Transcript – Investing Roundtable: Supermarket Showdown

This week Owain Bennallack and his team of Foolish experts talk 3D printing, sweep through the supermarket shares, and report back from their trip to the London Investor show. The guys also put their Motley Fool Champion Shares PRO stockpicking smarts to good use by highlighting three shares currently on their radar.

The following is an unedited transcript of this Fool podcast:

Owain Bennallack: Hello, and welcome to Money Talk, the investing roundtable from The Motley Fool. I’m Owain Bennallack, and I’m joined in the studio today by two of our trustiest Motley Fool analysts, Mark Rogers and Nate Weisshaar from our Champion Shares Pro and Share Advisor services.

Mark is recovering from a bout of man flu that has kept him home for a week, so it will be interesting to see if he’s gone soft, and Nate, you mentioned to me whilst we were … “enjoying, I was going to say — maybe not the right word — whilst we were missing Mark terribly, that you’ve got a reputation as a bit of a breeding laboratory for superbugs.

Nate Weisshaar: Yes, well it’s all alleged. I’ve been told that any time I get a cold, whoever gets it next is in for a very, very long, painful recovery.

Bennallack: I didn’t know you could catch a cold in the desert, which is apparently where you’re from.

Weisshaar: Perhaps that’s why I have these superpowers.

Bennallack: Is it possible? I could imagine that you could not get a cold, breed the bug, and pass it on. But surely if you got the cold, your body would … there’s some dodgy biochemistry going on there.

Weisshaar: Well, like I said, it’s all alleged and no experts were involved in this research.

Bennallack: Those who had the superbug didn’t live to tell the tale. Mark, stay away from Nate. Let’s just play it carefully.

OK, hopefully everyone at home is listening with their virus checkers turned up to max, with all this disease going around. We’re going to crack through a few things. We’re going to talk about 3D printing. We’re going to sweep through the supermarkets, and we’re going to report back from our field trip.

It was before you got ill, actually, wasn’t it?

Mark Rogers: It was, yeah. I was OK back then. Maybe … it might have been all those CEOs.

Bennallack: You caught something off a pesky investor.

Rogers: Yeah, I think it might be.

Bennallack: We went on a field trip, which is unusual for us, to the London Investor Show, so possibly exposure to real people rather than stock prices and company reports, pushed Mark over the edge.

We’ll have a few words about that and then finally, as always, we will discuss three share ideas that might prove good bets, even if the market dives, or they might dive with it, or they might go up, or they might go down. A lot of people are saying the market’s frothy at the moment, but we like to look at individual companies here at The Motley Fool, and assess their prospects, so we’ll be doing a bit of that.

Guys, are you ready?

Rogers: Sounds good.

Weisshaar: Let’s do it.

Bennallack: 3D printing is a bit of a stock market buzzword du jour at the moment — pardon my French — and this month we even saw a 3D printing exhibition hit London’s Business Design Centre. But despite the popularity of 3D printing as a theme with some investors at least, other people — normal people — they may not know what 3D printing is all about.

Nate, I’m not going to suggest you’re not a normal person, but I am aware that you know about 3D printing, so can you fill us in?

Weisshaar: Yeah, it’s really quite an amazing technology. I won’t call it a new technology — it’s been around for a couple decades — but it’s starting to achieve the point where it’s becoming viable commercially, as well as for consumers.

Essentially what it does is, if you think of an inkjet printer that lays down a layer of ink on top of your paper, this is similar, except that it lays down a very molecular level, thin layer of plastics or even some metals, and then layer upon layer upon layer, slowly builds up a 3D version of a prototype or a model keychain, perhaps.

Bennallack: Quite a nice way to think about it, I found at the start, was to think about a sculptor with a block of marble. Traditionally, he would have taken stuff out, but with 3D printing, instead of starting with your material and taking stuff out, you’re building it up, as you say layer, upon layer — which is why it has the other name of “additive printing,” because you’re adding.

Anyone attending the London exhibition would have that explanation, probably several times, from every stand they visited. They would have seen all sorts of stuff. They would have seen consumer-sized 3D printing machines that almost go on your desktop, if you’ve got a pretty big desk, to industrial units that are actually quite mainstream, despite all the recency about this technology, and plenty of stuff in between, and they would have seen a lot of companies competing in the space.

However, it’s fair to say that the two biggest — partly because they keep buying up everyone else — are the U.S. outfits Stratasys and 3D Systems. Now, if you’re a U.K. investor, of course you can buy Stratasys or 3D Systems at your own peril; I don’t think they’re cheap at the moment, but they are in a hot industry and they are growing fast.

Nate, are there any ways that a U.K. investor who, for some reason, doesn’t want to buy U.S. shares can get exposure to this theme through U.K. companies?

Weisshaar: Not very easy. There was a company called Delcam which developed software that could be used to convert engineering drawings into language that the machines need to create these 3D rendered plastics or metals. It was called Delcam; unfortunately, they’ve been snatched up by a U.S. rival named Autodesk, so if you don’t want to be investing in U.S. shares then that option’s off the table.

Bennallack: That rules you out again. We’ve been talking a little bit about Autodesk. The theory here would be that you don’t necessarily have to bet which manufacturer of 3D printers wins, because you’re buying the software that people would use.

Weisshaar: Yeah, in the U.S. Autodesk dominates the architectural and engineering, computer aided design market, so if you assume that they can extend into 3D manufacturing, that would be a good way to play it; a rather device-agnostic way to play it.

But they’ve got competition. There’s a major French firm called Dassault. They do a whole cycle — “lifecycle management” is what they call it — where you go from design to factory floor, and they provide various software solutions for the whole sequence.

Bennallack: There is one U.K. company, and I’m waiting for you to mention it because I have to declare I do own shares in this company, so it’s my favourite.

Weisshaar: There is a company called Renishaw.

Bennallack: Yes, there is!

Weisshaar: They have a small 3D manufacturing division. They’re focused more on the industrial side than, say, the consumer side. It’s still a small piece of their business, but they’re hoping to grow it up rapidly, so yes, there is a U.K. company with a toe in the industry.

Bennallack: They’re metal as well, aren’t they?

Weisshaar: Yes, their printers will do several materials, but the focus is on metals.

Bennallack: Well, as I say, I own some shares in Renishaw, and the 3D printing piece of the picture, whilst not particularly big, it doesn’t really hurt my feelings about them. I think there is potentially a bit of optionality there, in that company.

I suppose the obvious question that that leads one into — or the worries that one might have, Mark — is that if even Renishaw has a bit of a 3D printing division, who else might be out there looking at this space and thinking that they want a bit of it?

Some people are saying it’s like the early days of personal computing; they’re claiming every house may one day have its own 3D printer. I’m dubious that it will go quite so far, but even if it does come true, with all of these companies out there making stuff, trying to get a bit of this action, it doesn’t make investing in any one of them a slam-dunk, does it?

Rogers: Yeah. First, I’m going to shock you right now. Actually I’m a former Renishaw shareholder myself — that’s the only time I will actually say that on this show.

Bennallack: You had good taste, back in those days.

Rogers: Yeah, back in those days. Yeah, I think actually naming the 3D printing company, today, that’s going to be a huge financial success for shareholders 10 years down the line, is probably a lot more difficult than it sounds.

It’s quite surprising, but the majority of people who invested in, let’s say, car manufacturers in the ’20s, or aircraft manufacturers in the ’50s — relative to the importance that those inventions had on society and the economy, for shareholders it didn’t always turn out too well. There were over 2,000 car manufacturers in the United States alone, in the 20th century.

Only a handful of them ended up surviving to today, and not all of them delivered terrific returns for shareholders, so actually picking the winners is a little more difficult than it sounds, I think.

Bennallack: There’s an excellent Buffett quote — or maybe an angry fist, raised at the heavens — where he said something like, “From a shareholder perspective, the best thing you could have done with the Wright brothers in aeroplanes is shoot them.”

Because even though, over my house, a plane flies over laden with eager visitors to the U.K. literally every minute down in Southwest London, they’ve pretty much been terrible investments.

Rogers: It’s remarkable, isn’t it? When you think about how important those kinds of technologies are to our day-to-day lives — the same with personal computing, like you mentioned — we all use this technology; now it’s been adapted into other technologies, incredibly important for society and for the economy, and yet when you actually look at investing in those companies back in the 1980s, it didn’t turn out, for everyone, to be a great boon.

Bennallack: No. OK, now for something completely different — something much more up your usual street, Mark, and that’s supermarkets. Supermarkets are, in fact, up everyone’s street. They are everywhere. Supermarkets must be the definition of a mature sector that has nowhere else to go.

On that note, I wanted to talk about whether there really is any point in trying to pick winners here. Mark, I say this because we have discussed supermarkets here in The Motley Fool. Analysts, fund managers, everyone is always debating whether Tesco, Morrison’s, or Sainsbury’s has the edge — or Asda of course, which is owned by Wal-Mart, but that’s in the U.S.

I was looking at the graphs and I thought, “What is the point?” Over the past 12 months, Sainsbury’s and Tesco’s are both up pretty much exactly the same — 13.5 — and Morrison’s is trailing miles behind with a 5% return, so they’re all almost in the same ballpark. Aren’t they all just much of a muchness?

Rogers: Yeah, I think if you look out a bit longer; let’s say we go back to 2003, so pull up a 10-year chart. You’ll see that Tesco’s up more like 54% and Morrison’s and Sainsbury’s more like 20%.

But, I think importantly, when you include dividends and you look at total return, or you look at reinvested dividends in those kinds of situations, then the results are completely different again. Tesco’s and Sainsbury’s are both doubled over that time period, Morrison’s more like 50-odd% over that time period.

So, when you consider the different relative valuations there, what you start off with, and everything else, you can get very different results than you might expect.

Bennallack: That is a fair point, I don’t deny it. It is true that if you look at the 10-year graph you do see a lot of ups and downs, but I would say that there’s an element of reversion to the mean, even there.

Now, of course, this could be an opportunity for an agile investor to see that Tesco has got an unfair edge — because, according to my thesis, they’re all the same, it doesn’t deserve it, and it will come back, and vice-versa.

I’m not saying that one should invest based on these squiggles on the graph, but I guess I’m wondering whether that’s a manifestation of what is just this inevitable maturity?

If any company does anything, if anyone gets any kind of edge, that one of the rivals will quickly steal that idea. If someone introduces home deliveries, someone else would steal home deliveries; convenience stores, someone else gets convenience stores. They’ve all got about the same amount of firepower. Won’t they end up delivering approximately the same returns?

Rogers: Yeah, if we take returns out of it and let’s just talk about the actual business itself. To a degree, I think you’re right. Online and convenience offering — which is where the growth is coming from, it’s where the investment is at the moment in the sector — there’s a lot of commoditisation there.

In other words, me and Nate recently went into one of the Morrison’s new M local stores …

Bennallack: I hope you had your face mask on.

Rogers: I did, of course, yeah. We couldn’t be seen.

Bennallack: No, I more meant I didn’t want you sneezing over the cheese with your superbugs.

Rogers: Oh, right. Oh, no, it was long before that — unless Morrison’s gave me the illness …

But yeah, it was basically the same kind of store experience you’d expect in a Tesco Express, or in the Sainsbury’s equivalent as well, so I think you have a point in terms of them being similar in that regard. But I think for investors, like I say, you have relative different starting points.

Morrison’s has a lot of catching up to do at the moment; that’s different from both Tesco’s and Sainsbury’s. They don’t have any online presence, they’re just building up the convenience stores now.

Sainsbury’s starts off — if you invested today — with a fantastic real estate base. They have a lot of exposure to the very affluent southern market, whereas Tesco starts off with the market leadership position; over 30% of the U.K. market, and the international potential there as well.

I think, as well, one final point; when you look behind the scenes in these kind of situations, and you look at the real nitty-gritty of what you see behind those customer experiences — in terms of inventory, supply chain, procurement, that kind of thing — there are differences there as well.

It’s not always the stuff that you see that is going to move the dial in terms of margins, profits, and shareholder returns there.

Bennallack: You’ve long preferred Tesco because of its international exposure, but recently we’ve seen Tesco ratcheting back that, in China; “bailing out” I think is the technical term from the U.S. Does this not lend more weight to this flagging theory of mine, that the supermarkets are all just the same difference, play on the U.K. economy?

Weisshaar: Yeah, the differentiator for Tesco has always been — well, not always, but over the past several years — has been that it has an international presence, because I do think that the U.K. grocery market is mature; the best you can hope for is that it’ll grow with inflation, probably.

Bennallack: And GDP.

Weisshaar: And people would hope that it grows less than inflation, but as far as the international exposure that Tesco has, yes. I think withdrawal from Japan and the U.S. both changed that opportunity, but there’s still a big world out there.

Tesco’s Southeast Asian operations in Thailand and Malaysia are doing pretty well. Korea is a bit of an issue, but Eastern Europe is a problem right now — but that’s mostly a reflection of some pretty tough economic conditions there, which should recover at some point, everyone hopes — and when that happens then I think you will see that Tesco’s international position is a benefit to it; something that Sainsbury’s and Morrison’s, there’s just nothing there for them to hope for, really.

Bennallack: It’s true in terms of, where is a Sainsbury’s, for instance, going to put its cash flow in the future? It’s probably going to have to give it back to shareholders, which some people will like, but it has no real great prospects that I can see.

Weisshaar: No. I think we’re bumping up against a ceiling as far as how many convenience stores you can have within a block of each other …

Bennallack: Well, despite the ceaseless tumult of disagreement that our regular listeners know and love, and we’ve seen again from our podcasts, we’re not always at each other’s throats. Not always. In fact, this month we even went on a team outing to the London Investor Show in Olympia.

Now, I thought it would be interesting to share our impressions of that show. Not the bit where we all skipped along arm-in-arm on our day out, but more ideas that we picked up, the general buzz … just give the impression for listeners who couldn’t make it.

My personal impression was that it was a lot buzzier, even, than the last time I attended, which I think was probably in 2011. That was kind of like going to a Ferrari showroom in Italy in 2012, with the tax man trailing you. It was really quiet; there were a couple of talks about mining shares, I think that was about it.

I guess a bull market is the kind of thing that spices up people’s animal spirits, but what did you guys make of it?

Rogers: Yeah, I thought it was really interesting. It’s rare that you get the opportunity to, in one sitting, in one big, long day, to have so many companies give you a snapshot of their business — and you can really get a decent impression, a lot of the time, just by what CEOs are saying about that company, and how they present it — so I think it’s definitely interesting.

You know what? I think for private investors listening to the show, I think it’s worth looking at turning up to a show like this, at least once, to get the experience of it and to see it first-hand.

Bennallack: Of the presentations that you saw in the day, did any of them stand out? One thing we have to keep in mind, of course, is that generally companies pay to present at these things, so it’s not like an organiser has cherry-picked great opportunities. He’s cherry-picked his sales team’s great prospects.

Rogers: Yeah, you’ve got to keep that in mind. You’re effectively being pitched to by these companies, but I liked the pitch for some companies a lot more than I liked others. There were quite a few good stories out there, but a lot of the time even though it was an interesting story, whether it was an investable situation … maybe, maybe not.

An example of that was Fusion IP. I think this was a really interesting presentation. The CEO, really enthusiastic; the company effectively takes start-up technologies from university research departments, and tries to turn them into viable businesses.

To see the CEO onstage, he really captivated the audience with his explanation of some of these technologies; he presented something like six of them. They were all really interesting, had everyone listening to what he had to say. Whether or not it’s a situation where those technologies are going to make money for shareholders is a different question, but interesting stories, yeah.

Bennallack: Yeah, I think that’s fair. Ultimately, I would treat a day at one of these shows, like you say, almost as an experience or a day out.

Rogers: Yeah. Not all the companies were fantastic there. There was one in particular that put me off a bit. In fact, it put me off a lot. It was GW Pharmaceuticals — a really interesting concept — the only British company, or listed company, approved to cultivate cannabis for medical purposes.

Bennallack: That was the presentation where Nate went round the back and was talking to the man behind the … maybe that was a different one.

Weisshaar: Allegedly.

Rogers: Allegedly, yeah.

Yeah, I think the problem there was not so much the business itself — which was actually quite interesting and controversial — but the finance director, who was making the presentation, was almost constantly making references to things that were going to push the shares higher in the market, and improve the “excitability” — in quotes there — of the shares, by listing the company on NASDAQ.

It was just something that was probably the last thing I would have wanted to hear, if I was actually invested in that company.

Bennallack: Just to defend them, perhaps they knew their audience there.

Rogers: I definitely would agree with that, actually. They are pitching it, like you say, to people who they want to directly invest in that company. But for our point of view, as investors, not so attractive.

Bennallack: No, not really the way we invest. I would say, ultimately, there are thousands of investible companies out there, and personally I avoid meeting management anyway, even if I arrange the management, so for me being swayed because I happened to see the CEO — let alone, we saw at least a couple of investor relations people giving talks for 10 minutes — I don’t think that’s likely to be a secure path to outperformance. But it might be a first step to finding a winner. Really you need to just be scanning the universe at all times, for the companies you like.

On that note — and actually, I’ve just realised I haven’t asked you what you thought of it, Nate. Sorry. Nate’s looking at me going, “Look, you’ve made the quip about the medical use …”

Weisshaar: You can’t just make fun of me and then ignore me.

Bennallack: Sorry, Nate. That was very amiss of me. What did you think of the show? OK, let’s move on …

What did you think of the show?

Weisshaar: I agree with most of what Mark said. A lot of the companies obviously were making the pitch; they knew who they were talking to. But there were a few that stood out as companies that I would be interested in, and potentially even Foolish companies.

One of them was Mattioli Woods, which is a private bank or wealth management type company. They struck me — or the CEO struck me — as a very realistic investor. He’s not promising ridiculous returns, he’s out to save his clients money on fees, and completely transparent with them.

He’s trying to develop a wealth management company that adheres to the client coming first, as opposed to the company’s commissions or the partners’ bonuses. That was an interesting one. The shares don’t look exactly cheap right now, but it’s the kind of company that I will keep an eye on, because if they ever did get cheap I would love to own a company run with that type of management.

The other one is Cohort, which is a small niche defence contractor.

Bennallack: I thought that presentation was very strong. Very good.

Weisshaar: Yeah. I think they have some very interesting business segments, and they’re small enough that the budget cuts that we’re seeing across the defence industry, they should be able to be nimble enough to slip through the cracks and still get the contracts that they want.

Bennallack: And yet, the fear about those cuts might possibly be producing an opportunity?

Weisshaar: I think they are winning on the shares. The shares do look pretty cheap right now. The company hasn’t avoided the issues completely; they’re under some pressure in a few of their divisions, but I think the focus on cyber and electronic communications security is a good one, because the military is one of the leading adopters of technology.

There will always be a need to make sure that their computers aren’t getting hacked, so I like Cohort. I need to look at them a bit closer, but they look like an interesting opportunity.

Bennallack: OK, perhaps we’ve got something that we can write our expenses against, from that visit. Generally, we’re more doing our traditional investing techniques, which for Mark involves checking that the company has never visited an investor show, or in fact that the CEO hasn’t been seen outside of Lancashire for 50 years, and preferably that the grandmother is still in charge of human resources.

On that note, Mark, what are you watching at the moment?

Rogers: That’s a brilliant description of it. I need to get that framed. That’s fantastic.

Bennallack: I was going to say, listeners may think that Mark will think that that’s an insult. Far from it.

Rogers: No, no, that’s brilliant. Thank you, Owain.

I’m actually going to talk relatively briefly, for a change, about a company here. Synergy Health company provides sterilisation services for hospitals. When you’re talking about things like bed linen in hospitals, that’s fairly low-margin, straightforward stuff. But the higher-margin end, where things get a bit more important, is the sterilisation of surgical tools and equipment, that sort of thing.

It’s a founder-run company. The CEO earns 3%, and it’s a market leader in the U.K. and Europe. Now, the reason why I’m talking about it is because it’s just had results out, and there are a few interesting pieces of news in there for investors looking for where the growth is potentially going to come from.

Two new contracts announced, in China and the U.S. The company, let’s say, doesn’t have a leadership position in those countries; it could certainly use a leadership position there. It’s trying to make inroads, and it’s signed up two new contracts there — two new hospitals for sterilisation services — and I think it’s potentially a bit more proof that they’re on track for maybe more impressive growth than the market is currently taking into account.

Bennallack: Just for context, how big is this company?

Rogers: It’s about £700 million sized. It’s not huge. I think there’s still potential runway there, but it’s a fairly niche market it’s in.

Weisshaar: You talk about growth potential in the U.S. and Asia. If I recall correctly, they’ve built their toehold in the U.S. via acquisition. Growing by acquisition is one way to do it, but it’s also a riskier way to do it, in my opinion. How do you view management, as far as their ability to make acquisitions at the right price, and make something good out of it for shareholders?

Rogers: It’s really interesting you mention that, because when you actually look at how the company has grown in the U.S. and got its toehold there, one of the acquisitions more recently was an acquisition out of bankruptcy, so very opportunistic. They managed to get in there at a price that you would imagine is pretty attractive.

A lot of the smaller companies, that don’t have the same kind of scale as Synergy, struggle financially, aren’t valued by the market by as much as they would be worth if Synergy acquired them, so you have some potential there for Synergy using shareholder cash intelligently to try and get in opportunistically at the right kind of prices.

I think the track record there is fairly good. The one thing that I would mention, though, is the debt levels there, which may be slightly more off-putting. If they took on more debt to finance more of these acquisitions, I might be a bit more worried at that.

Bennallack: Do you know off the top of your head how much of their income is long-term, recurring contracts?

Rogers: I don’t have that off the top of my head. Nate?

Weisshaar: Most of the contracts are two- to three-year contracts, so there is some visibility there.

Bennallack: That’s probably why they feel they can gear up, I guess.

OK, that sounds like an interesting one. Nate, what’s commanding your attention right now?

Weisshaar: Well, surprisingly, I’m looking at Shell these days. It’s not a company I would usually consider very attractive, but given the disappointing reaction to their latest earnings results, they did catch my attention. They’re obviously one of the oil majors.

They’re not the best as far as track records go, but I think they’ve positioned themselves interestingly because of their focus on natural gas over the past several years. I just see that as a good road forward. As we push towards lower carbon footprints, and you see countries like China trying to push away from coal power plants, the logical transition step would be natural gas power plants, and Shell’s vast reserves of natural gas in the Australia offshore areas is an interesting opportunity, I think.

Bennallack: Well, I am shocked, Nate, because we discussed Shell this month, I think, and you did see some of my excellent points about it; its exposure to the Australian liquefied natural gas — no, I didn’t mention that — but it did look quite cheap and it has got a good yield, so I certainly did mention that.

But you were worried about a couple of things. You were worried, really, about how it’s going to manage its capital, on the grounds that it hasn’t done very well in the past, and of course all these oil majors have to balance out the voracious appetite of their investors for income — Shell’s yielding about 5% — with the need to replace the stuff that it pumps and sells.

Have you become more confident, or do you think it’s just more in the price now?

Weisshaar: I think it’s more in the price, more than me becoming more confident. I still need to look into this a bit more, but as you say Shell doesn’t have the best track record for capital allocation. They’ve recently had write-downs on some natural gas assets that they acquired. You don’t like to see that, but in this type of industry that’s probably more the norm than anything else.

So, yes, that’s a question mark that I would need to have more thoroughly addressed, personally. The management’s making all the right noises, but how well will they stick to their discipline of where they’re putting their money?

Bennallack: OK. Finally it’s me, and Mark, you’ll be especially pleased to hear that I’m resurrecting my predilection to talk about banks.

Rogers: Oh, God.

Bennallack: I think we haven’t talked about banks for at least three podcasts, but those barren days are over.

This time it’s Barclays that has drawn me in like a moth to the flame. I just can’t make my mind up about Barclays. It’s got more than sufficient capital. It’s trading well below its tangible net asset value per share — let alone its book value, which is nearly £4, more or less — which suggests it could be worth more dead than alive.

Some people say it’s going to end up dead, so perhaps that’s an (Unclear) that you need, but I had a U.S. colleague do a sum-of-the-parts calculation for an arguably similar U.S. bank, Bank of America; probably a bit smaller on the investment banking side, but it’s got a lot of exposure there anyway.

That analysis reached the conclusion that a breakup of retail and investment banks; Bank of America and, by extension, maybe some of the others, could actually be profitable for shareholders by unlocking value.

Barclays didn’t suffer anything like the dilution forced on Bank of America, nor U.K. banks like Lloyds or RBS, nor, in my opinion, is (Unclear) as bad — it hasn’t had so many terrible write-downs. The thing it does have is a sort of revolving door of investigators, lawyers, various other people marching in and suing it for something or other, and that’s what makes it so difficult, is the risks to this share.

The rewards are clear and plain. It’s a bank that used to trade at multiples of book value, trading below book value, so this could be a share that, in sunnier times, could be worth twice as much, easily. But there are these unquantifiable risks about how much it’s going to get sued — so that’s the danger, really. It’s the reward potential, with the potential of being sued to oblivion.

Rogers: Yeah. Owain, I have a question of a personal nature.

Bennallack: Do you want to take this outside?

Rogers: Yeah, I was going to say — why I’m broadcasting on a podcast, who can tell? Now, this is one that may surprise you again, but I was also a shareholder of Barclays back, in 2009-2010.

Bennallack: Were you using some of the GW Pharmaceuticals products in 2009-2010? Renishaw, Barclays — cyclicals and banks?

Rogers: Let’s just say that there were a lot more things available at a lot lower prices than there are today. My question relates to the on-and-off regrets I’ve had about realising the value there, getting out — and taking my money out too early, by the way — it could have been a lot better if I’d held on for longer, there.

But do you think that this is a share that an investor like myself, interested in buying something today at these sort of prices, and just holding it, let’s say for 7-10 years, reinvesting the dividends — in your opinion is Barclays the kind of share that you can do that with, or do you think that maybe I shouldn’t beat myself up too much about realising the value there — treating it as more of a value situation? What’s your take?

Bennallack: Well, I definitely don’t think you should beat yourself up about that, because I’ve seen your guns. You’d do yourself some damage.

No, you shouldn’t beat yourself up about that, because in those days … it’s hard to remember how scary it was. We didn’t really know what was going to happen. Now we’ve seen a big bull market — everyone’s a genius in hindsight — so I think that’s fine.

In terms of buying it and tucking it away, if you said to me, “You can only have two options. It’s going to go badly, or it’s going to go well,” I would probably plump to think it’s going to go well. I think if you buy something this big, this systemically important, and this cheap, generally you’re going to do well over 10 years, but you’re going to have to not look at it, because all kinds of hideous things could happen on the way to getting there.

Personally, if it was to get near — maybe not even get to that book value; maybe it’s sort of 350 — and all of these clouds were still surrounding it, I would possibly even sell it.

Rogers: Yeah, that’s what I was going to ask, is if it hit 350 pence within a month or two of you making this call — and, let’s face it, it has the potential for doing that; you know how these banking stocks have moved over the last few years — you would potentially look to get out of your position there?

Bennallack: Well, I might, but that’s assuming that nothing had changed, in terms of how it was being sued, and who was suing it, and whatnot. But I don’t think you need to do that. I think if you could genuinely still get share certificates, like you could in the old days, and put them underneath your girlfriend’s Zumba equipment, pop them in the cupboard …

Rogers: I was waiting for you to get that reference in.

Bennallack: If you could literally leave it down there, I’m prepared to say — because nobody’s going to come and find me in 10 years — I’m not sure, obviously. It’s all at your own risk, but I’m sure it will be good over 10 years, but I think that it’s going to be a hairy ride and, personally, the investment for me is that there’s screaming value here, but the risks — as I say — the risks are really difficult to quantify.

Rogers: OK, that’s a great explanation.

Bennallack: Classic tricky share.

OK, Nate’s kindly let me off talking about … he doesn’t want to ask me a question about Barclays, so I think we’ll probably wrap it up there, chaps.

Rogers: OK, well, that’s great. Thanks, Owain.

Weisshaar: Yeah, glad to be here.

Bennallack: Cheers.

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