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Are Fairfax cutting the fat or cutting the flesh?
Roger Montgomery
June 20, 2012
Roger Montgomery and Ross Greenwood discuss the recent Fairfax Media (FXJ) restructuring announcement and its implications in this edition of Ross’ program on Radio 2GB broadcast 20 June 2012. Listen here.
by Roger Montgomery Posted in Intrinsic Value, Investing Education, Market Valuation, Radio.
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Does crunching the numbers pay-off?
Roger Montgomery
June 9, 2012
Roger Montgomery certainly thinks so – and he explains why Value Investors need to do their homework to experience exceptional returns in this Australian article published on 9 June 2012. Read here.
by Roger Montgomery Posted in In the Press, Intrinsic Value, Investing Education, Market Valuation.
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Will rowing faster plug Qantas’ leaky boat?
Roger Montgomery
June 5, 2012
Roger Montgomery discusses why the forecast profit downgrade foreshadows some creative accounting treatments at financial year end for Qantas in this ABC News interview broadcast 5 June 2012. Watch/Read here.
by Roger Montgomery Posted in Airlines, Investing Education, TV Appearances, Value.able.
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The Qantas profit downgrade – what are Roger’s insights?
Roger Montgomery
June 5, 2012
With a downgrade in forecast profit of 90%, what should investors be thinking? Share Roger Montgomery’s insights into this latest bad news for Qantas in this interview of ABC Radio’s The World Today broadcast 5 June 2012. Listen here.
by Roger Montgomery Posted in Airlines, Companies, Investing Education, Radio, Value.able.
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The Market is sliding, but have we reached the bottom?
Roger Montgomery
June 4, 2012
Roger Montgomery discusses his Value.able Insights into the the recent losses in the Australian share market, and what the short term future may hold for investors. Watch here.
This interview was broadcast on ABC News 24 on 4 June 2012.
by Roger Montgomery Posted in Investing Education, TV Appearances, Value.able.
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The Market is pegging back, but is it time to start buying?
Roger Montgomery
June 3, 2012
In this edition of ABC1’s Inside Business Roger Montgomery discusses his insights into the causes of the recent market losses and how Value Investors should be interpreting the changes – Roger appears commencing 3:27. Watch here.
This program was broadcast on 3 June 2012.
by Roger Montgomery Posted in Companies, Investing Education, TV Appearances, Value.able.
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Should online lottery firms be in your investment portfolio?
Roger Montgomery
June 1, 2012
Roger Montgomery discusses the expansion of Jumbo Interactive (JIN) and the implications of further developments in the online lottery ticket industry in this Money Magazine article published in June 2012. Read here.
by Roger Montgomery Posted in Investing Education, On the Internet, Value.able.
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What does Roger Montgomery think of Gina Rinehart’s Fairfax shareholding?
Roger Montgomery
May 30, 2012
Learn Roger’s insights into the near-term future for Fairfax Media (FXJ) as Gina Rinehart increases her shareholding in this discussion with 2GB’s Ross Greenwood broadcast 30 May 2012. Listen here.
by Roger Montgomery Posted in Companies, Investing Education, Market Valuation, Radio.
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Were investors hasty?
Roger Montgomery
May 28, 2012
It’s true that many Australian businesses are on their own path and even amid the financial tempest raging in Europe there will be companies that succeed.
Conversely there will many that fail.
I have maintained that beating the market can be made simpler by sticking to high quality issues.
Skaffold’s A1’s, I believe, have the lowest probability of ‘catastrophe’ within a year or two of receiving their score. Of course, you have to realise that business is dynamic and Skaffold’s quality scores will change with new information.
Furthermore, having the lowest probability of catastrophe is not to say there is zero chance of catastrophe. A 100-to-1 nag at Moonee Valley might still win the race.
Nevertheless, I would however rather have a diversified portfolio of A1s and A2s than a portfolio of C5s.
And this brings me to today’s announcement that Hastie Group has voluntarily appointed Administrators, just three days after the company announced accounting irregularities would result in a charge to profits of $20 million.
Hastie Group Limited (HST) has today announced that it has been placed into voluntary administration. Many investors will lose any and all the money they had invested in the company. If you are retired or about to retire, you can least afford such a permanent impairment to your capital.
I get so frustrated when I hear young advisers telling people on air to ‘only use money they can afford to lose’. I don’t know about you, but I cannot afford to lose any!
And that’s were quality comes into its own. Skaffold was designed to mitigate the risk of investing in those companies where the risk of events like the appointment of administrators is highest.
Skaffold’s quality scoring is based on decades of international academic research into forecasting collapses. And for us it just works.
At Montgomery Investment Management the Quality of a company is our first filter. A high Quality Score is the cornerstone to our investment strategy as well as the core of our investment decision-making. The second step is value. We reduce risk even further when we buy high quality companies only when they are at sharp discounts to intrinsic value.
Hastie listed on the ASX in 2005 and enthusiasm for its shares once pushed the market value of the company to $500 million and to a share price – just before the GFC – of more than $40.
So, one sign of impending danger was that from 2009 onwards the company’s Quality Score dropped well below investment grade.
Fig 1. Skaffold Quality Score History since listing. (International Patents Pending). Hastie Group
The second warning was that the company’s shares, when they were at the height of their popularity were trading well above intrinsic value and intrinsic value was not rising at a satisfactory rate.
Fig 2. Skaffold Line. Hastie Group. (International Patents Pending). Expensive in 2006-2008 and flat and declining intrinsic value from 2007.
For many investors Figs 1 and 2 might be enough to turn the page and look to invest elsewhere. For those with more than a cursory interest however, Skaffold opens a window to the performance of the company.
As Fig 3 reveals, the company was reporting profits but even rising levels of debt failed to stem declining returns on equity.
Fig 3. Skaffold Capital History (International Patents Pending). Hastie Group. Note declining blue line (ROE) despite rising red columns (debt) and rising green line (profits)).
And weak cash flows (Fig 4.) as measured by Skaffold’s Funding Gap (the green line was below zero every year since listing) ensured the company would never meet all of our investment criteria.
Fig 4. Skaffold Cash Flow (International Patents Pending). Hastie Group. (note the green line (Funding Gap/Surplus) is almost always negative – biting off more than it can chew?
Finally, I note that Skaffold does something I reckon is positively spectacular. Using the Cash Flow Evaluate Screen in Fig 4. above as an example, Skaffold’s computing engine converts the chart to plain and natural English! Its a simple paragraph that explains in easy-to-understand terms precisely what you are looking at. Imagine that being updated live for every screen and for every listed stock! Have a read…
Fig 5. Skaffold’s Auto-generated plain language Cash Flow Screen description. (International Patents Pending)
Avoid potential disasters with Skaffold’s Quality Scores.
Skaffold consistently identified HST as expensive or poor quality or both.
For investors who seek to give themselves every opportunity to avoid the landmines, Skaffold’s timely assessment of HST’s poor investment quality represents the kind of early warning signal you need.
Decades of academic research into the study of corporate failure are the backbone of Skaffold. Isn’t it time you made Skaffold your portfolio’s most important investment?
To find out more about how Skaffold can help you avoid potential disasters such as Hastie Group Limited and best protect your portfolio in preparation for the future contact Donna at Skaffold on (02) 9692 5750 or register to attend the next Skaffold online webinars from the complete comfort of your own home, office or combine harvester.
Posted by Roger Montgomery, Value.able author, Skaffold Chairman and Fund Manager, 28 May 2012.
by Roger Montgomery Posted in Investing Education, Skaffold.
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Why is BHP less than a sure-fire thing?
Roger Montgomery
May 26, 2012
In The Australian Roger Montgomery discusses why the laws of supply and demand suggest demanding times ahead for mining companies. Read here.
by Roger Montgomery Posted in Energy / Resources, In the Press, Investing Education.