The following report has been contributed by Harley Grosser – a private investor. Harley has identified a small company he would like to share his findings and personal beliefs about called Paragon Care Ltd which is aiming to take advantage of the growing aged care industry. Paragon is a distributor and manufacturer of medical equipment, and has attractive prospects if it can continue securing major contracts with hospitals. Investing in small companies that have high growth potential but are yet to produce sustainable earnings is risky, but they can be rewarding for people with the right risk profile and investment horizon. Do not purchase or sell any securities without first seeking and taking personal professional advice.
The following article was contributed by Harley, and gives a very detailed account of Funtastic as a possible turnaround story. If you have the skill to identify them, turnarounds can be very profitable investments, although its not an area of focus for us at Montgomery Investment Management. In 2006, Funtastic fell to a B5 on our quality and performance ratings, and since that time has been outside the range that we would normally consider “investment grade”. However, as Harley points out, Funtastic may enjoy better times ahead if its portfolio of toys appears on enough Christmas shopping lists.
Funtastic is in the business of fun. As a leading toy distributor with domestic and international operations, as well an entertainment arm, Funtastic (ASX:FUN) make money by selling products that make us happy. The question is, would an investment in Funtastic at today’s prices set us up for pleasant future returns or is this one turnaround story that is worth avoiding?