PGW - PGG Wrightson

[Baa_Baa]

Unfortunately Baa Baa in the real world many of us holding dividend stocks find ourselves holding large capital paper losses from time to time especially in a downtrend like we currently have but most of them will come back up in value in due course, your theories are sound but impractical for the vast majority of holders of these type of stocks.

I don't get it couta, why is it impractical to sell a share that is in a confirmed downtrend, on the premise of continuing to make a dividend that is a modest %, below the capital lost, let alone the potential for further capital losses?

[couta1]

I don't get it couta, why is it impractical to sell a share that is in a confirmed downtrend, on the premise of continuing to make a dividend that is a modest %, below the capital lost, let alone the potential for further capital losses?

Quite simply because most average investors buy and hold and don't follow trends that closely, your preaching to a different animal with your (Good) ideas, now go watch the rugby.

[iceman]

Go watch the rugby you three

They dont show it down here at Cape Horn. Weather and fishing also poor so fighting some BaaBaa-rra-Couta will have to do :-)

[Baa_Baa]

In my opinion, if you have a good company and are looking long- term, it is not worth worrying too much about capital - yes, shorter- term, if you don't have the capital to spare, then yes, selling on a downtrend could be worth considering but you. Can't really predict what the future might hold and you could fail to ride an uptrend. I sold out of a UK stock that had not really performed for me at all, the day before an uptrend! I then watched it slide back down so took a small holding in it again thinking I could play a small trade or two on it. Two weeks later it was subject to a friendly takeover at +45% ..... Had I not sold my intial holding, I would have been even happier. I am more of a basics numbers and instinct investor who mostly only adds to the portfolio, only ever selling to pay down investment property debt.

You sound like my grandad (no offence meant). He didn't actively manage capital ... more accurately he didn't seem to care! As long as the divis paid the bills. He did die wealthy so you've got me there. Maybe not as wealthy as he could have, had he managed his capital as closely as he managed his income?

I just don't understand this passive approach to investing that can debilitate more capital in favour of a lesser income = net going backwards, particularly in a confirmed downtrend as we have here with PGW. It's not that hard to sell a down trend and buy and later buy the uptrend. I'd try to, but as an active manager of my portfolio, I'd prefer not to expose myself to obvious and avoidable capital losses, for the sake of income.

Appreciate your perspective on this BeeBop.

[Baa_Baa]

Quite simply because most average investors buy and hold and don't follow trends that closely, your preaching to a different animal with your (Good) ideas, now go watch the rugby.

Really? Are you saying, that for the sake of a simple price performance chart, (informing an up or down trend, that one can buy or sell into) that my approach is more sophisticated than the typical yield investor? I really doubt that, there are a lot of much more sophisticated investors here than me, and yet they still advocate buying a downtrend on the basis of a nice yield. That's the thing I don't get.

[James108]

Because

1) I don't beleieve "a confirmed down trend" actually means anything i.e. I believe there is a 50% chance of the SP going up or down (short term) from this point.
2) Why would I sell a stock that I believe is trading at a discount to intrinsic value unless I have no spare cash AND can buy a stock that I believe is trading at an even greater discount to intrinsic value.

For the record I have fair value at around 45 cents a share.

[BeeBop]

You sound like my grandad (no offence meant). He didn't actively manage capital ... more accurately he didn't seem to care! As long as the divis paid the bills. He did die wealthy so you've got me there. Maybe not as wealthy as he could have, had he managed his capital as closely as he managed his income?

I just don't understand this passive approach to investing that can debilitate more capital in favour of a lesser income = net going backwards, particularly in a confirmed downtrend as we have here with PGW. It's not that hard to sell a down trend and buy and later buy the uptrend. I'd try to, but as an active manager of my portfolio, I'd prefer not to expose myself to obvious and avoidable capital losses, for the sake of income.

Appreciate your perspective on this BeeBop.

Baa Baa, i daresay I am like your Grandfather to a degree. Taking a long term view (as with property), prices do fluctuate and you just can't quite predict when there will be an unexpected event. If, I held only two or three stocks and was really watching my capital then maybe I would take the sell on downtrend and buy when I was sure that was over. As the day to day value would be quite important and I may want to build it up.

For me, my approach works and has done for a very long time. I watch others come unstuck when the market goes down badly, or those trading unable to turn a good enough profit (where their capital is too small some good Documentaries from UK TV following these). I came from a very "non financial background" with negative equity when I left university and have been able to turn a very tidy net worth. Some years are soooooo inactive that I don't track performance (2009, 2011/2012) other than the health of what I do have and then sink money into desperately undervalued stocks. Additionally, I have a real estate portfolio as well which "secures" gains (i.e. Theoretically the house won't disappear into the ether). Overall, if you run a narrow portfolio then maybe doing what you are suggesting could possibly work (maybe you have to make it work?) but broadening to a degree means that risks are lower - not that I am an advocate of a highly diverse spread....might as well just employ a broad ETF...and now, that is absolutely NO fun!

Maybe in two years PGW will pay out a higher yield? Maybe the price will go down to 30c pushing the yield up? Or maybe, with bank deposits lower more will buy and the market will favour PGW a tad more? I don't know but I do know that I can wear a capital value slide. Take a look at PFE.US, I think it was in 2011 that it was way out of favour after a down trend....yes, I bought and it was not good on for my capital value for some time but then Mid 2013 came around and it was closing in on $28. Yes, I sold them because that was just too good for me and my mortgages enjoyed a lump sum payment.

[Beagle]

Baa Baa. I think the explanation you seek as to why people aren't selling lies in the dividend yield. If one sells at 43.5 cents and misses the final fully imputed dividend yield that they've held the stock for all this time then they're only getting a net price of 41.5 cps less brokerage. While there's clearly some debate about the prospects for the current FY16 year many of us long term investors believe that over time PGW can sustain fully imputed dividends of 4 cps.

4 / 0.72 = gross dividends of 5.56 cps and on a net sale price of 41.5 cents people selling now are foregoing a gross future dividend yield of 13.39%.

Now while I understand your argument that in theory one can time the market and acknowledge the stock is in something of a downtrend right at the minute, many investors would already have taken a cautious position in this market and presently be sitting on a fair chunk of cash which would be returning them something like 3%, (will be 2% by the end of the year). As interest rates continue to dive to fifty year lows people will be looking for income stocks.

I think there's a few people out there not too worried it if gets down to 40 cents as that's hammer time. I'd put myself in that camp. Hope that helps answer your question mate.
I suspect there's a fair few people playing the same long dividend yield game with HNZ but the yield is inferior and they've got smacked down a lot further in percentage terms from $1.41 to $1.09.
Notwithstanding that its interesting to note those same investors are running for cover with this stock...maybe they learned their lesson from the school of hard knocks while us others are now attending a similar school Only time will tell. I think the stock is great value at this level on a long term view especially trading cum the final 2 cent fully imputed dividend.

[couta1]

Even those of us with a 47c average buy in its still best to just hold until the divvy as the latest correction aside it could just as easily have gone up and been at 49c now ( The timing of certain events can't always be forseen) However for those that don't really care about divvies and had a lower average then I can see the merit in selling and buying back cheaper.

[noodles]

Even those of us with a 47c average buy in its still best to just hold until the divvy as the latest correction aside it could just as easily have gone up and been at 49c now ( The timing of certain events can't always be forseen) However for those that don't really care about divvies and had a lower average then I can see the merit in selling and buying back cheaper.

Couta, I would argue that in fact the decline this week could be foreseen. The event was the FY16 outlook on 11 Aug, followed by the confirmation that 20-25% of earnings are in dairy.