Montgomery’s A1-quality rating portfolio
How did independent investment expert Roger Montgomery’s A1-quality rating portfolio actually perform? Roger revealed the results to Peter Switzer on his Sky News Business Channel. Read article.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Mike
:
Hi Gail,
I too am trying out my first few valuations after getting Roger’s book as a late Xmas present. My figures are fairly close to yours. However my comment really relates to what multiplier figures to use when the Coy. ROE is larger than 60%. I found a previous discussion at the link below.
In essence it seems (Roger actually gives the formula in Value.able) the formula for the 100% dividend payout table is Coy. ROE/Investor RR.
The formula for the 100% retained earnings seems to work exactly for Roger’s table but only where the answer is above 1. I don’t know how legitimate these calculations are above Coy. ROEs of 60%.
Regards,
Mike
Roger Montgomery
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Hi Mike,
Everyone seems to be buried in the tables and not in the 5th para of page 193. It serves to explain why my valuations differ and why using ROE’s above 60% with such a model is simply dangerous.
Gail
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Hi all,
My first effort and decided to try and value PTM. Would someone please check my results. Equity $225398, shares 586684, EQPS $0.38, P/O Ratio 82%. Avg equity 209766.5 ROE 65%. Selected 60% (that’s as far as page 183 goes. What does everyone else do in this case? That’s if my workings are correct.) RR 11% Intrinsic Value $3.15.
My main concern is trying to read the financial reports, so would appreciate if someone could check this.
Lloyd
:
Gail,
Over the weekend, I wrote the following on the thread “What is your WOW Value.able valuation now Roger?” ( http://rogermontgomery.com/why-is-your-wow-value-able-valuation-so-low-roger/#comments ) but it has not shown up in the comments so I have repeated it here. My valuation based on the latest half year financial report appears to closely mirror yours and gives rise to a few questions which I have posed of Roger:
Roger,
Subject: PTM First Half Result and implications for IV
Platinum Asset Management (PTM) filed its interim after the close on Friday.
The interim result looks okay with revenue up almost 10% and earnings up 12%. ROE on average equity for the half is 69% (annualized basis) on average equity for the half of $227 million. Dividend of 10 cents/share was declared consistent with 90% payout on an anticipated full year dividend declaration of 14 cents/share. Cost rises in the business look to have been contained after a bit of a steep increase last year.
Plug all this into the IV calc to get valuation of ca. $3.50/share at 10% RR, assuming the maintenance of current levels of performance through the second half. This is well below current share price.
You stated in the thread “How has my Switzer Christmas Stocking Selection performed?” http://rogermontgomery.com/how-has-my-switzer-christmas-stocking-selection-performed/ that:
“Platinum Asset Management – he says this is an “obvious A1 – a great performer, has no need for debt, pays all of its cash out.” The company is trading at about its intrinsic value, so it’s not a bargain, but it’s good quality. The intrinsic value is expected to rise around 14 per cent over three years.”
The result is broadly consistent your expected 14% rise over three years. However, to get IV close to current price I have to value the company on current released results with a RR of 8%. Do you go this low when valuing PTM, or are you forecasting a very significant uplift in earnings in the second half?
Regards
Lloyd
Roger Montgomery
:
Lloyd,
I have explained many times on this blog (when questioned about why my valuations differ from those calculated using the Value.able model), that I have alluded to flaws with the model presented in Value.able. I am not a big fan of flaws. I try to avoid obvious flaws. The result is my valuations will be different. If your first post was not published, it was only because I didn’t see it. Send me an email if it happens again.
Ken G
:
Hi Roger
I see that Corporate Travel Management CTD must have a A1 quality rating , as Montgomerys Investment Managements was an early purchaser according to the Fin Review.Would you like to give some insights as you have an IV of $1.68.
Lloyd
:
Up 65% since listing and trading at IV…. no discount here in my opinion, unless you got in on the IPO.