Bargain Hunting (29/10/2013)
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.
David T
:
Roger,
Based on pure metrics, does an A3 beat a B1?
Roger Montgomery
:
about even in a portfolio and across time.
Archie Archbold
:
Unfortunately, I am 64 and do not have 20 years to wait for longer term results. I can not afford a 30% fall in my investments as occurred in 2008 (my net loss by 2010 was 15%) This is not a criticism of any fund, however, it is likely to be a misjudgement on my part. My concern arose from the above video which suggests that there may be little value in the market now and that the current bull market may only last til 2015. My decision to invest was in response to somewhat contrarian comments in the media, which broadly correspond with my views, and the strong performance of the fund to date.
Buying into a period of possible “irrational exuberance” would seem to be rather risky on my part. The adage of “buy and hold” may not prove true over the next 10 years. The evidence from the stock market movement for the past 6 years is not strong. In my view we are in a somewhat uncharted territory with a credit binge commencing with the move to fiat money in the 1970’s. Massive currency printing across the world. Private debt has ballooned. Housing prices in Australia are booming. Housing bubbles have burst in US, Ireland, Portugal, Spain. Australia appears to be willing to “sell the farm”. And so on …
My reality is that I do not know where to invest my SMSF funds and my savings. I cannot find a relatively safe place to invest with reasonable returns.
As I have suggested, perhaps I was wrong in investing in the Montgomery Fund at this time of uncertainty. It seems that staying in cash with 1% real returns is the only “safe” investment I capable of making.
Again, this is not a criticism of the Montgomery From. Rather, it is poor decision making on my part.
I apologise for my self-indulgent and hysterical post.
Roger Montgomery
:
Hi Archie,
We can’t tell you whether The Montgomery Fund will rise or fall in the short term. What I can tell you is that no matter what your age you should operate rationally and that means buying business with bright long term prospects at deep discounts to an estimaet of their intrinsic value. We do believe there is little value and our models are suggesting the move towards higher weightings of cash. Unlike other funds, we do not have to be fully invested at all times. Also helpful is our ability to participate in new floats, some of which are coming on at attractive prices because their private equity vendors need to encourage the market for the pipeline of floats they have emerging over the next few quarters. Once people start talking about the dangers of fiat money I cringe. there is no reasonable alternative and those who suggest gold as one, may talk themselves into an hysterical buying binge into 2015 or 2016 but that does not mean they are right either…
Brian Aitken
:
Based on Roger’s presentation I wouldn’t be surprised if the cash allocation of the fund has increased as Roger’s team sells out of overpriced shares, locking in profits, in readiness for the market to pull back to more realistic levels. I’ve been gradually feeding money into Roger’s fund since August last year & am very happy to have seen the unit price steadily climb. I would have thought that no matter where the index is when the next reporting season arrives, there’ll be a few good buying opportunities about.
Archie Archbold
:
I’ve just purchased units in the The Montgomery Fund and I am concerned that I have picked the absolute worst time to do so because of the recent surge in the ASX200.
Is there any information that will allay my fears?
Roger Montgomery
:
Hi Archie,
I don’t know whether it will prove to be the worst time or not. Most importantly you should be investing for many years not for a few days or weeks. You might like to think about the long term returns offered to someone who purchased 1 Coca Cola share in 1919 when it listed at $40. A year later, the shares fell to $20 (down 50%). Since then however and despite wars, oil, currency and financial crises, assassinations, inflation, deflation and stagflation but had you remained invested and reinvested the dividends, that initial $40 has grown to many millions.
As an investor, you wil receive a lot of regular correspondence including a welcome pack, access to white papers, our Best of the Best Magazine a bi monthly performance report which may include top completed holdings and access to occasional videos exclusively for investors. Finally if you are worried about the daily and weekly gyrations perhaps the stock market is not for you; Buffett’s special gift is simply being disciplined. It’s when markets are volatile that most investors lose their heads, while a few plant the seeds for their own future fortunes. Berkshire Hathaway’s share price was 58 per cent more volatile than the S&P500 Index. Only investors who remained disciplined and held their Berkshire shares would have enjoyed the long term performance. By way of example, over the 20 month period to February 2000 – the peak of the internet bubble – Berkshire shares lost 44 per cent in market value terms, while the market gained 32 per cent. Would you stick with a Montgomery fund if it underperformed by 76 per cent over two years? Buffett did just that, preventing emotion from interfering with a disciplined strategy. Warren Buffett isn’t worth US$53.5 billion because he sold at the first sign of dark clouds on the horizon or because he sold Berkshire shares when he thought they’d gone as high as they’re going to for the foreseeable future. No. He has more than tripled the return of the S&P500 since 1976 by simply buying and holding. As my friend John Morrison once told me, “you’ll get rich buying and selling but you become wealthy buying and holding”. Perhaps this is what Warren Buffett was referring to in 1994 when he said, “Ben Graham taught me 45 years ago that in investing, it is not necessary to do extraordinary things to get extraordinary results”.
Greg McLennan
:
Yeah, unless you need the money in the next six months, I wouldn’t worry too much.
Greg McLennan
:
G’day Roger,
This is probably not directly relating to the bargain hunting topic, but I thought I’d relay a bit of scuttlebutt about Codan. I was talking with a guy I know around here who does a bit of prospecting for gold around the Beechworth area. He used to use a Minelab detector as they were the best at the time. However he says that the competition has caught up and not only are they just as good, but are far easier to use and half the price! He is now using a competitor’s device.
Of course, my information is worth what you paid for it, but if it is true, Codan may have some challenges in the next little while. I am not a current holder so it doesn’t affect me either way, but if anyone does hold them it might be worth investigating to see if it is true.