elder ray bull and bear power
slow stochastic
relative strength index
MACD
average directional index
rate of change
commoditiy channel index
accumulation distribution
bollinger band width

Most important for me is the bollinger set up, the others are confirmation signals.

btw I won't buy anything without at first considering the fundamentals, the charts provide the timing. I've been buying regularly on the dips for some time and conside this a long term investment based on fundamentals and yield and i'll continue to add to my holding. At some point the tide will turn, this imv is the time to be buying this type of business when no one is interested in it, the same will come for resource stocks and miners at some point and i'm watching both of those sectors closely too. I'll happily stake build and wait a few years for the benefits to come through.

Buying the momentum trend has been fine over the last few years but we're in a different part of the business cycle now so i'm looking at unloved sectors and then patiently waiting to build stakes.

I do occasionally trade peaks and troughs and have done some of that recently on the back of my TA knowledge but it's not my normal investing strategy.

The next few months will be interesting as the share price has now moved closer to the book value and we've had a 75p divi. When the correction comes, and it will, there'll be a clammer for these safer stocks. aimho

Woody

[minerve] 27/11/2014 12:40

Absolutely spot on Salpara111. Interest rates increasing will take capital out of Insurance Linked Securities and add better return to the company's investments. Hopefully a double positive-edged sword.

[salpara111] 27/11/2014 09:38

Rate rises will be good for LRE as they will take cheap capital out of the market but I am not expecting it to happen any time soon.

[jonwig] 27/11/2014 09:11

keith, post #438 ... rate rises aren't correlated with equity levels until/unless they happen too far, too fast, as usually they are associated with increased economic activity and (maybe) with a bit of inflation in the system, which would also be useful!

Also, higher interest rates help insurers who can get higher investment returns when maturing bonds are re-invested.

Of course, general insurers aren't well-correlated with wider equity valuations, either!

[jakedog2] 27/11/2014 09:00

Will add more when 525p is hit.... the equivlant to the 600p btm from August ....factoring in todays divi

[hooley] 27/11/2014 07:32

Shorts will one day be closed, when the share price has fallen enough. On a longer view, the trick is to wait for the turn. I've taken a nice divi, yielding 12% and without assuming more to come before the next announcement. In the past 18 months the share price has fallen 40%, enough already! I can wait when the alternative is under 2% pa with the BS.

[keith95] 26/11/2014 21:09

... maybe Woodford is lending Odey stock to short so that it can be bought more cheaply ....

[wantage] 26/11/2014 18:23

Why would Odey remain short of 3.26% of this stock? According to Short Tracker this is one of their largest open shorts.

[keith95] 26/11/2014 17:58

Hooley - UK usually moves first with higher rates ... with so much debt in terms of student loans and housing ... tin hat time if/when this does happen?

[ursus] 26/11/2014 16:39

So shd open at about 545-550p tomorrow when marked xd (unless san francisco earthquake overnight).

[hooley] 26/11/2014 13:48

To the extent that the business is shrunk, so will special dividends be paid. Coy generates good cash flow so this could go on until the turn come, whenever that happens. Despite the tough trading conditions and the payouts, the b/s hasn't shrunk and the return on equity has been maintained at 15%. Do you really believe the Germans will sanction a programme of QE? The US and the UK have turned the tap off and the Old Lady has warned of higher rates soon, regardless.

[salpara111] 26/11/2014 12:45

Well, this has turned out to be one of my worst investments of the last few years!
I had been holding in the apparently vain hope that there would be a decent rally up to the 77p payout but given that they have been buying back their own stock the share price has still fallen back, I am going to dump prior to the payout as I fully expect it to drift back towards the £5 level once the share price is adjusted for the divi.
The ECB is talking about going for even more extreme QE next year so all that "free money" is only going to make matters worse here.
It is still a good business and making decent profits but until this QE situation starts to unwind returns are just going to continue on their downward path.

[hooley] 25/11/2014 09:29

If 15% return on equity is the benchmark and eps falls to 65p, then the implied p/e at 550p xd is just 8.5 and the dividend yield double digit, assuming a continuation of the tough trading conditions. The specials will fall when the cycle turns. As a short-tail business the turn would be soon reflected in rates.

[wllmherk] 24/11/2014 22:34

tempted to buy in here, but, recent share price weakness suggests that the share price will fall more than the 75p special dividend. I have set a buy order at 540p.


wllm

[plasybryn] 24/11/2014 11:56

Ex dividend on Thursday.