Market Valuation

  • New ASX Investment Talk – Beating the Index

    Roger Montgomery
    September 14, 2012

    Join Roger as he explains how the long-standing principles of value investing can be applied so that you too can identify A1 businesses for your portfolio and beat the index. Watch here.

    by Roger Montgomery Posted in Insightful Insights, Intrinsic Value, Investing Education, Market Valuation.

  • Big Apple?

    Roger Montgomery
    September 12, 2012

    Did you know that the market capitalisation of Apple Inc. is now more than the entire equity markets of Spain, Portugal, Ireland and Greece combined? Its stunning. Surely Forrest Gump from Greenbow Alabama would be writing to Jenny with much enthusiasm. But what about its intrinsic value? Back in 2010 (http://rogermontgomery.com/is-apple-an-a1/) I wrote that Apple’s intrinsic value was higher than the share price at the time. The table below first published in July 2010 reveals the company’s pattern of rising intrinsic values. back then the price was indeed showing a small margin of safety.

    A couple of blog readers have subsequently told me they purchased Apple shares and obviously they have done nicely. But what about today?

    Only last year, when the share price hit $600 I wrote that I thought price had run ahead of intrinsic value (but not forecast intrinsic value) and the share price subsequently fell slightly. We also noted declining margins and market shares losses. But improving quarterly results and rising forecasts means revisions have resulted in IV estimates continuing their stellar rise so a revisit of our assumptions might be worth our time.

    The graph below reveals that our ‘revised’ back-of-the-envelope intrinsic value estimate for Apple is forging ahead. If you are confident that Apple’s pipeline of products will usurp the competition, take back market share and fill Apple’s coffers towards 1000 billion dollars and that the iPhone 5 – expected to be revealed this week – will knock everyone’s socks off, then the massive rises in intrinsic value, might not seem so extreme.

    Of course all intrinsic values are just estimates and while our haven’t done too badly for us – we’ve been spot on with BHP at $30 and done well on others – the reality is they can change dramatically as new information comes to hand.

    So lets keep an eye on whether Apple impresses this week with its new release.

    by Roger Montgomery Posted in Insightful Insights, Investing Education, Market Valuation, Value.able.

  • Reporting Season – Emerging Conclusions

    Tim Kelley
    August 30, 2012

    Reporting season is a busy time for us at Montgomery Investment Management. Studying results announcements is one of the ways we try keep on top of what is happening in the market and identify economic trends and investment opportunities.

    We do this in a fairly systematic way.  Every day we review, evaluate and catalogue every last results announcement made that day.  As I write, we have reviewed several hundred sets of financial statements and the accompanying commentary, representing around $700B of aggregate market capitalisation, with many more still to come.

    This analysis draws our attention to individual companies that are performing well, and complements the automated stock screening tools we use, including Skaffold.  It also gives us a sense of broader economic trends and the relative health of different parts of the economy.

    continue…

    by Tim Kelley Posted in Companies, Insightful Insights, Market Valuation.

  • Australian Bank results show 1 Speed Aussie economy – SLOW

    Roger Montgomery
    August 20, 2012

    The full year result by CBA recently was a good reflection of the level of growth Australia is currently experiencing – low. The banks reported cash NPAT was up just 4% for the full 12 months or $278m to $7.1b. However, if we back out the 15% reduction in loan impairment expenses, $191m, despite the oligopoly the big 4 have in Australia, the best they could manage was growth overall of 1-2% in banking, funds management and insurance. The 15% improvement in credit quality was definitely a surprise in the result given the scores of jobs losses recently. A development we continue to monitor closely.

    by Roger Montgomery Posted in Companies, Market Valuation.

  • Reporting Season Update

    Roger Montgomery
    August 18, 2012

    Over the past week more than 100 companies have reported their full year results. These results have begun to flow through Skaffold, resulting in the changes listed below for each company. A membership to Skaffold ensures you are constantly up to date with changes to the quality and valuations of every Australian listed company.

    To become a Skaffold member and start taking advantage of market inefficiencies that may transpire during reporting season CLICK HERE

    And here’s a list of the elements in Skaffold that change automatically as companies report:

    1. Earnings and Dividends, Capital History and Cash Flow Evaluate screens updated with 2012 figures
    2. New 2012 Skaffold Score
    3. 2012 Intrinsic Value – Actual
    4. 2013, 2014 and 2015 Intrinsic Value forecasts
    continue…

    by Roger Montgomery Posted in Companies, Investing Education, Market Valuation, Skaffold.

  • WHITEPAPER

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  • Materials stocks will be doing it tough. More bad news from offshore…

    Roger Montgomery
    August 16, 2012

    At its Annual General Meeting held in Mumbai yesterday, the Chairman of Tata Steel, Ratan Tata, reported an 89% plunge in its June Quarter 2012 net profit.  <http://economictimes.indiatimes.com/tata-steel-ltd/stocks/companyid-12902.cms>

    Mr Tata said the Company will need to restructure its operations due to a slackening of global steel demand.  From their 2006 acquisition of Corus, around half of Tata Steel’s 24 million tonnes per annum capacity is European based.

    Meanwhile, Hong Kong listed China Resource Cement has released a disappointing interim report to June 2012.  Accordingly, their net profit forecast for each of 2012, 2013 and 2014 has been cut aggressively.  Despite building capacity by 25% to 64 million tonnes of cement per annum, the gross profit margin per tonne for 2012 is expected to be less than half that recorded in 2011.  China Resource Cement’s net profit should be around HK$1.4 billion in 2012, down 67% from HK$4.2 billion in 2011.

    by Roger Montgomery Posted in Market Valuation.

  • You wouldn’t believe it…

    Roger Montgomery
    August 9, 2012

    Many believe that understanding economics is the key to being able to predict the stock market.  Curiously the Chinese economy is growing the fastest of all economies and is variously described as the global growth engine.  And the Chinese ripples positively impact many peripheral economies too, as my recent visits to Singapore have shown me.

    Meanwhile the US economy is in the doldrums, threatening to fall into another recession with anemic growth, stubbornly high unemployment and continued weakness in housing.

    And yet the Chinese market as measured by the Shanghai Stock Exchange A Share index remains 65% below its high of 6391.98 in October 2007.  Perhaps ironically the S&P500 made its high of $1565.42 on October 10, 2007 and today it sits just 11% below that.  If the Total Return index is taken into account, its sits level or just above its 2007 highs.

    So all that chatter about recessions, depressions, unemployment and the like counts for very little.  How many children are suffering needlessly because the money spent on economists isn’t directed to the kids?

    What we do know is that investors should be looking at individual companies.  Or talking to people on the ground.  In China, balance sheets are deteriorating as receivables blow out while in the US, of the 411 companies listed on the S&P 500 that have reported earnings so far this quarter, 297 have exceeded analysts’ estimates, while less than 110 have missed their forecasts.  And as many of our travelling clients have informed us, things seem to be swimming along in the US.

    Keep an eye on individual companies and you’ll go far.  So don’t worry about whether you should say Go Australia or not.  We say Go ARB, Go WOW, Go CCP, Go COH and Go CSL!

    by Roger Montgomery Posted in Insightful Insights, Investing Education, Market Valuation.

  • Credit Corp’s results announcement

    Roger Montgomery
    August 7, 2012

    Credit Corp (ASX:CCP) has just reported their FY12 results, announcing a NPAT of $26.6m versus market forecasts and company guidance of $25-28m.

    The company increased its 2H12 dividend to 16 cps and most analysts were expecting 15 cps forecast. The 16 cent dividend takes the full year dividend to 29 cents, which is 45% higher on the previous year.  The company has talked down the forthcoming year and cited increasing competition resulting in higher ledger purchases.  Investors need to accept this at face value rather than continuing to assume the company will upgrade again at the next half year (as they have done consistently in the past).  FY13 guidance for NPAT is $27-29m and DPS of 29-32 cps.  Based on an estimated 50% payout and an estimated 22% ROE our valuation is further estimated (estimated being the operative word here) to remain well above the current price.  The comments here are for educational purposes only and not a recommendation.  Be sure to seek and take personal financial advice prior to engaging in any securities transactions.

    by Roger Montgomery Posted in Companies, Intrinsic Value, Investing Education, Market Valuation.

  • Reporting Season – it won’t be much of a celebration!

    Roger Montgomery
    August 3, 2012

    Over the next 20 business days, approximately 1,250 ASX listed companies will be reporting their full year (or interim) results to 30 June, 2012.

    Twelve months ago, the consensus forecast for the year to 30 June 2012, was for 20% growth in earnings per share.

    Over the past twelve months that number has been progressively downgraded to nil, nought, nothing.

    For the year to 30 June 2013, the consensus forecast currently stands at 15% growth in earnings per share.

    Insights from the outlook statements will be interesting and it wouldn’t surprise us to see consensus earnings per share growth forecasts for the year to June 2013 to follow the same downtrend as those for the year to June 2012.

    At Montgomery, we will be using our proprietary fact-based investment process to analyse the results.

    We hope this reporting season will alert us to some new companies which own extraordinary businesses trading at a discount to their estimated intrinsic value.

    by Roger Montgomery Posted in Companies, Insightful Insights, Investing Education, Market Valuation.

  • MEDIA

    Have we finally reached the bottom of the market?

    Roger Montgomery
    July 30, 2012

    And what are Roger Montgomery’s Value.able Insights into the latest market developments? Learn more in this edition of ABC1’s “Inside Business” broadcast 29 July 2012.  Read/Watch here.

    by Roger Montgomery Posted in Energy / Resources, Intrinsic Value, Market Valuation, Takeovers, TV Appearances.