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Is there a headline-grabbing event you would like my perspective on?

Is there a headline-grabbing event you would like my perspective on?

Last week I invited those of you who have registered to receive emails from me to let me know what headline grabbing events you would like me to comment on. I am currently collecting all the requests on this page and those that are the most popular, I will put up on my blog over the comings months.

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.

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195 Comments

  1. Hi Roger,
    Navitas (NVT) released it’s half year results today, Look’s like they had a good half: NPAT up 45%, EPS 45% and the DIV up 47% and it has a high ROE, the share price look’s a bit pricey to me, but what do you think?

  2. G’day Roger,

    If I’m not to late for your list, just wondering if you could value News Corp (NWS), Navitas (NVT) and has your views on Woolies (WOW) changed since the sales figures missed analysts figures?

    Cheers

  3. G’day Roger,

    I would appreciate your assistance in appraising and valuing Cellestis (ASX:CST), a biotech company that has recently realised its maiden profit following commercialisation of its tuberculosis (TB) diagnostic products. I usually find something wrong with every company I appraise, however I can’t seem to find anything problematic with this company in terms of its current B/S, P&L, C/F, REO, issued options, executive remuneration or competition threats; and its future cash flow, earnings, profit and growth outlooks appear to be very promising. The one puzzling exception is that I am unable to isolate the reason for the sudden drop in share price that occurred mid November 2009, except to observe that the healthcare index (XHJ) also suffered a significant decline at or about the same time.

    Another fledgling biotech company I like is Stirling Products (ASX:STI). This stock will be difficult to appraise at this time because there is no earnings history. Coincidentally, this company is developing products to treat TB and AIDS. It also has interesting prospects in the areas of organic animal growth hormones and human obesity reduction treatments, which I firmly believe to be growth industries.

    Kindest Regards

    Robert

    • rogermontgomeryinsights
      :

      Hi Robert,

      As you can imagine its not possible yet for me to cover every stock but I have put together a spreadsheet with every company readers here have asked for a valuation of. The highest ranked received 8 requests and many received one. There are about ten I will cover – because they received multiple requests – in the next few weeks here on the blog.

  4. Hi Roger,
    I have been folowing company which seems to fit all the criteria for being a great business, at a cheap price. (Unless I am missing something!) Sedgman (SDM). Global leader in Coal manufacturing plants. Consistent high ROEs (around 25-30% year after year) with basically no debt. Seems to be at aroung a 50% discount to JB Were’s DCF valuation. FY10 Dividend yield around 6% fully franked. Great cash-flow which seems to be increasing every year. Interested in your thoughts?
    Adam

  5. Hi Roger,

    I have taken great notice of the way you have explained the value of companies. My question is about two stocks, The NAB and WorleyParsons. I purchased both at about $29 and am wondering whether it would be better to sell the NAB’s and buy worleys or do you think it is worth keeping the NAB?

    I started trading stocks about 3 months ago and did quite well by only keeping most about a week and making a profit. Worleys I bought and sold between 28 and $30 five times before I have been stuck with them the last 6 weeks also, is it worth taking a punt on Prima Bio med?

    Dino

    • rogermontgomeryinsights
      :

      Hi Dino,

      Thanks for your encouraging words. I don’t punt Dino and neither should you and trading stocks – as you have just discovered – is an activity popularised by those that make several small and frequent profits, offset by infrequent but much larger losses. The net result is not great. I have my bank spreadsheets and valuations in front of me (the valuations may change at any time of course – but not as frequently as the price) and the NAB valuation based on forecast profits is $21 for 2010 rising to $37 three years out (makes the +$40 prices of 2007 look like irrational exuberance). Hope that helps. Sorry I cannot give you specific advice about what to do now. I always had to clean up after myself. Hopefully you haven’t lost as much as the value of the lesson the trade has taught you.

  6. Hi Roger,
    What are your thoughts on Options rather than Shares as an investment focus? Regards
    Paul S

    • rogermontgomeryinsights
      :

      Hi Paul,

      Like anything if you know what you are doing and have a competitive advantage you can do very well. ALl investors however must stay in the circle of competence or take a great deal of time and care to expand that circle first.

  7. I very much enjoy your comment on Sky Channels share market program. Based on the program “your money your call” I purchased a parcel of PRR (Prima Biomed) shares that Les recommended. Do you have any views on this speculative stock? Best regards,

    • rogermontgomeryinsights
      :

      Hi Kerry,

      I am sorry but I do not have a view on this speculative stocks. Perhaps you could give Les a call. Let him know that you watched the show, purchased the stock and ask what he is doing now.

  8. Hi Roger,

    Happy New Year! Next time you update you blog, it would be nice if you could give us a valuation of AGO, MGX and MMX. Their share price has been going up very fast in the last few weeks with rumour of iron ore contract price to go up by 20-30% this year. Thanks

    Daryl

    • rogermontgomeryinsights
      :

      Hi Daryl.

      Hope you are well. Thanks for the suggestion. As you can imagine, time is precious. I will try to get around to all stocks but the most requested have to come first.

    • rogermontgomeryinsights
      :

      Hi Jim,

      WIth the ASX losing its regulatory power its ripe for a takeover offer I presume. Time will tell. Don’t speculate! I haven’t got a recent valuation handy but I will do it because its received a few requests I think.

  9. Hi Roger,

    I am interested in purchasing shares in Woodside Petroleum. I am also
    interested in your valuation.

    Regards,
    Pero

    • rogermontgomeryinsights
      :

      Thanks Pero,

      Woodside has received a few requests. Find the link on the front page of the blog to my YouTube Channel and you should be able to find a video of me comparing Woodside and Santos.

  10. rogermontgomeryinsights
    :

    Hi Roger,

    I’m thinking of purchasing CSL at $31 to$32 EPS compound growth of 32% and Equity per share compound growth of 17% ROE was lower at 19%.

    Can you please share your thoughts?

    Thanks,
    Louis

    • rogermontgomeryinsights
      :

      Hi Louis,

      A great business whose value should rise significantly over the next few years. Of course its profits will be affected by the falling US dollar – that’s why the apparent value exists.

  11. I would like your wisdom on 2 stocks. ASX:AND – 100,000s of shares were issued in recent months due to options being taken up, possibly due to its fund raising activities earlier. Now is there a way I can foresee this – where to look – months ago ? ASX:SRX – looks like a JBHifi in the biotech sector. Is there a risk with this “one-trick” pony share? Thanks in advance, Ben

    • rogermontgomeryinsights
      :

      Hi Ben,

      I have had a few requests for the ASX so I will try to comment in the next week or so.

  12. Roger,
    Do you see the gold mining stocks as a safe place to invest, dependant on the company, due to the rising gold price?
    Tim

    • rogermontgomeryinsights
      :

      Hi Tim,

      Gold is a weird one, as someone once pointed out; we dig it up out of the ground, melt it and clean it and put it back under the ground again. There are very passionate views about the price of gold and what it is going to do. The bulls may be right, unfortunately you will have to be too because valuations are based on profits and gold company profits are based on the gold price.

  13. Like your stuff Roger. Chasing what your valuation of Westpac is now and maybe forward 6-12 months. Cheers Seth

    • rogermontgomeryinsights
      :

      Hi Seth,

      Remember valuations are not a prediction of the share price. I have no idea what the share price is going to do. Westpac is currently worth about $20.50 per share rising to $26.50 next year.

  14. Hi Roger,

    I’m struggling to find much value in the market right now. Two stocks that sound like your thing (unloved & high ROE);

    Dexion (DEX)

    1300Smiles (ONT).

    If you have an opinion -keen to hear it at your leisure. Beach comes first this time of year.

    Cheers,
    Andrew

    • Hi Andrew I own some ONT shares and feel I may be able to offer a few thoughts. Yes this listed dentist has had consistently high ROE and a history of increasing profits but it is very illiquid and ownership sometimes feels like your part of a private company.
      I have talked to a few “brokers” and people in the dental industry and the main criticism is “Why would a professional work for wages when they can set up their own practice”. I believe the company gives young dentist a way to gain capital and experience before going out alone and also possibly an outlet for the dentist that doesn’t want the hassle of running their own clinic.
      It is a small but interesting company and I am a happy holder, although capital gains have been slow to materialize over the last couple of years, my intrinsic value calculation is higher than the current price, I am staying put.

  15. Hello Roger,

    Do you see any value in the Australian reit sector?There has been a lot of dilution of these companies shares to pay down debt.I have been reviewing the NTA and many are trading at 20% of NTA.The investment company Orbis has been buying into many.

    Thank you,
    Michael

  16. I enjoy your insights, Roger, and probably the only thing I can think of the say/ask at present is: Have you valued MORTGAGE CHOICE? Using your basic valuation method (from your short white paper from a while back) and then using another fairly simple method I keep coming up with a figure that shows it to be priced at a reasonable discount to it’s current intrinsic value. Regards – Liam

  17. Roger,
    What are yout thoughts on share price growth of property trusts over the next 4 months and 18 months? MOF, GMG, IIF, IOF, GPT, CHC, Australand

  18. Roger
    Would like to know your thoughts on a share called Nexus Energy. I have owned this share for more than three years, they have been as high as $1.90 .They have had a fair amount of bad luck this year. Longtom is now compleat, though Santos
    It seems only take gas as they require and not a set amount per month. Crux find seams a long way off.
    There are a few brokers saying .70 cents should be correct price now not 31 cents. Hold or sell.
    Regards
    Troy

  19. I value your analysis and i am a follow or your fundamental comments at sky business news. May i have your views on wooodside and bhp and lei and nab and anz theses are my current stock – on current prices.

  20. G,day Roger,

    One to add to your list of companies to value if I may, Reckon (RKN). It has high ROE and no debt.
    Have a great Xmas and happy new year.
    cheers

  21. Hi Roger,

    As one of my “Best Businesses”, Is it possible for you to give me your valuation on Woolworths? As today it has gone down to $26.69

    I know you also have been up beat on CSL valuation, which is also one of my preferred Businesses. Is purchasing up to $31.50 still good buying?

    Regards,
    Roger Sousa

  22. Hi Roger,
    I don’t understand what is happening to AGL (code AGK) which seems to be well run but is languishing for months. Also CALTEX which is going nowhere. Is it time to sell both or are the good times just around the corner?

  23. Do you have any valuation of HFA. News from the company is in short supply. I have believed the share to be substantially under valued but its moribund sp has me worried.
    Best regards,
    Fred

    • rogermontgomeryinsights
      :

      I don’t have a view on HFA. It just hasn’t popped up on my radar which regularly scans for favourable characteristics.

      Roger

  24. Hi Roger,
    I had purchased shares for gold anomly limited (GOA), few months back when it was gold aura limited and planning to take over anomly limited. I was hoping share price to increase and bought fair bit of shares @ $0.057. But with current fund raising it has done it’s share price has fallen to $0.038. What would be ur recommendation, to hold on to that stock to come up in value or is it still going to fall down? What is the prospect of that company?
    Thx ria

    • rogermontgomeryinsights
      :

      Hi Ria,

      Speculative companies are full of danger and without a valuation, you are really flying blind. The key is to know what the company is worth BEFORE you buy its shares. I cannot help you with this one because I don’t follow it or have a valuation for it.

      Roger

  25. Hi Roger,

    I would like to know your valuation of Elders and whether you think it would be a good 5-10 year investment?

    Thanks,
    Ian

    • rogermontgomeryinsights
      :

      Hi Ian,

      I am collating all the valuation requests and will get back to you with valuations of the most popular requests in the next couple of months.

      Roger

  26. Hi Roger..could you please have a look at PLV,FAR AND GOA.. I have an interest in all of these Companies and would like to know if they are worth hanging on to… Cheers for taking the time.. Regards Rodger

    • rogermontgomeryinsights
      :

      Hi Ryan,

      Thanks for your feedback. I will put STW in the list to review after I have collected all the requests.

      Roger

  27. Dear Roger,

    Christmas Greetings. At some stage when you have some spare time and space I would appreciate your views of LICs

    Thank you

    Patrick

    • rogermontgomeryinsights
      :

      Ok Patrick. In advance I can tell you that there is a very simple strategy that, provided you are not in too much of a hurry, seems to work. Focus on the LICs with great returns and stable management. By that I mean check the staff turnover of the management company. If stable for a long time and with great returns, you buy them at very large discounts to NTA and sell them at premiums. Of course there is an element of timing here (you want the NTA to be rising too) which I am the first to admit I am no good at.

      Roger

  28. Season’s Greetings!

    Would you be kind enough to value the following stocks?

    Redflex RDF Commonwealth property trust CPA Oilsearch OSH

    Thanks

  29. Hello Roger

    I noted your comments on NAB and CBA, and as my portfolio is heavily weighted towards the bank.s I was wondering if you could provide me with your valuations for the four big banks as well as Suncorp and whether you regard any of them as good businesses worth having. I assume from your coments that you think favorably of CBA but not so of NAB.

    Thank you and Best Wishes for Christmas and the New Year.

    Ross Hocking

    • rogermontgomeryinsights
      :

      WIthout giving all my secrets away, just be aware that the CBA is trading at my long term valuation and the rest of the banks all look over priced. Very overpriced. For example NAB is trading a good 15-20% above my valuation. The value of course could rise, but rather than speculate, I prefer to wait for a demonstrated track record.

      Roger

    • rogermontgomeryinsights
      :

      Hi Ross

      I think CBA is the best performing bank from a business economics perspective. The NAB’s valuation should it proceed with it purchase of Axa, will drop from $25.50 to $21.30 on present estimates. Of course my valuation could change but that will only happen when more information becomes available. AT present the information I have about Axa and the terms of the deal have a negative impact on NAB’s valuation. They are paying $4.6 billion for businesses that earn $240 million! Not a great return on equity.

      Roger

  30. What do do you think of Boart Long Year and it’s current shre price (.34 cents)?
    Would you buy at current prices?

    • rogermontgomeryinsights
      :

      In short I would not. It appears that it will take some time for my valuation to catch up to the current share price.

      Roger

  31. Hi Roger,

    I would just like your opinion on two stocks at the moment as of the 18/12/2009 AGL and Telstra. I was just wondering your intrinsic value on both of these shares

    Thankyou,
    Scott

    • rogermontgomeryinsights
      :

      Hi Brian,

      I will put them in the list for consideration once all the requests are collated.

      Roger

  32. Dear Roger,

    Merry Christmas.
    I was just wondering if you could give us your valuation of ORG in the new year, when you have some time.

    Thanks very much.

    Kind regards,
    Kelvin
    Private investor

  33. Medium and long term outlook for PHC given its $1.3billion debt level and the reduced medicare rebates in Pathology

  34. Roger,

    I enjoy and value your comments on the business channel. Just wondering if you could give me your opinion on Straits Resources Ltd (srl)? I have been trading them but are now looking longer term.

    Regards,
    David

  35. Hi Roger.

    It is good value watching you on Sky Business. I am currently investing a small amount of money for my mother and currently own Focus Minerals (fml) and am following Flinders Mines (fms). Am in both for short to medium term only (waiting for positive multiple announcements from both by January end). I understand this is high risk; but the upside for my mum is greater than the downside.

    On another note, I have been lucky picking “a good thing”. In another 3-7 years you will be a prominent tv personality in Australia. It is a pleasure watching your skills.

    Have a nice day,
    Mark Joseph

  36. Hello Roger,

    Enjoy your thinking regarding company valuations. Could you send me valuations on my portfolio to help me accumulate with more confidence please? AAD,AAX,AAC,ANZ,AWE,WDC,WDS,SGM and TFC (sandalwood).

    I’ve also held WOW since 2.79 and feel around 26.00 is still a bargain.

    Thank you Roger, look forward to hearing from you.

  37. Hello Roger,

    I have viewed your opions on the Sky Business chanel with great interest I noted your comments on Industrea. I was wondering if you could give a valuation on a company called Imdex. ASX Code IMD. It is in the same sector as Industrea and was wondering which of these companies as the better value.

    Thanks,
    Stan

  38. Hey Roger,

    Love ya work on the business channel. Was wondering if you could give me a valuation on TFS Corportion (TFC)? I hold a reasonable amount of these shares cause I believe from my reasearch that they are undervalued at these levels. I’m 22 and started out buying shares near the start of the year and been slowing building my portfolio.

    Cheers,
    Andy

  39. Hi Roger,

    Thanks for taking the time to read my comments

    I was just wondering if you could give me a fundamental analysis on the companies Speciality Fashion Group- code SFH and Boart Longyear-code BLY

    Also if you have time PRR and MEO( but i understand if you don’t have time for these two).

    I enjoy watching you on the Sky Business Channel. You are teaching me not to get caught up in all the fizzle and just to look at the fundamentals and ability of a business to earn profit, with potential to increase that profit going forward. I will adopt this method in 2010 and see how i go.

    How can i buy a copy of your book?

    Once again thanks and have a merry Xmas and New Year!

    Mark

  40. Hi Roger,

    Looking forward to when your book is available and hope you enjoy your Xmas and break.

    I did notice you say on Your Money Your Call to some callers to email re lesser known stocks so I hope you don’t mind if I ask your opinion on a green stock, bearing in mind that I am aware that these are difficult to predict. Wanting to ‘do my bit for the planet’ I have invest in CWE Carnegie Energy which is using wave energy. Given that wave energy seems to be flying under the radar compared with solar, wind, hydro and nuclear but seems to be doing very well with its trials at Garden Island and expects to be a fledgling commercial proposition in late 2010, do you think it is harder for this newer technology to break ground against those that are better known with greater investment already under way? I ask this because it seems that ‘might may be right’ in the alternative energy industry simply as a matter of the monetary investment already committed which then leads me to the question as to which alternative energy source has the greatest amount of investment and in what order are the sectors currently falling?

    Rgds,
    Frances

  41. Hi Roger,

    I saw you on Nina May’s Your Money Your Call on the Sky Business Channel last night and you asked if viewers had companies they wanted valued you would try to value them.

    If its no trouble could you value the following three stocks? Stock code (SFR) Sandfire Resources NL, (AQA) Aquila Resources Limited and (SLX) Silex Systems Limited

    Many thanks,
    Con

  42. Hi Roger,

    I would be interested in your valuation and opinion on a small company called FSA Group It offers a range off debt solutions for individuals and small business plus none confoerming homes lending. Its sailed through the GFS increasing profits, high return on equity management has a big stake in the business and it looks cheap, on my calculations mid 50cents

    Thanks,
    Bretton

  43. saw you on Your Money Your Call tonight and was impressed. I wanted to know whether you have a newsletter with stock recommendations? I’m also curious to know whether you have valuations for some of the stocks below: HGO AAM ESG RXM FML CFE SWK IGR EMU

    Thanks,
    Sree

  44. Hi Roger,

    Im a fan of yours, I understand when you talk about valuations about a company it makes sense . Could you please do a valuation on MQG for me, as i’m thinking of purchasing some shares to see if this is the right time.

    Regards,
    Jim.

  45. Hi Roger,

    I just saw you on Your Money, Your Call, and you are a pleasure to listen to. I was wondering what your thoughts are on Oil Search (OSH) in the short term?

    Regards,
    Lisa

  46. Roger,

    Find your thoughts on “your money your call” insightful.

    What is your opinion re CXP and ALL? Two stocks with good roe, roc, history of increasing dividends and earnings, low relative debt.

  47. I hold shares in MACMAHON HLDGS [MAH] what do you value them at for 2009 and 2010?

    I would also like to buy shares in some Australian companies that pay a dividend of 5% or more and have good ROE. Capital gain is also important to me. Shares in companies like Woodside, Csl, Bhp, One steel, Leightons, Woolworths, and Newcrest are all great companies but the dividend just is’nt worth investing in. The capital gain over the past 2 years is not sufficent to warant buying them. Do you know of some stocks that are worth while? All the best Paul Bourke

  48. could not get through to your show to night thursday i was looking for you opinion on 2 stocks toll holdings paid 8 50 for them and i would like to know about resmed as well and what they do in the future thank you

  49. Could you please give me avaluation on Carnavon Petroleum (VCN) and Nomad Building Products (NOD) if availible? I hold both these stocks.
    Thanks,
    Les

  50. I was watching you on Your Money Your Call and I would like to know what is your valuation of mcmhanon MAH.
    Thankyou,
    Dom

    • rogermontgomeryinsights
      :

      Hi Don,

      I posted my thoughts on MAH back on 23 December – http://rogermontgomeryinsights.wordpress.com/2009/12/24/what-is-macmahon-worth/

      What is MacMahon worth?
      By rogermontgomeryinsights
      On the Sky Business Channel with Nina May recently, a caller rang in and asked for my valuation of MacMahon Holdings Limited (ASX Code: MAH).

      I ran the numbers and received mixed signals. The return on equity of the company has only exceeded 21% in one year – 2008. In 2006 returns on equity were less than 1% and since 2002 ROE with these two years removed, has averaged just under 14%. This is not a return on equity to get excited about. Disappointingly, the company has also raised $216 million from shareholders, and diluted them by increasing the shares on issue by more than 300% since 2000.

      The decline in borrowings between 2007 and today from $169 million to $111 is initially encouraging, as is the reduction of retained losses by $86 million since 2002, but since 2007 the company has raised $78 million through equity raisings. Arguably it is not the performance of the business that is reducing the debt burden and the retained losses simultaneously, but the performance of the company’s PR team. Finally, at a price of 59 cents, all the value investing margin of safety is gone. Indeed the price today is about my value for this company two years out. I cannot predict what the share price will do – it may double from here, but on present performance expectations, such a move would not be justified.

      Posted Roger Montgomery, 23 December 2009

  51. Enjoy the show on the Business Channel Roger :)

    What are your thoughts on Santos (STO)? They seem a very up and down company, I bought them just over a week ago at $15.00 when they appeared to be on the way up then things have gone south since.

    I am looking for a solid long term purchase, do you think Santos is worth its current value and more importantly what do you think its potential value is?

    Michael

  52. Hi Roger,

    I love watching you on Foxtel and was hoping that you would discuss the figures for BHP and AEO.

    Is there any chance that you could please forward the information on and how do I register for your blog.

    Many thanks for your time.
    Angelita

  53. Hi Roger.

    I enjoy your comments on stock valuation.

    We have the stocks ANZ,QBE,CSL in our portfolio as well as a couple of specs RSG,WDR and PRR.

    If you could provide any comments it would be much appreciated.

    Kind regards,
    Linton & Erin

  54. What is the Value of AEM and do you see the recent announcments in relation to a mine in Thailand reflecting the share price

  55. Hi Roger,

    I have a lot of time for your opinions having listened to you on Sky Business. You seem the most knowledgable of the panelists by a long way. I’m interested in your valuation for The Reject Shop (TRS) for FY 09, 10 and 11.

    Thank you

  56. Hi Roger,

    I have just been watching you on “Your Money Your Call” during which you
    kindly offered to value companies if a viewer sent you an email request.

    I would therefore like to request a valuation on a mining services
    company called Forge Limited (stock code FGE).

    Many thanks,
    Sue

  57. Roger,

    There have been two what appear to be “new” investors buying in to PPX – DFA and Franklin Resources. Now that PPX is approaching becoming a straight global paper merchant (after sale of much of manufacturing, and closure of the rest), does this seem an investment prospect?

    I have always seen merchants as, if they are good, efficient users of capital in that often working capital is covered by creditors terms against debtors out-standings. Whilst an equity issue is likely, to shore up the balance sheet, what do you think about PPX as a medium-term prospect?

    John

  58. Hi Roger,

    Only discovered your YouTube channel last night and it was great to listen to you talk. Just wondering what your thoughts are on Tabcorp as a long term investment?

    Regards,
    Anna

  59. Hello Roger,

    Thank you for your advice for viewing tomorrow night.
    I know you must have 100’s of people asking for valuations of companies and I have recorded all that you have given out through the media so far.
    My investments are in my personal super fund from which I am taking an allocated pension,so I cannot afford too many mistakes.
    I like to have one or two small companies in the fund and have purchased a small quantity of Patties Foods Limited. Whatever the financial position of the country is,we all have to eat.
    From what I have been able to read through the ASX screen, I believe this company is on the “right track”.
    When you have the time Roger, could you please advise me what you consider the Intrinsic Value of PFL to be?
    I don’t trust myself to do the calculations, and would far prefer to rely on your estimation.
    All the very best for Christmas and the New Year. I will be watching tomorrow night.

    Kind Regards

    Paul

    • rogermontgomeryinsights
      :

      Hi Paul,

      I have finally had a look at PFL. Its value is about 80 cents and while it is expected to rise over the next three years, it still won’t get to the current price. The company is thus overpriced. PFL also raised a lot of money in 2007, evidently to pay down some debt, but today the debt is right back up there again. Not a first class business I am afraid either. Of course none of this is a prediction of the share price which could halve or double. Valuing a company is not the same as predicting the price.

  60. ‘ll certainly be watching your final stint on “your money your call” tomorrow night 17th Dec. One favour though – your assessment of WFL (Willmott Forests) would be welcome. Thanks in anticipation and ENJOY your break … cheers … neville benson

  61. Thanks Roger,

    My wife and I really enjoy and value your program on “your money, your call”.

    We also agree – JB Hifi is a terrific business. We have currently invested in KRL and would love to hear your thoughts/analysis of the company.

    Cheers,
    Andrew

  62. Dividends and franking credits will contribute a larger proportion of investor returns this decade. I am interested to read your views on this and what your macro predictions are concerning inflation vs deflation vs stagflation and how these views contribute to your stockpicking.

  63. Hi Roger,

    I’ve watched you a number of times on Your Money Your Call and really enjoy hearing your comments and thoughts on various stocks. I have some questions I was hoping you’d be able to answer for me.

    First of all, you mentioned to one caller that you have a particular way of valueing companies and that if she emailed you, you’d send her back the information on how to do that. Could you send that over to my address please?

    Second, a (dissapointing) trend that I have noticed over the (roughly) 2 months or so is that the Australian stock market has been under-performing most of it’s peers. When the DOW has been up say 100 points in the past, we would normally be up around 45 points.

    Recently if the DOW were to close up 100 points, we’d be lucky to finish the trading day in the green. What I find hard to understand is that we have weathered the GFC far better than the U.S, U.K, France, Germany, Spain etc – yet our market is under-performing all of those countries. I would have thought we should be out-performing those countries? I’d just like your thoughts on this. As I am writing this the DOW futures are up around 70 points and our SPI futures are down 14 points!

    Finally, I’ve been looking over some stocks which have ‘lagged’ since the March rally. I’ve compiled a list and am considering buying these soon. CSL, Caltex, Blue Scope Steel, QBE and Westfield.

    Of those I think CSL and Westfield are the top two highest quality stocks, but after the recent fall in the Caltex share price it is looking very attractive at around $8. What do you think?

    Thanks in advance,
    Steven.

  64. Hi Roger,

    I was watching Your Money the other week and I was wondering if you would value ROC?

    Kind regards,
    Leo

  65. Hi Roger,

    This is not really a ‘headline grabbing event’ but I wonder if you could provide some feedback on valuing listed investment companies. Obviously they are the sum of their investments (including cash) held and this is the basis for calculating NTA/share but is this their value, or does value depend on the underlying value of the assets they own?
    I notice many LIC’s like CAM often trade at a hefty discount to NTA and just wonder if this is an arbitrage opportunity to pick up the underlying shares (assuming you like them) at a discount.

  66. Hi Roger,

    I’m wondering what your views are on the value of Nomad biulding Solutions NOD.

    I thought they looked like a pretty solid company with 91% shareholder equity and a good outlook for the mining sector in WA. Reasonable ROE outside of this year.

    Look forward to your book.

    Cheers,
    Steve M

  67. Hi Roger,

    You have been a vocal supporter of MMS for a while now but I have noted that your recent comments taking a more cautionary tone in response to uncertainty over the Henry tax review and its outcome for future MMS revenues.

    In a situation like this, where all that is known suggests a quality business which is undervalued (which would normally suggest holding on), would it be prudent to also estimate a ‘worst-case scenario’ valuation based on possible future events (speculation!?). When I did this recently, I came up with a “worst case” valuation closer to $2.50 and considered selling all/some of my shares.

  68. G’day Roger,

    I know your a big fan of both MONADELPHOUS and FLEETWOOD. Just wondering if you are starting to see value emerge after the recent drop in share price for Fleetwood and the price of Monadelphous being flat like the rest of the market recently.

    Cheers.

  69. Roger,

    A few more questions if I can :

    1) I know you prefer stocks with no debt, but how much debt is acceptable? I have been looking at IVC, it has ROE above 45% but also has debt to equity above 250%! Do you think that this makes a high ROE less valid when it is achieved with such high debt?
    http://money.ninemsn.com.au/shares-and-funds/research-a-company/results.aspx?inforeq=historical&code=IVC
    2) I understand that you use analysts consensus estimates, how important are these to your valuations? I noticed that many analysts EPS growth estimates suddenly turned negative when the market collapsed in 2008. Would this cause a large difference in your valuations if we had another major event?
    3) Forgive my ignorance on this, but can you just clarify, when you are talking about equity, is this the same as book value? For example, when you are talking about a price that is “2 times equity”, is this the same as “2 times book value”?
    4) Do you find that some stocks are very difficult to buy below their intrinsic value? I have been waiting for WOW to fall in price, but it never seems to get to a level where I am comfortable to buy!

  70. G’day Roger,

    If I can make a comment in regards to the state of the Australian economy using my very own local Westfield index. In October last year when visiting my local Westfield I was shocked to see so few people in there, so I knew the economy was in trouble, When I went again in March this year (when the world according to the experts was falling apart and we were headed for another great depression) I was quite surprised to see heaps of people there shopping so I took it as a good sign on the economy and starting buying shares again.

    Well l went to the local Westfield last night (Thursday night shopping) and I was blown away by the amount of people there, the place was packed, it took me ten minutes to find a car park, when we left at closing time 9pm, we were stuck in a traffic jam for 5 minutes.

    So from what I saw last night I think Gerry Harvey might be right and it will be a bumper Xmas. Also Roger you will be happy to know, JB Hifi was packed to the rafters, lots of people buying big screen TV’s and computers.

    Cheers

  71. Roger,

    There is very little coverage of agricultural stocks such as AAC and PAG, and as I am a farmer I am interested in how these companies profitability compares to small family farms. We are continually told by experts that we need to expand to get economies of scale but from what I can see these large listed farms are making less profit than my small farm. What should be paid for these stocks, or is agriculture valueless?

    • rogermontgomeryinsights
      :

      Thanks Craig, I will add it to the list of possible companies to value over the next few months. I am also working on the format to present the valuations within.

  72. Hello Roger,

    Thank you for your most recent blog in which you nominated your top 5 ROE stocks.

    After some research I bought a small parcel of Southern Cross Electrical Engineering ($1.67) whose numbers suggest an excellent business.

    I am interested on your thoughts concerning the future growth options available to SXE??

    Best Wishes,
    Nick

    • rogermontgomeryinsights
      :

      Hi Nick,

      Please keep in mind that when I discuss stocks on air it is in relation to a question about what I like. Because I like something however doesn’t mean its a recommendation to you to go and buy it. Please remember that I did also say that it was included as a more speculative addition to my list. I cannot add any more information, I’m afraid, lest it begin to sound like I am recommending the stock.

  73. Roger,

    A few questions (assume for all quesions below that I am referring to stocks with low debt and high return on equity) :

    1) If you see the market as overvalued and most stocks you look at above their intrinsic value, do you just stay in cash until they become cheaper, even if you could be waiting years (like the 2003-2007 period)?
    2) I know you like stocks that pay no dividends, but what happens if management does something stupid and the stock price plummets? At least you have got something from your investment if you have received dividends.
    3) Do you have any concerns about buying a stock that has low liquidity (as it could be difficult to sell if something goes wrong)

    Thanks, Richard

    • rogermontgomeryinsights
      :

      In answer to your question (assume for all quesions below that I am referring to stocks with low debt and high return on equity):

      1) I look at individual companies rather than the market. If there are no individual companies that are cheap, the answer is yes.
      2) You have misunderstood my stance on dividends. Its quite a common misunderstanding. My position is that all things being equal, a company with a high ROE that can retain its profits and compound them at a high rate is worth more than a company with the same ROE but paying some proportion of its earnings out as a dividend. I am quite happy to buy companies that pay dividends, I bought Fleetwood earlier this year on a dividend yield of more than 20%, but the price I must pay for them is lower. On the second part of your question, you are right, the assumption is that if management is going to retain profits they must generate high returns on those retained earnings. The track record of management doing stupid things however is long so I can understand shareholder reticence towards management hanging on to the cash.
      3) Even managing more than $100 million I bought shares with low liquidity but I was right in those cases and their superior performance eventually attracted increased liquidity. Had I been wrong then yes, the illiquidity would have been a problem. They key is to worry more about being right, then you don’t have to worry about the liquidity.

  74. Hi Roger,

    Following you on the TV shows is really helpful to my investment decisions, so thanks very very much.
    I’d also like to have your view on current commodity bull trend. I understand that you like to value companies based on ROE, RR, etc, but do you ever try to reasonably predict the metal / commodity / gold price for next year? While you may say that is speculation, but a reasonable prediction based on supply / demand would also help in determining the company value?

    • rogermontgomeryinsights
      :

      I am interested in commodity companies. There’s something in the fact that billionaire Jim Rogers has been saying expect new highs in virtually all commodities over the next decade. there’s also something ominous in Warren Buffett’s purchase of a railroad company. Both men clearly believe that oil prices will rise substantially. I think its impossible to predict prices of anything in the short term, however I do believe that over longer periods there are supply/demand considerations that are easier to discern. With regards to taking advantage of this, I have so far been biased to investing in the commodity itself rather than stocks. Companies that mine a commodity have risks that aren’t related to the commodity price. For example there is execution risk, board room risk, funding risks and exploration risks, not to mention stock market risk. You may believe that the gold price is going up but the gold explorer whose shares you have just bought, doesn’t find any gold! You may believe the wheat or corn price is going to go up but the farm you just bought has its crop wiped out by a flood. I have thus far taken interest in commodities directly rather than through stocks.

  75. Is it possible to value the Agribusiness and LNG/energy sector (i.e. in particular Gunns – which is trading well below its NTA and Origin Energy, which is considered the top play in its space.)

    Also, could you value QBE?
    Thanks, James

    • rogermontgomeryinsights
      :

      I’ll put these on the list and see how many others want them valued. The most popular requests over the next few months will be valued and posted.

  76. Could you value CTX (now seems the right time to buy given it has come well off its recent highs.

    Being a contrarian investor, what are some stocks that are out of favour but will eventually return to their glory days.

    Thanks, James

    • rogermontgomeryinsights
      :

      You have to be able to predict the SIng. refiners margin. “The price of all fuel sold by Caltex is calculated using an import parity price as a basis – that is, what it would cost to land fuel from Singapore refineries into Australian terminals. This includes the Singapore benchmark price for refined petrol or diesel, the addition of a quality premium to take into account Australia’s high fuel standards, plus shipping costs and cargo insurance. This is then converted from US dollars per barrel into Australian cents per litre.” You are a better man than me if you can do that with a degree of accuracy. That said, I will put it on the list to value in the next few months.

  77. G’day Roger,
    Heard you on Your Money Your Call talking about your rankings for the big four banks, just wondering what order you rank them in, and what value do you place on them?. Do you think that the big four will leave the regional banks way behind in their dust over the next cycle?
    cheers.

    • rogermontgomeryinsights
      :

      The big banks are already leaving the others in their wake and the CBA is leaving everyone behind when measured by economic performance. Here’s how I rank them by economic performance for the next year: 1) CBA 2) WBC 3) NAB and 4) ANZ. Prices now however are about right in the case of the CBA and overpriced for the remainder.

  78. Australia Minerals & Mining Group Limited

    Dear Roger

    Further to following your recent commentary on various floats, just wondering if you are covering anything in the resources sector, such as Australia Minerals & Mining Group Limited. Could you please advise if you have or will be making any such comments?

    Thanks and regards
    Bruce

    • rogermontgomeryinsights
      :

      At this stage all I can do is put it on the list. Some of the recent floats are for exploration companies which are impossible to value on a going economic concern basis.

  79. Just a suggestion that you could cover all this takeover rumourmongering in regard to BHP’s next takeover target.

    How could a hedge fund get this type of info and “leak” it. Is it legal for hedge funds to announce this sort of thing? Considering they long WPL after they leak it isn’t there some sort of repercussion for them? WPL did not flatly deny this but just said no announcement was made of any formal offer and that they do not want to sell.

    Also do you value CSL at all?

  80. Hi Roger,

    Would you be able to give me your opinion on a company called ARB Corporation (code ARP). My research suggests to me that the financials look good (strong compound earnings growth over the past 7 years and very low debt). The management of the company also seems to be quite sound. Further, it’s ROE is 24.5%, a figure it has maintained for that past 7 years or so which also gives me further encouragement. It is currently trading at 3.7 time equity which does seem to represent good value. I’m would be keen to know what your valuation of the company would be.

    Regards,
    Phillip

    • rogermontgomeryinsights
      :

      Hi Phillip,

      I will put ARP on the list to value in coming months. If I divide the ROE by say 10%, I get a rough multiple of 2.5 times equity. This is by no means a valuation but it tells me the company will have to be retaining and compounding a large proportion of its profits to be worth 3.7 times equity.

  81. Roger,

    How serious do you think the impact of the Dubai debt issue will be? would it possibly impact the earnings of Australian miners and mining engineering company?

    • rogermontgomeryinsights
      :

      The Dubai issue is a small one for most Australian businesses. I cannot however tell you what the impact will be on share prices because this is largely dependent on perceptions which I find impossible to predict.

  82. Hi Roger,

    Thanks for your email and hope you are well.

    I would like your view on the following questions ( I am not asking for investment advice just your thought on the subject)

    1. When the company stock rose and the director or CEO of the said company sold most of his or her shares. Would u factor this in your valuation? and how much confidence would you have in relation to the management team of the company?

    2. Would you do your valuation of the company before finding out the price of each stock you are interested in?

    3. With IPO company, what would u look for or consider when some of earning records or return on equity are not available for your valuation?

    4. Are you always being conservative when it comes to applying inflation, future or expected return figures in relation to finding out the stock price?

    5. If you have investment plan in place. when it comes to cutting your losses, will each of your stocks have the same exit plan?

    Thanks in advance and hope I am not being a pain in a neck to you.

    Regards Dean

    • rogermontgomeryinsights
      :

      Thanks Dean,

      Answers follow:
      1) I put significantly more weight on an insider selling shares than I do on them buying.
      2) Yes, almost always. In fact I was at a lunch in Double Bay earlier this week and I valued a company on my iphone without any idea about the price of the company. As I estimated the value I explained that I had made an optimistic assumption. I was then told by the requisitioner the share price. Coincidently my valuation was the same as the current share price. The share price was thus not representing good value.
      3) If no history is available I look at the forecasts in the prospectus. There are dire consequences for the directors, the accountants and the lawyers associated with the production of a prospectus, when forecasts in a prospectus have no basis. Often however, it is worth remembering that companies listing on the ASX have been operating as unlisted businesses. On the day of listing, they will supply several years of financial statements. These are lodged on the ASX platform along with everything else.
      4) It is better to be conservative and wrong than optimistic and wrong.
      5) There are 5 reasons for selling. I list them in my book.
      3)

  83. Roger,

    I have been acquiring McMillan Shakespear, MMS, shares over the last year based on valuation and have been very interested to hear your comments on the Business channels. I had been purchasing on ROE valuations so I am still completely comfortable with the share.

    There is one risk however, that I would appreciate your opinion on, and that is the Ken Henry taxation review, specifically the fringe benefits tax. I noticed that Matthew Kidman, from Wilson Asset management, had recommended MMS on Switzer’s show on sky business, with the caveat, however, that an unfavourable outcome to fringe benefits from the Henry review and that “all bet’s were of” for MMS. Do you share this view and based on risk management do you consider this outcome likely, as I had invested under the premise that a negative FBT outcome was an unlikely from the Henry Review.

    Your thoughts on this subject would be greatly appreciated,
    Regards,
    Romano

    • rogermontgomeryinsights
      :

      Absolutely agree. In fact someone here on this blog asked me the same question a while back. At the moment you can only deal with knowns.

  84. Hi Roger,

    Thank you for your email, I enjoy listening to you speak about the market and trading. I will wait to hear from you after Christmas and I cant wait to get a copy of the book.

    Has the Dubai crisis changed your mind on ANZ, how much are they exposed to Dubai?

    Looking forward to chatting to you again.

    Have a great Christmas.

    Dave

  85. Hi Roger,

    Interested in your long-term view / valuation on JB Hi Fi and how you go about valuing JB Hi Fi’s business.

    I am very bullish on the stock. Consistently high ROE past and future. Great value proposition (lowest cost player) and ever growing product range as technology keeps changing.

    Whilst there offerings are “consumer discretionary”, they are effectively a consumer staple as everyone seems to buy something from their stores.

    I bought them when they floated for emotional reasons initially when young (as I bought my first DVD from their East Keilor store in Melbourne). As I got older I discovered that they are an amazing business and great investment as well. I have been selling / buying regularly / taking profit. Recently bought back in at $19 and again at $23.

    Intending to hold them for at least a further 12 months.

    Look forward to reading your book in the new year

    Cheers,
    Ari

    • rogermontgomeryinsights
      :

      Hi Ari,

      It has been my preferred pick (and I have talked about it at every opportunity and on every TV interview) since June and have owned it since $8.50 late in 2008. My only thought for you is that you will make more money, buying and holding than trading, unless you are in a zero tax structure.

  86. Hi Roger,

    what do you think of transpacific industries and their hybrid step up notes (TPAPA)? the notes are currently paying a 12% coupon on last price of $65 and either step up to 6% above BBSW or redeemed for $100 on october 2011. it seems the only risk is either transpacific goes under (less likely now) or coupons don’t get paid (no intent of not paying mentioned). as this is a sort of consumer monopoly business with long government contracts, do you think its attractive?

    thanks Ron

  87. Hi Roger,

    I recently purchsed shares in Beach Petroleum. Fundmentally it is in very good shape and it appeared to be trading below its intrinsic value.

    I am new to investing but prefer the ‘value investing’ approach.

    I was hoping you could let me know your thoughts.

    I have a two year target price of $1.90 and was wondering if you valued it anywhere near that?

    Best wishes,

    Steve

  88. Hello Roger

    How far do you believe the market fall with this credit scare in Dubai. The world would believe the Dubai Government would have been solid credit wise.

    Thanks
    David

    • rogermontgomeryinsights
      :

      Hi David,

      Gee I wish I was THAT smart and could pick such things. I know this; it won’t make a lick of difference to the long term performance of many if not most Australian businesses. Their performance will continue to be driven by factors not influenced by Dubai. Don’t forego the opportunity to buy wonderful businesses at cheap prices because of such short term concerns.

  89. I watched you again on your money your call last night
    I have in the last 3 months or so started to take a more active interest in the sharemarket, although I have owned shares for 10 years or more.
    With regard to your discussion on JB HiFi, stock trading at $24 with a 2 year target of $34, is it still a good time to buy into the stock, considering it is already trading at $24? Any thoughts would be greatly appreciated.
    Always good to listen to your thought on channel 602.
    Thanks for your help
    Dale

    • rogermontgomeryinsights
      :

      Hi Dale,

      this is a great question. First let me make this clear. I cannot tell you what the share price will do. My valuation of $34 in 2011 is a valuation. It is what I think the business will be worth. It IS NOT a share price target. The share price could be half that in two years. I just don’t know. Valuing a company is not the same as predicting its share price. Provided my valuation doesn’t change (and valuations can and do change) then any share price weakness would be an opportunity.

  90. hi roger was watching u and les talking about silver companies am interested to know if you think any silver companies are worth backing as always love to listen to your views thank you timothy mcdermott

  91. Hi Roger, I often hear you talking about how to value a company. However is it possible for you to do a valuation on BHP, TRS, or JB Hi FI. Where do you find out the information and the figures and come up with the valuation? And what is the formula? I think by doing a real evaluation of a real company would give myself and the general public a good idea of how to go about this task, as it seems extremely daunting. Anyway mate, thanks for all the insights, its great reading/listening. Cheers, Luke

    • rogermontgomeryinsights
      :

      Hi Luke,

      I have devoted entire chapters to answering your questions in my forthcoming book. I hope you can be patient and wait for it to come out in the first quarter of 2010. Your question will be comprehensively answered.

  92. Dear Roger

    Do you have any thoughts on Soul Pattinson (W.H) – SOL ? They seem to be smart guys, very conservative with zero debt!

    cheers
    P

  93. Hi Roger, I have been watching the business channel and I am impressed with your stock analysis. I entered into the stock market in May 2008 on recommendations from a financial advisor. I have some money invested with a managed fund and a large % portion in regional Bank Bendigo Adelaide bank. Currently the stock owes me around $10.15 a share so I am greatly interested in your valuation method to see where the Bendigo sits for the future.

    I know the Regional Banks are under funding pressure , however Bendigo Adelaide have dealt head on with this problem and look like things may improve next year.

    I have looked at other methods of advise like Vectorvest and morningstar but your analogy makes good sense to me.

    I have registered with you to purchase a copy of your book as I want to learn how to invest confidently for the future.

    Yours Sincerely
    Greg

  94. Hi Roger,

    Interesting show on Your Money tonight. I am curious about how you value a business. If you are able to share any information.

    Also, I hold Ramsay Health and was wondering when time permits if you can offer a valuation on this business.

    Thanks
    Darren

  95. Hi Roger

    Would like to know how you value a company as per your money your call tonight

    and if you have spare time would like yuor opinion on
    BHP
    CBA
    WPL
    ANZ

    with thanks
    Stuart

  96. Hi Roger. I just wanted to see what you value WATPAC (WTP) at, whilst also Crane Group Limited. Also, what do you think about the uranium outlook and in particular BMN Bannerman Resources. Thank You

  97. Hi Roger,

    Thank you for number of interesting blogs that you have posted over the past few months. It would be nice to have to read something regarding the right selling time. I know that we should sell when the shares are up but how do we know the right time. e.g, I bought SEK ( seek) for $3.28 and now it is over $6.00. How do I decide when is the right time to sell. Looking forward to your comments. Thank you

    Regards,
    Dimpy

  98. Hi Roger ,
    Thank you for your email regarding AMP,TCL ANZ.
    May I please ask your comments on RIVERSDALE Coal (RIV), and COCHLEAR (COH), both of these shares jumped a fair bit today.

    Another share which has had very high volumes and jumped from 15 cents to 48 cents and then to 98c is Golden West Resources GWR

    See chart.from the 13th inst.
    I believe they have discovered some high grade Hematite iron ore in Western Australia in the Midwest region. I also believe they have been given a speeding ticket. I spoke to one of the directors who said they cannot explain the rise and the rush. There is a chinese and american joint venture inviolved .

    At long last TELSTRA is kicking off. It was recommended on Sky news tonight. All credit goes to your valuation (posted to YouTube). The recommended stop loss is $3.20 .

    Also SGT is taking off now.

    Kind regards
    Mahmood

    • rogermontgomeryinsights
      :

      Hi Mahmood,

      Thanks for noticing. Please keep in mind that while I think TLS is cheap, I do not think it is an outstanding business. Its profits in 2009 were the same as in 1999 or 2000 and in that time mobile phone services have grown from 8 million subscribers to 22 million, pay TV has gone from 0% penetration to 40% I am told and internet penetration has gone from 20% to 85% or more. TLS profits are the same today as they were a decade ago.

      Roger Montgomery

  99. Hi Roger,

    I watch Switzer almost everyday – including your appearance.Nice one! Also “your money your call” drag my feet to share investing thru Bell Direct.

    First week buy – still got 2 lost stocks:
    STO SANTOS LIMIT… Entry:$15.365 Today(25/11):$14.830
    WEB WEBJET LIMIT… Entry:$1.828 Today:$1.800
    Manage to Swap ASX w/ AAX and get Net Profit of $40 from the swap.

    2nd Week (after learning more about Forecast Earning+Dividen)
    Manage to get a solid position w/ below 3 stock until now – all 3 still Porfit:
    DWS DWS ADVANCED…. Entry:$1.496 $1.550
    MND MONADELPHOUS… Entry:$13.140 $13.190
    WPL WOODSIDE PET… Entry:$48.850 $49.410
    I believe I can hold all 3 which still UP for long term as those 3 has solid Fundamental.

    How about WEB and STO?
    I think WEB is still has potential (entry is not too expensive).
    But for STO I might buy at expensive entry?
    Should I let go WEB and STO (currently not much loss)?

    Plan to get more companies which has more than 10% total return (Earning+Divident) while waiting for the right moment to get bargain entry price..

    Appreciate your thoughts…

    Cheers,
    Yudi

  100. Hi Roger love your feedback … I witnessed a fellow on early morning TV – ch 602 from USA who spoke briefly that in his professional opinion with the changes going forward in the world over the next few years in relation to climate change and “Solar energy etc” that the best “conductor” isstill Silver and that the price of silver will “soar” over the next few years – $17 now up to $100 and was very adamant and willing to debate this … he didnt get a chance to elaborate further due to TV time restraints – what do you think about this? Just “crank” stuff or worthy of further investagative speculation?

    • rogermontgomeryinsights
      :

      Hi Gordon,

      There are some pretty bright and very wealthy people who say that silver is the place to be. I am no good at forecasting commodities so read up on what people like Jim Rogers have to say. Silver evidently is 90% below its inflation adjusted highs and by definition, bubbles produce new highs. That hasn’t happened yet in SIlver.

  101. Hi Roger,

    I’m trying to understand why Caltex share price keeps falling? I see the oil price is hovering around the $80 mark so I thought Caltex should still be up around the $14 mark where it was a few months ago. Does the acquisition of Mobil benefit this company in any way? Will it create more ROE? I see they didn’t pay a dividend this year to use the cash for this acquisition. What are your thoughts on Caltex?

    Pearse

    • rogermontgomeryinsights
      :

      Hi Pearse. Take a look at my post on Caltex at http://rogermontgomeryinsights.wordpress.com/2009/12/10/what-is-caltex-worth/

      In summary… “You should be aware that if you are trying to value Caltex, you are punting and making a plain old bet. Its a bet you might get right, but it is speculating not investing. Perhaps if you can buy Caltex at a 50% discount to a conservative estimate of intrinsic value it would be a safer bet but even then it is still a bet.”

      Roger

  102. Hi Roger

    I have been following your broadcasts and writings the last few months and like your approach to value investing, something I have tried to follow since I started managing my own superannuation portfolio (about 10 stocks at any one time) a couple of years ago and before the market collapsed. After going down about 35% with blue chips I am now comfortably back in the black. Being a former computer software entrepreneur, 2 of my stocks (and the most successful) have been Isoft and McMillan Shakespeare. I have seen your analysis of Isoft on conventional lines and don’t agree with your valuation, although you did note the huge jump in NTA last year which should be repeated in future years should the current trend continue. I feel you have not taken into account the complexity of the Isoft software and the almost certainty of ever increasing repeat revenues. Any hospital or entity who instals Isoft software will be a customer for many many years as the software is so extensive in its application that it will spread and grow through any organisation that instals it. Also they look like they have the UK market on a plate.

    Another stock I am surprised has not come into your sights is Navitas. A company where all the customers pay in advance, which has a successful financial model and which continues to spread to more and more Universities, in my view has a lot of appeal.

    Thank you for making your experience and insights so accessible. I await your book with interest.

    Best wishes,
    John

    • rogermontgomeryinsights
      :

      Great work John.

      A couple of quick thoughts. First, Navitas is firmly on the radar screen. Don’t worry. I have not missed that one. Second, with regards to Isoft, you are not the first person that has told me that my valuation is too pessimistic. Please keep in mind, the valuation has to be based on what is known and demonstrated. Comments about its future amount to speculation unless you can give me some concrete numbers. I am more than happy to change my view 180 degrees and will do so in a second but I would like some evidence for the optimism. Until that time, the valuation has to be based on actual results.

      • I see you have Navitas on your radar but some valuation tools have a value of under $2.00 on it and currently trading around the $4.00 mark. Why the difference of opinions by such a large percentage?

  103. Hi Roger,

    I enjoy listing to your regular media interviews which I recently found by accident on youtube when I was searching for articles on value investing.

    Over the past 10 years I have tried to read every article published by successful value investors such as Benjamin Graham, Warren Buffett, Seth Klarman, Bruce Berkowitz, Jean-Marie Eveillard and Bruce Greenwald in order to improve my investing skills so I was quite excited when I found my first value investor in Australia who has a passion for wanting to share how they go about investing in the stock market.

    So my headline grabbing event is ‘if most high quality businesses are currently over priced should one be looking to establish a sub-portfolio of say 10 mediocre businesses that are available today for less than 50 cents in the dollar (ie what Benjamin Graham would call cigar butt investing) ?

    One such cigar butt could be Willmott Forest Limited (WFL) as it has low profitability (typically in the range 11% to 13% over the past 30 years) and is available for substantially less than book value ($1.11). WFL record their land holdings at cost ($129m) rather than market value which could be closer to $182m (which would represent an additional 37 cents per share in value). With the demise of Timbercorp and Great Southern Plantations, WFL is now the dominant player in what the financial press see as a downtrodden sector. I also understand WFL’s CEO, Marcus Derham, has continued to hold onto his circa 27m WFL shares despite their market value rising from $20m (2004) to $74m (in 2008) then down to $12m today. WFL has also raised additional capital to be used to upgrade their Bombala sawmill (which is a 50:50 joint venture with Dongwha, a major Korean company with global timber processing operations) which appears to have the support of the local council (according to the Bombala Times) and 250 tons of sawlog per annum has already been presold to Forests NSW for the next 20 years.

    The potential kicker would be the EFS given very few industries are as green as forests. The exit criteria would simply be upon achieving a 30% return on ones investment or at two years, whichever is the earlier given Marcus is forecasting at least a 20% return on the upgraded Bombala sawmill after 2 years of operations.

    I would be interested in hearing your views on cigar butt investing in general and WFL as a possible cigar-butt opportunity.

    Peter

    • rogermontgomeryinsights
      :

      Hi Peter,

      Great to meet you and thank you for getting in touch. My own approach is to focus only on the very top tier of businesses in terms of quality so I won’t be heading down the mediocre path with you. That is not to say it won’t work for you it is just that it is anathema to me. WFL certainly seems to tick the cigar butt boxes and it appears as though you have done a bit of the hard digging. I wouldn’t put too much value on the fact that a director or CEO has bought, held onto or owns shares. I can also see you have adopted Ben Graham’s hold for X% gain or two years whichever comes first. I cannot give you any advice other than to say you are doing more work than most and formalise a process and ensure you cover every contingency.

      Roger

  104. Dear Roger,

    Thanks for your regular emails on Value Investment.

    Can you please analyse MQG on your blog (if possible).

    With warm regards,
    Deepak

  105. Dear Roger,

    Thank you for your email are you aware that the reject shop could grow profits in WA, if they could take over the Red Dot shops and become the dominant player in WA, similar to JBH what do you think? regards Sel.

    • rogermontgomeryinsights
      :

      If anyone can make it work it will be Chris Bryce. I called Chris recently to congratulate him on his appointment to the role of CEO. He knows the business well as he has been CEO for a long time and worked under Barry Saunders whose a retailing icon in Australia. At the moment I cannot see the value rising dramatically at TRS. Happy to be wrong. I sold the shares at $14.00 ( see my article on the subject and trade in the Eureka Report) because I felt JBH had much better prospects in terms of valuation appreciation. JBH has risen significantly since then while TRS has been left behind a little.

  106. I am a long suffering frustrated holder of Oz Minerals, trading call options and writing puts. With the recent gains in copper and gold recently, why is Oz so stagnent? Any info or perspective on Oz would be appreciated.

    Am I holding for an immenent jump when Terry Burgess outlines how they are going to spend their $1bil or am I in for the long haul?

    I realise after the failed merger and asset sale they are a one mine company with huge shares on offer. Is this the reason for the no action in price, or are they still a tarnished name due to last years strife they were in?

  107. Hello Roger – I am enjoying your blog and various emails.

    Bit of a challenge for your – maybe – if u have the time and inclindation – what’s your view on the latest incarnation of BBI… stock dropped 18% on the open yesterday and since I was born in Yorkshire of scottish parents I always have an eye for a bargain. Assets seem good – (or what is left of them after being rapted by Brookfield). Wondered if you had mulled this one over?

    David

  108. Hi Roger,

    TPI almost became a casualty of the economic cris – falling from $14 to currently $1.34.

    The company had binged on acquisitions and borrowings, however that has currently ceased after the intervention of the cornerstone investor. The MD reponsible for M&A still remains in that position.

    The cornerstone investor has obviously begun flexing his muscle in the past few weeks, with a board reorganisation, appointment of two capable COO’s (from within) several weeks ago and significant redundancies of MD and mid level managers last week (over 40), saving about $20M.

    Do you follow the stock ?

    What do you think of the cornerstone investor as a change agent ?

    What are the prospects of a recovery in the share price (obviously not to $14)?

    Buy, hold or sell ?

    I enjoy your comment on the Eureka report site & DVD. Keep up the good work.

    • 1. Do you have any thoughts on EMG (emergent resources).They have signed a $250 million deal with a chinese company recently and have good deposits of magnetite at their Beyondie project in the Pilbara.

      2. What is your gut feeling of what the market will do in the next couple of months?

      3. Would you have 3 shares to outperform over the next 12 months?

      We follow your articles on the Eureka report and respect your advice. We also listen avidly when we see you on Market Moves which is a great show on Fox.

      Thanking you Fiona

  109. What is your opinion re Toll holdings on its current global buying spree? The price has come back recently and overall market sentiment seems jittery at moment, possibly creating short term entry opportunities at some time?

  110. I have been keeping up with your articles and interviews, and recognise that you believe the stock market is generally overvalued by about 15%.

    As as far as your top 5 stock picks are concerned, I do own Woolworths, but am fairly interested in ERA and SXE for growth.

    However, I am also looking for yield as well, and apart from the above, would be interested in your comments on the following –

    1. IMF
    2. Telstra
    3. Ardent Leisure
    4. Astro Japan
    5. Duet yields
    6. GUD

    Thanks again Roger.
    Lawrie

    • rogermontgomeryinsights
      :

      Please remember that ERA and SXE were added to the list on TV because I was asked for five stocks. I really could only find three but appreciate there are some viewers who like more speculative companies to investigate. You must investigate yourself and be satisfied that you are happy owning more speculative issues. I am not. I don’t own either SXE or ERA as they are not my cup of tea. I simply mentioned them as companies that met the basic criteria set; rising valuations, discounts, low or modest debt etc…

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