Flights reduced, jobs cut at Qantas
The head of Qantas says high fuel costs and a series of natural disasters means the company is facing its most serious challenge since the global financial crisis. Today the airline’s chief executive Alan Joyce announced the company will retire aircraft, reduce flights to Japan and New Zealand, and cut staff. Roger Montgomery said “If they keep going the way they’ve been going – with the amount of planes that they’ve got, the amount of staff that they’ve got, the routes that they’ve got and the prices that they’ve got – then yes they’ll have to keep increasing the amount of money that’s contributed to the business”. Read transcript.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
LukeS
:
Once again Qantas gets a Rogering.
Adam W
:
Dear Roger
Great comments in the Fin today (Wed, 6/4). I smiled when I saw other analysts quoted in the same article referring to meaningless ratios such as P/E. Obviously they have not read your book!
Regards
Adam
Roger Montgomery
:
We had a polite and respectful giggle here at the office too when we read one analyst that said ‘you need ROE to be at least as high as you can get in a bank account!’ It appears even those who weren’t talking about ROE five years ago are getting the message and changing their methods for the better. This is good for value investors, indeed all investors, long term.
Punchy
:
Thanks to Graduates comments below. I have done about 15 IVs by hand using the homework sheet. I agree this was good practice. I spent all day yesterday learning how to use excel and am happy to report I have developed my first IV on Excel. Thanks for all the advice you are a generous group. Its true I did learn a lot about how the valuation process works.
I am having an internal debate about the RR as the drop from RR 12% to RR 10% seems to be a whopping 27.8% drop in IV. So setting the RR is critical?
I tested this using WBC 2010 annual report data provided by John M on November 19 2010.
My new Excel sheet calculates IV of $28.07 at 10% RR and $21.95 at 12%RR. This result matches John M’s advice. I will have a look at the book and see what it says about setting the RR as the variance bothers me a lot.
Roger Montgomery
:
So a 20% change in your RR triggers a 20% change in IV? Doesn’t seem unreasonable in that light.
Punchy
:
No the decrease in IV percentage terms from a 10% RR to a 12% RR is from $28.07 down to $21.95 not the other way. My point is not the Math but the sensitivity of selecting the RR to the IV result. The difference between 10% RR and 12% is so wide a mistake with selecting the RR will render the IV either too conservative or too aggressive. I am looking for a way to make the selection of the RR less exposed to personal confirmation bias.
Andrew
:
Congrats and welcome to the journey Punchy. You appear to be on the right track your WBC valuation is a dollar off mine ($27.11 on 10%RR) which is a negligable difference in the scheme of things and nothing to worry about as my spreadsheet and calculator will be slightly different then yours.
Your right, choosing the appropriate RR seems to be a tough part, the thing is there is no right or wrong way to do it and you just need to come up with a way your happy with. Others have discussed how they come up with theirs on random other posts. Just remember what Roger says, you don’t reduce the risk by adopting a higher or lower IV. A bad company will still be a bad company whether you choose 10% or 100% RR
Just stick to core concepts of investing in HIGH QUALITY companys and buy them at a large discount to what their worth and you should do quite well over time.
fred
:
I missed the latest 15 picks by Roger if anyone has a minute could you please post them…….Thanks
Roger Montgomery
:
I will publish a new list later this week, or early next week Fred.
Andrew
:
If you join the Eureka report you can see them still. I am not on there but the others who are seem to enjoy them.
Shane Doherty
:
Dear Roger
your work is facinating. I have been review associated articles (associated) with your website. There are two which i have lost the links too.
1.) Shows the sorces of information from the bank sites (Commsec, ETrade, etc) and provides examples/highlights the relevant sources of information>
2.) The article was accessed via a highlighted words (“data” and other words (i think one was “input”)
i would appreciate if you could advise the appropriate links for these articles (i ahve lost the links)
Regards
Shane Doherty
Roger Montgomery
:
Thank you Shane. Here is the link: http://rogermontgomery.com/wp-content/uploads/2010/08/Where-to-find-the-Source-Data-for-Value.able-valuations.pdf
Punchy
:
I have finished a draft excel sheet for calculating IV but dont know how to post or link it to this page. Can anyone tell me how to share it?
Cheers Punchy
Andrew
:
You can’t, and it’s probably best too. I myself feel indebted to Roger a little bit for the help he has given me through this blog and his book and i want people to buy his book, if people started posting their spreadsheets and models up here, no-one would buy the book as many people don’t want to pay the money but get the formula.
if you want to test the setup there was a good post a long time ago called something along the lines of “How do your valuations compare” where Roger gave us ten or so companies and we worked out the IV for them, he then gave us his answers to see if we get the same.
Everyone has since made their own valuation system each with their own unique points. I do though think this could lead to an interesting post and advertising for your book Roger. A post from some graduates explaining how value.able has helped them and where they are now on their investing journey (i.e how they decide what a quality company is etc). Might give you a break from posting lists of A1 companys.
Or is a break a similar word to PE ratio for you Roger? I sometimes get the feeling you don’t sleep between running a fund and analysing companys, this blog, selling your book, tv appearences and your many seminars and other appearences as well as being the go to man for quotes on companies in the press.
Roger Montgomery
:
I have been collecting all the spreadsheets (haven’t spent any time checking them collectively) and the only two stumbling blocks actually has been how to display them and what the disclaimers should say (whether each author needs to have an AFSL etc…)
Ash Little
:
Lol Roger
Don’t display mine. It is too hard to follow and will just confuse the issue, Plus as you say no licence so buyer beware
Brad
:
anyone had a look at GR Engineering IPO?
Jonesy
:
Brad – there was a previous post where this was mentioned (from the top of my head I think it was in the “Who makes your A1/A2 small cap list”) – some of the concerns raised were that $30million was paid out as dividends prior to this capital raising of $30million… Also, very low capex spend in the last 18 months. I had a look at the prospectus and didn’t feel there was enough information there / much historical data to make a fully informed decision.
Ron shamgar
:
Oversubscribed!!
Will list at 30% premium…. Mark my words!
Punchy
:
I have noticed that several versions of excel templates exist on other blogs for Rogers IV calculations but nothing from Roger himself. Has anyone got the template in the format used by Roger in the post “What is your WOW Value.able valuation now Roger?”
I would prefer to get it from the official RM site. If its not available I will have a crack at doing it myself but will have to learn to use Excel first. Just looking for a shortcut to that pain.
Cheers Punchy
Andrew
:
I don’t think Roger will publish one on his site and there are some pretty good reasons for that when you think of it.
For example, the IV calculation chapter is probably the least important chapter in the book but gets so much focus that if people would be able to get their hands on a Montgomery intrinsic value calculator they would not buy his book, they would just grind out valuation after valuation and not understand what they are looking for and will then start complaining when they start losing money.
I would be wary of what you can get or read about the valueable approach on other sites. I have read some other blogs about Roger and his book and the feeling i get is many on those forums don’t quite understand the method of investing Roger preaches and would there for likely have some inaccuracies. I have seen some where they claim to have set up a spreadsheet to work out MQR’s which is laughable as no-one outside Roger himself knows how to calculate this.
Me thinks some people are using it to try and create a profile for themselves and using Rogers popularity as a vessel so there needs to be a sense of danger and buyer beware in regards to these. This blog is probably the most accurate in regards to anything to do with Rogers method (mostly because it is run by the guy himself).
There are some great benefits to doing it yourself punchy, let alone teaching yourself Excel which i think is a wonderful program and is extremley helpful in so many areas, its pretty simple as well. By doing it yourself you will also learn better and you can set things up the way you want. Some others have tweaked certain aspects of it so this way you do it the way you want and don’t need to accept any problems or limitations that the other might have.
Just a handy hint from someone who has created one for himself (well three as i keep changing things due to problems i identify as i learn more).
-Don’t do a simple input and get valuation type generic calculator, use it as a table where you can keep the details there for reference on each company after you have done it, this will make it easier to make adjustments when new information arrives as well as a good guide of reference when comparing valuations against others on this blog or wanting to help out others who seek help with their IV. Otherwise you will have find the information and to redo the calculation everytime you want to check it.
Adam W
:
Dear Punchy
Pen and paper work just as well as an Excel template! For the first 10 or so calculations of IV I used pen and paper before developing a spreadsheet – I think doing it by hand helps understand the process rather than just punching numbers into Excel.
If you are going to use a spead sheet my advice would be to construct your own. That way you truely understand how it works. For example, some people will input values in ‘per share’ terms while others will input ‘total equity’ and ‘total earnings’ and have the spreadsheet calculate the rest.
Cheers
Adam
RobertD
:
In my experience, Excel / Spreadsheets are a must have tool for any serious investor. If you pick up on someone else spreadsheet, you really need to understand how it has been put together, otherwise you are driving blind. My recommendation – spend the time and learn Excel…. it’s a ValuAble tool !
Rob
:
Hi Punchy,
Unless you enjoy the pain of handwritten spreadsheets, as per one of Ash’s friends, the next best investment you can make, is to learn a little excel. Recreating Roger’s spreadsheets as it appears in the blog mentioned is really quite simple.
Of course the best investment is to buy Roger’s book which has the formulae explained and tables you can use in that simple spreadsheet.
Cheers and good luck with Excel,
Rob
Jonesy
:
No pain no gain Punchy. I’ve spent hours coming up with my spreadsheet, incorporating the Value.able formula and continue to make adjustments and edits. I’ve found it a great learning experience and feel that my knowledge has improved throughout the process. As hard going as you may think it is, I’d highly recommend it.
Punchy
:
Thanks for all your Graduates comments above. I have done about 15 IVs by hand using the homework sheet. I agree this was good practice. I spent all day yesterday learning how to use excel and am happy to report I have developed my first IV on Excel. Thanks for all the advice you are a generous group. You are right, I did learn a lot about how the valuation process works.
I am having an internal debate about the RR as the drop from RR 12% to RR 10% seems to be a whopping 27.8% drop in IV. So setting the RR is critical?
I tested this using WBC 2010 annual report data provided by John M on November 19 2010.
My new Excel sheet calculates IV of $28.07 at 10% RR and $21.95 at 12%RR. This result matches John M’s advice. I will have a look at the book and see what it says about setting the RR as the variance bothers me a lot.
Roger Montgomery
:
Hi Punchy,
The drop in RR should result in an increase in IV! Hopefully that was a typo and the spreadsheet behaves properly.
Craig
:
Challenge after challenge. Can anyone recall a purple patch?
Lloyd
:
Yes…. for a 12 month period after Ansett collapsed in 2001. Every dog has its day, however brief and fleeting!