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.
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Roger Montgomery heads back to Matrix to find out what happened to the share price and, more importantly, where it’s going. Read Roger’s article at www.eurekareport.com.au.
Qantas has reported a $250 million profit just a week after announcing plans to lay off 1,000 workers. Roger Montgomery says the airline does have to change drastically to cover the soaring costs of new aircraft. Read the transcript.
In the height of reporting season, and following the announcement of the annual results from Matrix Composite & Engineering (ASX:MCE), Roger Montgomery shares his insights and Value.able expert opinion with Ross Greenwood. Listen to podcast.
When to sell Rule #1 is: No junk policy. In the second part of Roger’s selling mini-series, he identifies Rule #2: Expensive.
While market declines alone don’t prove merit in selling shares, the broad declines do suggest a disciplined approach to shares significantly above an estimate of intrinsic value is necessary. For me, if the businesses are also of a lower quality in terms of our A1-C5 ratings, for example Asciano, Amcor, Westfield or Santos – there is an additional urgency to review.
Three weeks ago these C-rated businesses were all trading at prices significantly higher than an estimate of intrinsic value. Fast-forward to today (19 August 2011) and despite the falls, Safety Margins are are stubbornly high:
Asciano: -75 per cent
Amcor: -39 per cent
Westifeld: -46 per cent
Santos: -76 per cent
For us, it is neither here nor there whether you agree with our valuations and therefore Safety Margins. What is important for us and the portfolio we manage, is the combination of quality and value. In the absence of either trait, we would be unlikely to remain a holder of the shares.
It can be potentially permanent devastating holding shares in poor quality businesses at prices significantly above value.
Imagine you acquired shares in a business today for $2 and estimated those shares to be worth $4, rising to $4.10 the following year. Then suppose after six months the share price rises to $3.00. What would you do? Value.able Graduates, are expected to answer that question correctly. Now imagine the price of those same shares has risen to $6 in the same time frame. Would your answer change?
It may be tempting to set up some hard and fast rules about when to sell. I am not as comfortable with this approach as I am with the idea that the appropriate premium above intrinsic value at which to sell depends on the future prospect for the company and therefore its intrinsic value for the future.
Your response may be that there is greater uncertainty in future valuations. If that is your view, then you should sell.
Whilst we should not try to predict the future, it is important to look through a conservative telescope. What will be the value of each company in your portfolio next year? And the following year? Understanding the business and using that understanding to help establish prospects for intrinsic value appreciation in the future is a vital component of the Value.able approach, we advocate here.
If you are yet to join the Graduate Class, order your copy of Value.able immediately at http://www.rogermontgomery.com/. Once you have 1. read Value.able and 2. changed some part of the way you think about the stock market, my team and I will be delighted to officially welcome you as a Graduate of the Class of 2011 (and invite you to become a founding member of our soon-to-be-released next-generation A1 service).
Value.able TV #5 was recorded at Montgomery HQ on 19 August 2011.
Posted by Roger Montgomery’s A1 team, fund managers and creators of the next-generation A1 service for stock market investors, 19 August 2011.
Visit http://www.rogermontgomery.com/ for Roger Montgomery’s step-by-step guide to valuing the best stocks and buying them for less than they’re worth.
Qantas is planning to drastically cut costs by forming two new airlines and cutting 1,000 jobs in Australia. Roger Montgomery reveals his thoughts on Qantas. Read the transcript.
Congratulations are in order at our office.
Not to Forge or ARB for their full year results released today but to Chris B. our resident Albert Einstein, data integrity guru and valuation formula genius. Chris became a CFA today.
Well done Chris.
Thanks for all your hard work and keep it up – its working! Just look at the chart.
We are all excited to have you on the team.
(note: Yes everyone the results ARE due to significant amounts of cash (inflows) that the process Chris helped developed DID NOT deploy into the market) Well done Chris and on behalf of our investors thank you.
Posted by Roger Montgomery, 17 August 2011, with sincere thanks.
WARNING: This publication has been prepared by Montgomery Investment Management Pty Ltd ABN 73 139 161 701 AFSL 354 564 (“Montgomery”) for the purpose of providing general information, without taking into account your particular objectives, financial circumstances or needs.
An Information Memorandum (“Offer Document”) for the Fund(s) is available from Montgomery. Potential investors should consider the Offer Document in deciding whether to acquire, or to continue to hold, units in the Fund(s). Montgomery, its officers, employees and agents believe that the information is correct at the time of compilation, but no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors or omissions (including responsibility to any person by reason of negligence) is accepted by Montgomery, its officers, employees or agents. This online blog contains general information only and is not intended to represent general or specific investment or professional advice. The information does not take into account an individual’s financial circumstances. An assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial or other professional adviser before making an investment decision. No guarantee as to the capital value of investments in the Fund(s) nor future returns is made by Montgomery.
In this appearance on Your Money Your Call, Roger Montgomery answers viewer questions on McMillan Shakespeare (ASX:MMS), Ansell (ASX:ANN) Think Smart (ASX:TSM), Thorn Group (ASX:TGA), GR Engineering (ASX:GNG) and Technology One (ASX:TNE). Roger also reveals which gold stock continues to attract his Value.able eye? Watch the interview.
Your teenager wants to invest in the stock market. They have $6000 sitting in an ‘advantage saver’. What should they do? Roger Montgomery suggests this young investor seek out businesses with high rates of return on equity, little or no debt and bright prospects. The final step is to ensure shares in such businesses are acquired at prices less than they’re worth. In this interview Roger also shares his suggested portfolio allocation strategy to minimise risk for this young investor and reveals why he was pleased by Credit Corps (ASX:CCP) full-year results. Watch the interview.
In this appearance on Your Money Your Call, Roger Montgomery reveals nine extraordinary businesses he recently acquired for The Montgomery [Private] Fund. Roger urges investors not to be fearful of market downturns, but rather embrace the opportunity to acquire extraordinary A1 businesses for prices less than they’re worth. Roger also answers viewers’ questions on Forge (ASX:FGE), Macmahon Holdings (ASX:MAH) and Decmil (ASX:DCG) – whose intrinsic value is forecast to rise to above $8 by 2013? Watch the interview.
If anyone were to make a second run at Qantas, now would be the time to do it. Read Roger’s article at www.eurekareport.com.au.
