Standard Life Aberdeen Share Discussion Threads

[kenmitch] 14/8/2018 15:55

Very good post 668 fenners66. Good to read sensible informed comment.

[fenners66] 14/8/2018 15:47

Do they still do funds with a 4% guarantee and is that a net 4% ie. after charges?
Also your comment suggests that that fund is not available for a drawdown - but is that the case ?

[mcunliffe1] 14/8/2018 15:07

Thanks to you both (fenners66 and jaws6). The With Profit policies (three of them) all carry a 4% growth per year guarantee in the share price. That's quite valuable. This remains until I'm 75. The three other policies I had (two managed and one UK equity) carry no such guarantee. I crystalised one of the Managed policies and moved the funds into a draw-down friendly fund (Std Life Old Mutual) that had shown great growth over the past five and 10 years.
I'm reasanably clued-up about pensions. I've also no particular issues with the SLA returns on my five policies plus the draw-down.

I do wish though that they'd be more open about decisions and be more responsive to the web site problems I've identified.

[jaws6] 14/8/2018 15:00

post 670 is right ,there is lot of choice to invest in pension. most good smaller co and lot fund is there.

[fenners66] 14/8/2018 14:51

If you use SLA for your pension surely you can chose from a wide range of funds rather than the "With Profits" fund.

If you have an interest in the market , though you may not want the hassle of managing your pension fund - you can split it into chosen sector funds - eg US , EM, European small companies etc. then you get to see where the growth is and how the funds compare to their peers.

[mcunliffe1] 14/8/2018 09:19

It is a pleasure to see some well considered posts on this thread of late. I'm glad fenners66 has seen my point about an investment company being unwilling to "invest" the £1.75bn. That struck me as a strange decision when I first read of the buy-back and special divi.

SLA is a pretty good manager of (my) money and has been for many years. They do however have a tendency towards secrecy and I have in the past often pushed them (very strongly) to disclose information I believe I should be given.

I feel that one of the functions of these discussion forums is to "out" companies who are not overly open. For example, on the 1st August 2018 the Terminal Bonus on ALL of my With Profit pensions were reduced by about 10%. No explanation, no warning - at the time. My research on the SLA website tells me they have indeed adjusted the T. B. but found this:

"Most customers will see an increase in the value of their plan
compared to last year."

Does anyone on this thread hold an SLA pension, With Profits and seen an increase in their Terminal Bonus?

On a related issue, has anyone used the Customer platform to examine their SLA policies? I've been reporting technical issues to SLA for well over a year on this aspect and they are disinterested in fixing the errors and misleading/erroneous data.

Sorry for being slightly off-piste re. shares here folks but needing some additional, wider feedback.

Thanks.

[fenners66] 14/8/2018 01:51

I really like the point of this post - which PO seems to have missed entirely

MCunliffe1
9 Aug '18 - 09:02 - 639 of 667

So, an investment company uses spare cash to buy back its own shares in order to reduce the share capital of the company. During the buying phase the share price is likely to rise as a substantial number are being bought within a clearly defined period.

I'd suspect that at the end of that period the share price will then revert to the trend it has established over the past six months, ie. falling. And that in a generally rising marketplace.

I wonder if the executive bonus scheme relies upon a share price to reach a particular point somewhere before 21st Nov ember 2018. If I recall, their year-end is the 15th November.

So, why can't an investment company utilise the "spare" capital in a more productive manner by investing it. It's what we pay them to do after all.



Pertinent points

1 - Investment company - has surplus cash and does not know what to do with it in order to beat the potential increase in EPS which a buyback may make .

WHY not ? Why should anyone invest with them if they admit that best potential return they can get from £175m is 10% ?

Work the maths through at a £ 3.21 share price , 1.8% EPS on £964m profit.........

So I thought that % was going to be lower ...... and 10% does not seem so bad - but their funds are targeting much higher returns with which to take their cut out of before it reaches the consumer so they should be doing better....

2, We are talking about where the shares will be after buybacks NOT during. You add demand for the shares on ANY given day and if it exceeds supply they can go up. But tomorrow is another day and anything can happen - just because notional EPS has gone up does not mean a thing if supply exceeds demand the next day.


3, EPS for bonuses - yes all other things being equal an easy way out for the board. No risky asset or business buying to risk their returns - unlike the whole business model that means ALL the customers are risking their capital on the chance that SLA beats the market.


As for shareholders voting for anything - most shareholders never vote, shares that are held by institutions mostly never vote against a resolution see the huge bonus schemes at house builders that made it passed.
Its always headlines when a vote has a large "against %" let alone if a board ever actually loses. So essentially its the board that makes the decisions knowing full well its very unlikely to be questioned.

I had the discussion about buybacks centred around a company with £2.5BN of debt where the debt could be reduced instead.

There is the increased EPS to gain from not paying interest and fees on renewing every few years and the idea that since the enterprise value of the business is a function of the debt and equity - a reduction in the debt should lead to an increase in the equity value anyway (win win).

Buybacks are NOT a return to shareholders - dividends do that - they are returning cash to EX Shareholders - so a carpetbagger may make a few quid and the investors get nothing but potential increase in EPS.

Furthermore they are bought in the market from those who want out anyway they do not know who is getting them from them nor do they care its just a price to sell.


If you want share price growth - put the money to good work and grow the business in the long term that's the only way

[pierre oreilly] 13/8/2018 18:57

ok, i've said enough, people can decide as they like if they are at all bothered. I'll just point out that anyone thinking mcun has posted a list of cotradictions in my posts must be totally illogical (as must mcun for saying they are contradctions).

I think the whole debate centres on the inability to understand the quite simple words 'than it would otherwise be'.

Last words to you ...

[kenmitch] 13/8/2018 17:39

Pierre Oreilly

I hope you realise that my replies are simply in response to your inaccurate "facts" and are not aimed at you personally. You might be the salt of the earth!

BUT the most dangerous posters on ADVFN bulletin boards are not the complete idiots who wreck some threads (e.g Tern) and not worth replying to, but those whose posts give the impression they know what they are talking about when they don't.

MCunliffe1 has pointed out some of your mistakes and inconsistencies in the post above this one, so I'll leave most of those to him. And so did scrawl in his excellent reply.

Your last reply and previous posts show basic misconceptions or factual errors:-

1. e.g you started by posting that as most people voted for it that's what they wanted. True!! But that doesn't then mean that decision was the right one. e.g The majority voted for Brexit and for Trump. Time will tell (and I'm NOT starting a debate on that!) whether those were good decisions.

The majority might vote for something that turns out to be a disaster. Company history is littered with terrible aqusisitions that were voted for at the time that ended up either bankrupting that Company or nearly doing so.

2. In post 649 you wrote;- "unassailably , a buyback increases the price from what it would otherwise have been. If it would have dropped 50p without the buyback then withe the buyback it may only drop 20p for example."

That's tosh! Do you really think that before a share is priced a computer or whoever/whatever calculates a share price to take account of perhaps daily buybacks? Impossible.

If you want the facts read scrawl's reply again. He explains correctly, as I have too, that YES, buybacks DO mean higher eps than would otherwise have been the case. BUT higher eps does not always mean a higher share price. If news is bad, or profits disappoint, or there are more selling than buying then the share price will drop and again no way are buybacks factored in before the price is marked down.

3. Again a simple factual error and this time from not reading a post carefully.
You wrote:_ "I think pointing out a share which had a buyback and subsequently fallen in price as proof they are a poor way of returning cash massively misses the point."

That's not what I wrote! I gave examples where that had happened. I could also give examples where a share had done very well after buybacks. I was trying and failing to get you to understand that buybacks do not automatically mean a higher share price than if they hadn't bought back.

4. And as for your "I should have complained to the Board and too late to be whinging now comment," again you have misunderstood. I don't currently hold SLA having sold soon after their merger. I AM now tempted thanks to the much lower share price along with a very attractive dividend (and looked here to see if any useful information).

I've made clear that though I prefer dividends to buybacks there are plus points for buybacks too. And I used NEXT as an example of plus and minus points.

e.g Next have now bought back more than half their shares and for anyone looking to buy NEXT after the big share price drop instead of holding on during it the share was so tempting at £38 that I jumped in then. With 50% fewer shares in issue NEXT can afford to pay higher dividends on the shares remaining. So I'm happy to accept further NEXT buybacks now as I would be if and when deciding to buy SLA.

Finally have you read any detailed research on buybacks? Your inaccurate and confused posts suggest strongly not?

e.g admittedly a few years ago, detailed research from Morgan Stanley showing how the share prices of Companies buying back subsequently underperformed those in the sector who did not buy back. That doesn't mean all buybacks or wrong nor that it is always better to have dividends. It's all a matter of opinion but it helps when posting your opinions here if you have some knowledge about the topic you are posting about.

[mcunliffe1] 13/8/2018 16:46

Pierre,

I'm puzzled by your latest stance. Today at 14:58 you stated:

" A very good mix of cash in pocket and an improvement in the shareprice from where it would otherwise have been. (that doesn't mean the price will rise due to buybacks)."

Which seems to agree with my earlier posts about my doubts that SLA'a share buyback would increase the share price.

Kenmitch provided us with an excellent report - thanks.

Below, are three clips from your posts over the previous few days:

Most Recent one: 11 August 10:20
mcun, one thing is clear - the buyback is a return to shareholders because, unassailably, a buyback increases the price from what it would otherwise have been. This is clear from the mechanics of the orderbook.

If it would have dropped 50p without the buyback, then with the buyback it may only drop 20p for example. If it would have risen 50p without, then with it would rise 80p for example.

The One Before that: 10 August 08:09
The buyback increases the value of your shares by the assets and profits being divided between fewer shares.


And the one prior: 9th August 09:37
mcun - it's a return to sharehlders. The buybacks cause the prce to be higher than it would otherwise be.


Seems you want it all ways Pierre. :-)

[pierre oreilly] 13/8/2018 14:58

I'd say the fact that sla are returning a billion by way of a share scheme effectively putting cash in our pockets together with .75 bn by way of a buyback is likely to mean most shareholders wanted that arrangement since that's what was voted for. It certainly suits me. A very good mix of cash in pocket and an improvement in the shareprice from where it would otherwise have been. (that doesn't mean the price will rise due to buybacks).

No arrangement guarantees the price will rise, divis, share schemes, buybacks or cash in brown bags. (and nobody has said any do). In particular, a big special divi would have been met with an equally big drop in the share price on ex-special day.

I think pointing out share which have had a buyback and subsequently fallen in price as proof they are a poor manner of returning cash massively misses the point.

I'm afraid if you and every other person here prefers spacial divis, then you should have raised that with the board at the time - it's too late whinging about it now (but it would have changed nothing in any case).

[scrwal] 13/8/2018 13:37

kenmitch I completely agree with you. The money on "buy backs" is returned to shareholders who want to sell but if you want to keep your holding as part of an income stream then for those investors it isn't a return - yes the eps will rise but that won't necessarily increase the share price if the P/E goes the wrong way nor does it mean an increase in dividends as the earnings cover increase could be used to improve it from say 1.5x to a more palatable 1.7x to appease the market.

I prefer special dividends but wish a lot more companies adopted the Next model which is to pay it out in quarterly instalments so that the xd price isn't hammered unlike insurers like Direct Line who paid theirs in one go 15p with a price of 386.6p as well as a final div of 13.6p.

[kyoquot] 13/8/2018 13:31

Good informative post, many thanks kenmitch.

[kenmitch] 13/8/2018 12:52

In case anyone is wondering about buybacks. I don't like them and much prefer dividends, but that's by the way.

Buybacks do not always mean a higher share price. If they did investors would always win if only buying shares in companies buying back. Yes they are always referred to as "a return to shareholders" but that doesn't necessarily mean that shareholders are rewarded. Indeed there is a lot of evidence to show that buybacks reward those who want out as there is a ready buyer (the Company) at the expense of those who stay.

A couple of examples and these are facts and not opinions.

1. NEXT. It is widely accepted that Next are the bellwether for how to do buybacks. They ONLY buy back when thinking the shares are good value. If not confident on that score they go for special dividends instead.

BUT despite that sensible approach to buybacks (unlike many Compannies who buyback regardless or not of whether share looks fully or even overpriced) NEXT bought back heavily AHEAD of what turned out to be a big share price fall from £80 to £36.

So those rewarded by those buybacks were not those who stayed with NEXT but those who got out ahead of the falls and big investors who were able to sell in size thanks to NEXT being happy to take their shares off them.

2. Many companies have seen big share price falls even when buying back heavily and while buying back nearly every day.

e.g MAN share price crashed while they were buying back.

e.g BP spent £30 billion on buybacks and their share fell heavily after then and then fell even further after the Gulf of Mexico disaster. The money they spent on buybacks could have covered most of the compensation bill.

Is SLA buying back going to see a guaranteed increase in the share price? NO.

BUT a big plus is that at least SLA are buying back while the shares look to be good value so for those who like buybacks there is a stronger case for SLA buying back than for those Companies who buyback even when share looks very overvalued.

Why are Directors so keen on buybacks?

Partly because buybacks DO guarantee higher eps than would have been the case without buying back. And Director bonus pay is often based on eps.

Have posted this as a one off in case anyone is interested in a few basic bits of information ahead of ill informed rubbish.

There are strong points for buybacks and strong points against them. I prefer dividends because with dividends we always get the money and that is not the case when I am supposedly "rewarded" with a buyback IF the share price goes and stays lower.

[essentialinvestor] 13/8/2018 07:26

The earnings call transcript is on Seeking Alpha. for anyone interested.

It's worth reading their opening remarks, makes very clear the broader
challenges facing active asset management.

[chinese investor] 13/8/2018 07:12

They've started buying.

[pierre oreilly] 12/8/2018 23:38

It's only a couple of minutes every several hours mcun. Anyway, it's quite amusing seeing some posters effectively arguing that a return to shareholders isn't actually a return to shareholders.

[mcunliffe1] 12/8/2018 17:11

Thankyou for welcoming my opinion even when wrong. We should all be thankful for your time devoted here to educating us lesser mortals, Pierre.

[kenmitch] 12/8/2018 13:07

Nonsense again, but have had a quick look at your posts and realise not worth bothering with you.

[pierre oreilly] 12/8/2018 11:50

Ken,
If you knew how the sets orderbook worked, you'd realise it's unassailable that share buybacks, or indeed any share buy, either ticks up the offer, or makes a tick up more likely. This is just the mechanics of sets during a buy. There is also lkely to be an increase in the share price from what it would otherwise have been (do you understand the last 7 words?) due to a decreasing p/e and improvement in all other ratios when the shares are cancelled.

Just to repeat yet again since i've just read your last sentence - share buybacks increase the price from what it would otherwise have been.

But you are welcome to your opinion, however wrong it is.

[kenmitch] 12/8/2018 11:27

Pierre Oreilly.

Aside from the case for or against buybacks, unfortunately your explanation about the share price effects is nonsense! There is no such share price adjustment in the way you describe. What buybacks do is increase eps. That might or might not feed through to share price gains. There are plenty of examples where they don’t or didn’t.

E.g the banks bought back heavily ahead of their share prices crashing in the 2008 banking crisis.

e.g Next have bought back more than half their shares, and buyback more effectively than many companies. But that didn’t stop their share price falling from £80 to £36 last year.

[cmackay] 12/8/2018 09:39

Thank you for your explanation CI

[pierre oreilly] 11/8/2018 17:09

Hmmm, I'm so sorry to have upset your oh so delicate sensibilities mcun, even though i can't see how i did. Anyhow, good to see you've resorted to ad hominem attacks, i always take that as my point has been taken and you have no other reply.

Here's how you address other posters on here, and an example of your extremely silly and naive attempts at deramping. What a nice man you are.

MCunliffe1
8 Aug '18 - 09:11 - 627 of 650
0 0 0
Gerry Grimstone tells us he's buying back £175m of shares - starting very soon - and the share price leaps.

Gerry, perhaps you should have bought them last week BEFORE your announcement caused a share price increase - you'll have bought more for OUR money.

Alternatively, try opening your mouth more often and perhaps THAT will help the beleaguered share price more than your financial investment capabilities and those of the terrible twins.

[mcunliffe1] 11/8/2018 14:00

Pierre.
not only are you rude and personal but you're assumptive.

As Arnie always said..... "I'll be back".

Either way.