Insightful Insights

Roger provides his latest insights into the current state of the Australian share market (and a lack of value therein), the impact of changes in the mining industry on the Australian dollar and future foreign investment, and the outlook in the United States and its “Fiscal Cliff” with Ross Greenwood on Radio 2GB.  Listen here.

This program was broadcast 13 November 2012.

by Roger Montgomery Posted in Energy / Resources, Insightful Insights, Radio.

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AMA, MXI, AHE and ARP share prices are all booming on the back of surging demand in an under supplied car market, causing a shortage of capacity which is driving up margins for the sector’s operators.

You can read one of our recent post on the subject here.

Naturally we have been drawn to the operators in the sector on the back of this capacity shortage. The ability to charge higher prices in a capacity-constrained environment is great if they are enduring, but I must ask, is the entire sector in a little bubble? A bubble in profitability and short-term market growth?
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by Roger Montgomery Posted in Companies, Insightful Insights, Manufacturing.

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In this Australian article published 10 November 2012 Roger discusses why listening to share market cliches is likely to result in poor portfolio returns.  Read here.

by Roger Montgomery Posted in In the Press, Insightful Insights, Investing Education.

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World Steel Production, according to Macquarie Equities, has been cut by 4 per cent to an average 1.7 billion tonnes per annum over the 2013-2015 period.

China’s steel production accounts for an average 760 million tonnes or 47%, approximately 50 million tonnes more than their forecast average demand.

Global mining capital expenditure is expected to peak in 2012 at $142b and decline by around 10% per annum to $115b by 2014.

Earnings downgrades are being experienced by major excavator companies like the Japanese listed Komatsu, where mining equipment makes up 30% of its US$22b revenue line.

by David Buckland Posted in Energy / Resources, Insightful Insights.

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By Russell Muldoon & Roger Montgomery

We like to keep an eye on monthly new car sales statistics produced by the Federal Chamber of Automotive Industries. For a number of businesses we are interested in, including Carsales and ARB Corporation, they are both beneficiaries of a high level of new vehicle turnover.

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by Roger Montgomery Posted in Insightful Insights, Investing Education, Manufacturing.

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In the wake of the RBA’s decision to leave interest rates unchanged it’s interesting to see some of the commentary on the attractiveness of fixed interest versus ‘riskier’ investments, including property and shares. RBA governor Glenn Stevens is reported to favour investors moving into these asset classes away from low-yielding term deposits.

We have recently been doing some interesting analysis to better understand the long-term value proposition currently offered by the Australian equity markets. We will share the results of the analysis here when completed, but the emerging view – for those with a long-term perspective – is that governor Stevens has a valid point.

by Tim Kelley Posted in Insightful Insights, Investing Education.

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Do Imdex (IMD), Sundance Resources (SDL), Woodside (WPL), Axiom Mining (AVQ), Seven West Media (SWM), Silverlake Resources (SLR), Mesoblast (MSB), Titan Energy (TTE) , Metcash (MTS), Emeco (EHL) or Magellan (MFG) achieve the coveted A1 grade? Watch this edition of Sky Business’ Your Money Your Call 6 November 2012 program now to find out, and also discover how David approaches investing in small cap mining stocks.  Watch here.

by Roger Montgomery Posted in Companies, Insightful Insights, Market Valuation, TV Appearances.

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From time to time we are asked about option strategies. There are many different types of option strategy, and the merits of any given one depends very much on the particular strategy and the circumstances, but there are a few general principles that are worth keeping in mind. These include:-

– Buying or writing options is a zero sum game. This means that when one person sells an option to another, one of them will win and the other will lose. This is in contrast to ordinary shares where it’s reasonable for all long-term investors to expect a positive return
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by Tim Kelley Posted in Insightful Insights, Investing Education.

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In releasing the Government’s white paper, Prime Minister Gillard told the Lowy Institute the 21st Century would see Asia’s return to leadership. Asia’s rise was “not only unstoppable, it is gathering pace.” Treasurer Swan said Australia “must continue building on our strengths to take advantage of the opportunities that are unfolding in the Asian region”. Large productivity gains is a major focus of the white paper.

Of the twelve separate categories that make up the rankings in the “Global Competitiveness Report” from the World Economic Forum, “Labour Market Efficiency” remains Australia’s nemesis. If our political leaders are serious about productivity gains and workplace reform, then our poor record in areas like burden of government regulation, wastefulness of government spending, flexibility of wage determination and infrastructure bottlenecks need to be urgently addressed.

by David Buckland Posted in Insightful Insights, Value.able.

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We have been watching with some interest the attempts by the Steelmakers Australia consortium to engage with the Arrium board (not that we have ever owned shares in Arrium).

Often in an unsolicited takeover offer, the initial bid will be a “sighting shot”, which the board will quickly reject. According to the conventional storyline, the bidder then ups the offer, the target board relents, and shareholders are left with the impression that the board has managed to secure a better deal for them.

In the case of the Arrium bid, Steelmakers Australia appears to have diverted somewhat from the standard script. They have come back with some modifications to their original proposal (shorter due diligence, evidence of funding capacity), but have not lifted the price.

This is not be a good sign for the Arrium board, nor its shareholders. It indicates that Steelmakers Australia sees itself having a strong negotiating position.

The reason for this may be the $2.14b of debt on Arrium’s books. Steelmakers Australia may expect that Arrium’s directors will be reluctant to negotiate too hard lest the offer disappear, leaving the debt problem to be resolved by the board.

by Roger Montgomery Posted in Insightful Insights, Manufacturing.

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