Tom Winnifrith Bonus Bearcast: can anyone interpret my new nightmare, a Saint (Vin) and a sinner (Lucian) and his toxic 4
Back in March I asked the question ‘do you feel lucky...Rolls-Royce (RR.)?’ as ‘for a lack of profits/cash flow even this year, this one remains a long term stick the shares in the bottom of your drawer play’. I admitted then that I remained a holder on the basis of its airline engine, defence and even ‘being a player for low-carbon civil aerospace solutions’ over the next decade or two. But, reflected by the massive share price fall since early 2020, it has a lot of debt and correlation with the COVID-19 impacted world. So whilst Rolls-Royce shares are a few pence down from their previous level and March (and only a few pence up year-to-date), there is a little bit of positive progress in today’s first half numbers.
Let’s face it 2020 was not an easy year for Rolls-Royce (RR.), meaning a big fall in its share price and it hitting the markets for £4 billion of funds (split between an equity and a bond rating). Back in August HERE, I admitted my late 2019 call was wrong (‘But if you are a long-suffering Rolls-Royce shareholder, the key conclusion is that activists - along with the rest of us - can and do get it wrong’), but what do I think now?
I recently covered Rolls Royce (RR.) as being worth a look as a long term investment once it had managed to refinance its balance sheet, and news on that front came today.
Rolls Royce (RR.) is one of the most famous British companies, and even though it no longer associated with the car brand, it is still renowned around the world for its engineering prowess. But despite its reputation, it has struggled in recent years and the arrival of Covid-19 in combination with a poor set of results for 2019, not to mention impending debt repayments, caused the share price to plummet back in late February and throughout March. Since then, apart from a brief recovery in early June when the markets bounced back, it has seen a further decline and is now trading at close to an 85% discount compared to where it was a couple of years back...
Tom Winnifrith has been railing against Innovate UK with regard to splurging taxpayer cash on less that wholly deserving applications for funding from companies which could turn to the public markets or which have returned time and time again for more taxpayer cash with no discernible advance shown from the last payout. Today I turn to the Rolls-Royce of taxpayer cash consumption. It is indeed Rolls Royce (RR.)
In the last fifty days I have written about aerospace name Rolls-Royce (RR.) twice already before today. The first was to ask the question 'when the money raising was coming?' and the second was to appraise whether a selling activist shareholder was bonkers or rational. So finally - as previewed in both articles - what did the formal first half numbers say?...
Last month I observed that investors in aerospace engines and military supplier Rolls-Royce (RR.) should 'gird your loins to be tapped for an additional contribution to the coffers' and noted there would be a lot of homework analysis for investors to be undertaking in late August when the next set of numbers is set to be declared. Well it seems that West Coast activist investor ValueAct does not have the patience to wait as it has dumped its entire holding to crystalise a massive loss. Activist investing is not always a one-way route to profitability...
Since I last observed about Rolls-Royce (RR.) back in early April that it was 'a longer-term play on a high barrier to entry area', the shares have been all over the place. Today they are back near the lows of their recent range after a first half trading update which was informative...but did not answer the big question and debate about the shares out there...
Time for a tips of the year update. Obviously it is grisly thanks to our old pal the coronavirus. However you have to keep looking and thinking even when it is not going well...
I last wrote on Rolls Royce (RR.) in September where I noted that 'stuttering engines at Rolls-Royce sounds like a horror show - imagine being on a plane if it all went wrong! - but I would buy the shares now and below seven quid if Mr Market gives an opportunity. Ultimately I see them testing the high of the last 52 week range at c. 10 quid again'. And despite what was undoubtedly a very messy update yesterday, I retain that view today…
There is quite a lot of news out for a Friday. I was pleased to see that the industrial to medical conglomerate Smiths Group (SMIN) - which I wrote enthusiastically about in March - has blasted today deeper into my then hoped for 1600-1800p share price range…
In the Thursday earnings season results frenzy I knew that Rolls Royce’s (RR/) interim management statement was going to be of the ‘excitable’ nature when the first emboldened headline of the statement was ‘fundamentally strong portfolio of products’.
Rolls Royce (RR.) has had a real roller-coaster of a year so far, including profit warnings and disappointing financial results. The FTSE100 listed aerospace and defense company had just about recovered the losses to its share price from the profit warning that it issued last October, when it announced in mid-May that it was reducing its marine business and set-off on another downwards trajectory.
Back in October I bought shares in Rolls Royce (RR), saw them ride up to over £10.50…and Monday – after another profits guidance warning – saw them back at the aforementioned c. £8 level. A true Grand Old Duke of York share: riding up to the top of the hill and then riding down again.
My second choice for the traditional Christmas share consideration and selection game has the following merits. It is a share that has performed well over the long term but having underperformed the market this year. It looks attractive on a technical interpretation of the share price chart and is well supported by fundamentals on low estimated measures of value. It is of course, Rolls Royce (RR.) which I last visited in October when the shares were 800p and looking, I thought, particularly bombed out.
My observations recently on Rolls Royce (RR.) HERE concentrated on market valuation and value. I now add some further thoughts by way of explanation of what ‘headwinds’ faced the management at the interim stage as well as an assessment of the current share price based on a so called “technical” evaluation of the share price chart.
The latest profits warning looks near term and marginal in its impact. The shares of Rolls Royce (RR.) have lost all their former premium and at 803p look good value. A great opportunity for serious long term investors to pick up this long term technology growth stock at what looks like a low valuation of earnings.
Well what a week and if you are a Rolls Royce (RR/) shareholder what an end to the week…but more on the perils of owning one of the favoured holdings of institutional professional fund managers in a minute.
It has been a bad year for Rolls-Royce (RR.) so far, but it still looks a good bet for the longer term. Its shares are currently trading in the 930s, well off of the highs of close to 1,300p that it hit at the start of the year, and meaning that over £6 billion has been wiped off of its market cap in recent months.
A glance at the Rolls Royce (RR) share price chart shows that in the last half year it has been trading, approximately speaking, between 1000p to 1100p; a neat 10% trading range. Last seen, the share price at 1020p was getting close to that trading support level again. So is the Rolls share price going to bounce again and is the level of 1000p looking like a launch pad for further long term share price growth in due course?
Further to my recent observations on the fall in the Rolls-Royce (RR.), following the announcement of a change in guidance to the market on the company’s defence business, the company now has a bit of bother with the Financial Reporting Council (FRC). According to the accountancy regulator it believes the company’ pre tax profit and net asset value are misstated for 2012 and 2013. Near term, this is not good for the share price, but any dips should be bought into.
'Catch a falling star and put in your pocket’. Is that appropriate advice for Rolls–Royce (RR.)? The shares have plunged nearly 25% in five weeks, following a warning that its military aerospace profits would fall 20% this year to 31 December 2014. Even so, the further they fall, the more attractive Rolls-Royce’s valuation looks.
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