No more Value.able Roger?

Insightful Insights, Investing Education, Value.able | Comments (94)

No more Value.able Roger?

The First Edition of Value.able has sold out.

Thank you. Thank you for purchasing copies for your family and friends. And thank you for allowing me to share my way of investing with you.

If you haven’t yet purchased your copy, don’t worry. I plan to release a Second Edition paperback in November. The manuscript is with the designers and will soon be on the printing press.

You can pre-order and secure your copy at my website, www.rogermontgomery.com. Or if you haven’t yet done so, join up to my mailing list and I will let you know when then Second Edition is available.

I have received a few emails from investors who purchased their First Edition copies in early September and are patiently waiting for them to arrive. The books are delivered by Australia Post. If no one is home at the time of delivery, a parcel reminder will be left at your front door or in your letterbox and your book will be taken to your local post office. Unfortunately I have heard of occasions where no reminder note was left.

If you haven’t yet done so, please check with you local post office and if you don’t have any luck, please let me know.

Posted by Roger Montgomery, 7 October 2010.

INVEST WITH MONTGOMERY

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.

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94 Comments

  1. ABE
    :

    Hi Roger,

    I highly respect your professional understanding and education of the financial markets. However, without any disrespect, I am concerned who is going to benefit from your wide education. Every time you discuss a stock through the media, the price reacts immediately. Are your followers investors or really punters. Your stock picking and the higher prices may prove in time to be a result of the punters increasing the company’s value and not as a result of the company’s improved position, only time will tell. However, until we know the true reason for the stock price improvement, you are the financial winner as you have already backed the horse before tipping the great story to the media.

    How, can the average investor acquire these so called undervalued great stocks, if their prices are being pushed up artificially prior to proving their value.

    The majority of the stocks that you promote trade at low volumes which is further evidence that the increase prices are not necessary the result of the performance of the companies but more by speculators.

    I believe that you do genuine believe in educating people, however the system is made for the few to get rich at the expense of the majority who will always try but will end up with only the left overs. What do they say floods raises all boats. Even mug putters make money during bull markets..

    Whoever said the market is fully informed has never traded/ invested or has had the benefit of inside information. Roger even you have a running start on the majority of investors with your contacts, plus your access to company directors/ fund managers, eager for your support. Such relationships allow you to receive current up to date information , which maybe available to a variety of other people, however the retail investor only hears about the news once the share price has already reacted.

    Given the about, food for thought, you you are not interested in pushing up the shares that you may already own, by the mug punters. Please continue to educate in 2011 without the share tips. This way , there is win win, you get the thrill of educating and the true investors will financially benefit by using your education material.

  2. william gill
    :

    Hi Roger,
    To add to Ashley and Mathews thoughts on gold (Oct 18)
    eighty years ago gold was fixed at aprox US$20.00 an ounce.
    Today it trades at aprox $1300.00 an ounce
    It has doubled in price just over 6 times in 80 years. $20,$40 $80 $160 $320 $640 $1280.
    Woolworths since listing in 1993 at $2.45, has doubled 3.5 times. WOW has doubled every 4.5 years. Where WOW has had a fantastic run Gold has retuned about 5.5% . I think Fools Gold sums it up.

  3. Roger D
    :

    Hi Roger,

    Wondering if you could recommend a few books on value investing for me to read over the summer holidays (bar value.able and security analysis of course. However I will probably read yours again!). Thirst for knowledge is definitely a good thing.

    Kind Regards,
    Roger D

    • Roger Montgomery
      :

      Hi Greg Mc,

      Perhaps there will be an announcement. As you know I do become cautious when the key man or woman sells shares but in the case of Realestate.com.au and McMillan Shakespeare prices have continued upwards after the event as long as intrinsic value continues to rise. Remember some people here at the blog have correctly expressed caution because of the high price to book ratio.

    • Ashley Little
      :

      Hi Greg,

      Good one mate

      I hope the same thing

      I for one was not as keen on this stock after the last report.

      ROE down Debt Up.

      This throws up a my first warning sign that all the low hanging fruit has been plucked and ROE will decline. How fast is the question.

      I have redone my numbers and have still have IV at $8.50 but doing nothing for the next few years.

      Hope I am wrong but in the meantime if something else becomes attactive it’s good bye to my forray into selling handbags

      Never reallly suited my country boy image anyway

    • Pat Fitzgerald
      :

      Hi Ashley

      From my observations businesses with a high payout ratio can keep their ROE high (MND, NVT, PTM & ORL are examples) but they may not be able to increase their IV at a good rate.

  5. James
    :

    Hi Roger,

    I was wondering your opinion on FXL (Flexigroup). It seems to be undervalued at present with good ROE and low payout. Do you have a rating/any comments on it?

    • Ken Milhinch
      :

      James,

      Beware the $18M one-off tax credit that boosted the 2010 NPAT. It makes their IV look a whole lot better than it really is. Take that out and you will get a number a lot closer to Roger’s.

      Regards, Ken

  6. Ashley Little
    :

    Hi Roger,

    My 2011 Valuation for QR is 57c

    Very quick and dirty IV but thats what it deserves

      • Chris
        :

        Hi Roger,

        A loss making business, yet everyday in the paper we see nice graphs of rising EBITDA’s etc. As you say, EBITDA isn’t much use, as someone has to pay all that tax, and QR is such a capital intensive business that the number is basically meaningless.

        On the one hand, we’re all responsible for our own decisions, and should always seek personal advice. On the other, it’s hardly fair to bombard people with this kind of information for weeks on end.

      • Roger Montgomery
        :

        Hi Chris,

        Thanks for those comments about QR National. EBITDA is meaningless because someone has to pay the interest and the tax and the depreciation, because of its historical cost nature and inflation, means that it can understate the true expenses associated with capital expenditure and maintenance. Warren Buffett, in a prescient note to shareholders in Berkshire Hathaway’s 2000 annual report, said: “References to Ebitda make us shudder.” Analysts and spruikers focus on earnings before interest, taxes, depreciation and amortization. But Buffett says this only makes sense if you think capital expenditure is paid for by the tooth fairy. In his 2002 Letter to Shareholders Buffett wrote: “Trumpeting EBITDA (earnings before interest, taxes, depreciation and amortization) is a particularly pernicious practice. Doing so implies that depreciation is not truly an expense, given that it is a “non-cash” charge. That’s nonsense. In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid up front, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense – a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?”

      • Ashley Little
        :

        Hi Roger,

        This is so so true,

        As some know i am an accountant and do many valuations for clients looking at buying businesses.

        Just recently I was asked an opinon on a pizza shop and I received the accounts from their accounting firm.

        The were totally doctored but the first thing I noticed was that no depreciation was in the figures at all. I requested the fully accounts including depreciation and the answer I got was “why do you need this”

        My answer was “i am guessing that the ovens are expensive and need replacing often.This is required so my client can fully appreciate the workings of the business.

        I know this is a small time story but it is relevant to all investing.

        Guys depreciation is a very real expense and often more than disclosed in the accounts.
        Just ask Telstra and Quantas

  7. Roger D
    :

    Hi Roger,

    I just saw in one of your videos a copy of ‘valueable collectors edition’, do you think you can tell us a bit more about this product?

    Thanks, Roger D.

  8. george
    :

    Hi Roger,
    I have been looking at structural systems STS and it has little debt.
    Ifs trading above IV at the moment do to a problem it had with its formwork division. That is behind them now and IV is projected to increase massively wit hugh gains in IV over the next couple of years. It appears very under priced for the recovery. Before the problem wih the formwork business the ROE was in the mid twenties.
    It looks like a good opportunity.

    Regards George

    • Roger Montgomery
      :

      Very interesting indeed George. Thanks for the heads up on STS. You are right, its past has been mixed when looking at cashflow and ROE was more than 30% in 2007 and 13% last year. I have it forecast to rise to 22% by 2013.

    • Ashley Little
      :

      Thanks George & Roger

      Can you guys or anyone else tell us who the broker is that covers this stock?

      Like to find out more as this no looks slightly interesting

      Thanks

      • Craig M
        :

        By George I think he’s got it(sorry just had too)

        STS looks very interesting, I have calcs of IV 2011 $2.30 2012 $2.47 2013 $3.66
        Debt situation looks under control and it’s another picks and shovels to the miners play. Anyone can break up ROCKs though so not to much competitive advantage there but the Post Tensioning side of the business might have some.
        On the web site they refer to themselves as “the acknowledged leader in this field”
        Great job George, oh Ashley looks like I am pretty close to your “quick and dirty”
        Any other opinions out there?

      • Ashley Little
        :

        Hi Guys,

        I have had a fairly good look at this and the problem I have is the guys who are running the show are the same guys who have given the company such a checkers past.

        There is only one guy who covers the stock. He lives in Sydney and the company’s Head Office is in Melbourne. This makes me slightly nervous to start with but the company has make some poor aqusitions in the past which they have writen off as extraordinary items.

        To quote Adam Schwab” If a gain is a one off, assume it won’t be repeated – If a loss is due to management assume it will be”

        The forecasts might be right(but to question them) for the company but i will pass as I have to have confidence in the management before I invest.

  9. Ken Milhinch
    :

    Roger,

    I would be interested to hear your view on companies that capitalise things like software development, mineral exploration, scientific research etc. For instance, does the MQR “penalise” a company with these things showing in their non-current assets ? My inclination is to view them with some suspicion, and I am reminded of the words of Peter Sykes in his book “The Numbers Game”, quote; Ask yourself How much could this be sold for ? and Who would buy it ? If the answer is zero and nobody then you have your answer.

    Regards,
    Ken

    • Roger Montgomery
      :

      Hi Ken,

      I cover this in the chapter on cash flow. I suspect you know my response. You will see these things, in mining exploration companies, property developers (now changed) and Telstra amongst others.

      • Ken Milhinch
        :

        Roger,

        Your book only touches on this subject, but what I am really keen to understand is whether it would be a determining factor in your MQR assessment.

        Regards, Ken

  10. David H
    :

    ACR has advantage with its transdermal technology ie patches, sprays, creams to deliver drugs through the skin. I am awaiting the outcome of the FDA approval, as future earnings would greatly depend on this. Sirtex SRX also has a very interesting technology of selictive internal radiotherapy used in liver canacer and probably will be used in other solid tumors. This treatment method is slowly being accepted into maintstream medicine and also starting to be used earlier in treatment. They are continuing with trials and hopefully will show advantage in using it as and adjunct to chemotherapy rather than just after chemo has failed. Profitable at present but struggling with high $Aus, but it has speculative attraction along with reasonable current ROE. PS I do own some SRX and considering buying more if studies show benefit in early treatment of disease.

  11. Ashley Little
    :

    Hi Roger,

    I have a question for you

    Lots of pople are making comments like “Value Investor Roger Montgomery Says………………….”

    My question is do you consider youself a value investor?

    You want to buy businesses below their value but you also want these businesses value rising at a good clip. So are you really a growth Investor trying to maximize your returns.

    Or do you just think these are just labels and you are just an Investor.

    After all it was Buffet who said Value and Growth Investing are Joined at the Hip.

    I thought I understood this Buffets quote all the time but it was not till a few months ago that I truely understand what he meant.

    So what is it Roger Value, Growth or Joined at the Hip

    Thanks again for this great Blog

    • Roger Montgomery
      :

      Hi Ashely,

      I think its convenient for commentators to put a label on things. I am happy to be known as a value investor however what is investing if it is not trying to get more than you paid for? “all investing is value investing” – Charles T. Munger.

      • Greg Mc
        :

        I think that according to those who like to use the label, ‘value’ investors are supposed to like boring stocks with low PE ratios and suchandsuch. Not exactly Roger, but we can’t just have him introduced as ‘Investor’ or people will just think he’s some bloke they picked up off the street.

  12. Mark H
    :

    Hi Roger,

    Yes, saw your archived article on the Health leaders earlier this year and agreed with your comments. The lack of historical stability makes me a bit nervous, especially with more stable options out there (meaning I can sleep easier).

    Cant find any EPS forecasts (they are all blank) for ’11 onwards which again suggests calculating them may be a bit of a lottery at the moment. Subject to FDA approval however, they are guaranteed $80m revenue next year which will drive most of next year’s profits. Years ’12 and ’13 remain a bit of an unknown.

    Will continue to dig/research however.

    Cheers

  13. Simon
    :

    In the words of Napoleon Hill “Just as our Eyes need light in order to See, our Minds needs Ideas in order to Conceive.” Thankyou Roger for taking the time to put your own thoughts down in a book and on this blog. You have given my own mind many new ideas to conceive, and of course as always I will SEEK MY OWN PROFESSIONAL ADVICE ! :)

  14. fred
    :

    hi roger,

    Thank’s Andrew & Graig for your explanation of commodity type stocks. Warren once said that he had a car insurance company that was the cheapest insurance company in town, is that not a commodity type stock then as well ?

    Thank you Roger

    • Roger Montgomery
      :

      Hi Fred,

      As I mentioned earlier, being the lowest cost provider can be a competitive advantage. But if you are going to offer the cheapest price, you want to be sure you have and can maintain the lowest costs. Its a competitive advantage but a challenging one to maintain.

  15. David Harms
    :

    Looking at gold miners, SAR have no debt and have just started producing. If price of gold remains high should be very profitable, with very high ROE. Unlike MML their mines are in Australia which may decrease risk a little.

    • Thomas
      :

      i’ve estimated a profit of about 30 million for 2011 with an ROE of about 45% with an avg gold price of $1200/oz. i think the share price is on its 2011 value already and will have a declining ROE if it retains all its earnings.

  16. Alan Ferguson
    :

    Hello Roger,

    Second Edition? I suppose you’ve just succumbed to the Quantative Easing Pandemic that is sweeping the world.

    All joking aside Roger, big thanks, I switched into some of the investments highlighted by your method and have seen a 10% increase in 3 months.

    When do you plan to blog a new list of current valuations and projected valuations for your recent bundle of A1’s?

    Alan

    • Roger Montgomery
      :

      Hi Alan,

      Switzer was right and I was wrong. Having said that the hardcover first edition won’t be printed this time around. More seriously, I am delighted that its contents is having a positive impact on your investment thinking. Regarding the next list of A1s at a discount to intrinsic vale, thats something I am working towards in the next few weeks.

  17. Mark H
    :

    Hi Roger,

    Been looking at some on the top 300 businesses in Australia (according to AFR). Interesting that many businesses, both big and small, fail basic selection filters, not just for it to be an extraordinary business, but even to meet criteria for an OK one. (I’m patient so this dosen’t concern me).

    An interesting 1 that ticks most of the Value-Able boxes is ACRUX (ACR), a bio-tech company based in west Melbourne, that won a contract this year with Eli lilly (worth 60m, and maiden 2010 profit) and has other revenues of at least $90m for 2011 (pending acceptance from the US FDA (food and drugs agency). It has developed fast-drying spray on drugs which are revolutionary in the market.

    This year’s numbers are good. It has v.high ROE in 2010, no debt, retained all profits this YR (good, given v.high ROE) and has a conservative IV well above current price (around $2.40).

    1 box you can’t tick however is a previous increasing IV (as the research breakthrough and subsequent contract from Eli Lilly only emerged in 2010). Future prospects/earnings (to sell and licence more of these products, particularly in the US and overseas markets) look good though.

    Any thoughts on the numbers?

    Am continuing my own Qual research as per usual advice. Will be sure to check both the MQR and KQR to avoid any confusion!

    Thanks Again

    Mark H

    • Roger Montgomery
      :

      Thanks Mark,

      Acrux has popped on my lists back in June/July but with so many other wonderful opportunities, the lack of a demonstrated track record ranked it a little lower than some of the other companies that have been mentioned here (and since done ok). It earns an A1 this year (up from A4 last year) and it is at a discount to intrinsic value but before getting too excited, I would be interested to know what earnings forecasts you have for the next few years? More importantly, the key here is to think about the fast changing nature of the technology industry it is in and whether you can be certain a better mousetrap isn’t going to pop up anytime soon. Not being 99% confident about that makes the risks a bit high. Before writing it off if you can come up with a reason it can defend its methods/techniques and entrench itself in a global distribution network while building its reputation, then you could have a Cochlear. There are some pretty big difference though and I would be delighted to hear from Kathy and Peter on this one.

      • Kathy
        :

        Hi Mark & Roger,

        You may have read my previous post regarding what I think of biotech companies so I won’t repeat that here (in Roger’s Oct 1st blog entry on forecast valuations)!

        Roger you took the words out of my mouth. Sometimes it is all just too hard for me. It all sounds promising, but there are some question marks.

        Hormone replacement therapy (HRT) has been controversial over the years due to the potential health risks (breast cancer being one). The metered-dose transdermal spray (MDTS) technology that ACR have developed can deliver lower doses of the drug through the skin since the colon is bypassed. This may be quite a success in HRT, but it is too early to know. Also what are consumers perception of HRT now? I do know there has been a decrease in the number of women taking HRT over the years due to the risks and bad publicity. Can ACR step in and successfully sell this product? I am not sure. Time will tell of course.

        Hormone treatments are a bit of a pain-ask any woman who has taken the contraceptive pill. You have to find the “right one”. It is hit and miss. I don’t know what the case will be with this range of products. It would be prudent to ask doctors who prescribe it (don’t ask just one either-many doctors just prescribe anything because they get nice benefits from pharmaceutical companies). I’d be interested to know how patients respond to the medication over the long term.

        It is certainly a stock to watch but I would rather miss out than buy now without knowing more information. Esp. the all important forecast data.

        Kathy

      • Matt R
        :

        KATHY

        Was just flicking through these old blogs and saw your comment “many doctors prescribe anything because they get nice benefits from pharmaceutical companies…”

        As a GP, I find that comment quit loose with the facts, and bordering on insulting.

        While it is true that some doctors may be sponsored by a drug company to attend a conference as a presenter, and in the past conferences have been sponsored by some drug companies (without such sponsorship many of these educational events couldn’t take place due to prohibitive costs), as doctors our foremost responsibility is that of the safety of our patients. Unlike the private sector, most health professionals pay for professional development out of their own pocket, with the exception of the small contributions from pharmaceutical companies. However, most doctors are reasonably intelligent people and prescribe medications that have been tested to be effective and mostly safe in well constructed trials.

        None of my colleagues to my knowledge have received benefits from drug companies, and none of us would prescribe a toxin (ie drug) to get a kick-back from a drug company-it’s insulting to suggest otherwise.

        As in any other profession, there are unscrupulous people within medicine, but I would suggest that these are in the significant minority, and not the “many” as you suggest above.

        As a personal reflection for you, please ask yourself what evidence you have to support your statement above, as other people have probably read your blog and it may have influenced their perspective.

        Regards

      • Ashley Little
        :

        Hi Kathy,

        Thanks for your valuable posts,

        Great stuff and please please keep posting

        Your insights are Invaluable

  18. fred
    :

    hi roger,

    In your book you say don’t trade in commodity type stock’s or you don’t trade in commodity type stock’s. What is a commodity stock? CTX, STU or Origin, are these commodity stock’s ?

    Sorry for this dumb question.

    I got a tip to buy ARE which is a Commodity type stock that is the reason for my question.

    Thank’s for all your help always !

    • Roger Montgomery
      :

      Hi Fred,

      When I say “commodity” I mean a company that is a price taker – a company that must accept whatever the going price is. A poorly run retailer with no competitive advantage can be such a business. Its the sort of business where a customer comes in and says “Hi, The Warehouse Hut has this (insert object or service) for $10, can you beat it?”.

      • ron
        :

        jbhifi is a price taker but a well managed one….they usually are the cheapest so u go to them first and then try and get a discount at another retailer :-)

      • Roger Montgomery
        :

        Hi Ron,

        True. Their competitive advantage is not being able to charge a higher price. They are the lowest cost provider. Different but equally valid competitive advantage.

    • Andrew
      :

      Hi Fred,

      My definition of a commodity type business is very similar to Roger. Basically in my view a commodity business is a business with no competitive advantage. This means they have little power over the prices they offer and the effect offering such prices has on its profitability.

      It is mainly but not exclusively in my book a company where the customers have the power over the prices being offered for the product/service.

      The Buffet berkshire example is a good one where he said that he struggled to charge an extra half a cent or something like that for berskire lining as their was no competitive advantage or brand power for that business. Chanigng it slightly to more modern times “No-one ever asks for an Armani suit with a Berkshire lining”.

      Another hypothetical example is, JB Hi Fi sells a TV for $100.00 and XYZ Electrical is selling it for $150.00. JB Hi-Fi is set up to provide products at the lowest cost and are able to still sustain their profitability (this is one of the sources of their competitive advantage). XYZ is not so lucky. Mr Customer walks into XYZ’s store and says “JB’s has the same TV for $100, can you beat/match that?”.XYZ then needs to either lose the sale entirely to JB Hi-Fi or lower the cost of the product there for lowering their profit margin. This happens over and over again and XYZ’s profitabitlity will decline.

      A little game i have come up with to work out what the market leader is and there for work out which companies to add to my list to take a look at is to ask (or annoy lol) people to name the first companie that comes into their head in a particular industry.

      The more one sided the answers the more than likely that that particular company is the undisputed leader and would more than likely be the lucky holder of a competitive advantage.

      The more varied the answers, more than likely it is a commodity industry.

      Not completley foolproof but is fun and has helped me when researching different companies and industries looking for investing opportunities.

      Can’t offer you much help with ARE as i have a rule of not investing in any mining company, basically due to it being an industry that i really don’t understand or am able with any confidence to judge or predict whether they are/or going to be doing a good job at what they do. I’ll stick to retail, banking, gambling and other services that i understand a lot more.

    • Craig
      :

      Hi Fred & Roger,

      This is the way I try to think about it. If I were a customer in the market for a good or service provided by the business, does my decision to purchase depend on any other consideration apart from price. If price is my only consideration, I deem it a commodity business.

      For example, on a previous holiday, seven of us flew to the Gold Coast and the goal was to get there as cheaply as possible, even if it meant a slightly inconvenient departure time. To me, the discount airline I chose to fly with was therefore a commodity business. Personally I felt they had no competitive advantage, other than being the cheapest for me on that particular occasion.

      Regards,
      Craig.

  19. Rainer
    :

    Hi Roger
    Any chance you can make the book digital, so we can read it on ebook, or digital media??
    I bought your first edition, but would like to take a media format when
    travelling abroad to read.
    Thanks Rainer

      • Peter Kruckow
        :

        Hi Roger
        I’m with you on this one. You wouldn’t be able to study Value*Able the way ‘Young Les’ , Michael in bali and Jesse on the offshore rig shared with us .
        Keep up the excellent work
        Cheers
        Pete

      • Ken Milhinch
        :

        Roger,

        I recently bought the Amazon Kindle ( for a fraction the price of Apple’s offering) which gives me access to Amazon’s immense library of books. I will never buy another book again. I think it’s wonderful. Buy on Amazon with one click, download in 60 seconds from almost anywhere in the world and it holds up to 3,500 books. Now that sounds like a competitive advantage.
        Perhaps you could enquire about putting your book on there. It would certainly expose you to a much bigger audience with none of the printing, transport or storage costs.

        Regards, Ken

      • Mick
        :

        I’m with you Ric – and Roger and Peter

        No to digital format for mine – scary loss of control of IP and we’ll have ‘black-boxed’ versions out all over the place, which miss the qualitative message of Value.able. Not to mention literary thieves! By all means publish whatever you want Roger, it’s your business entirely, just make sure you the the credit and any payment due to you for your hard work!

  21. Austin
    :

    Hi Roger,

    Can you give a preview of the second edition, i presumed this is another stage of Value.able course? If that’s the case i’m sure many of us would like to pre-register.

    Cheers,
    Austin

    • Roger Montgomery
      :

      Hi Austin,
      Second edition will contain all the information that has had such a positive impact on everyone’s investing, as the first edition. The only difference is the cover stock. It will have a very stiff card stock rather than the heavier hardcover.
      Roger

  22. Ken Milhinch
    :

    Roger,

    I share your aversion to miners and drillers, but I have found a gold miner that really pressed a few buttons for me, so I broke my own rule and bought some. I bought them 2 weeks ago and in a low spot, doubled up last Monday. Yesterday they were the market #1 performer and I am sitting on a very nice profit. The company is Medusa Mining (MML) Even after yesterday’s rise, and using a conservative RR of 14% it is still trading well under my IV and its financials get a perfect score on the MQR (Milhinch Quality Rating). Do you have an opinion ?

    Regards, Ken

    • Roger Montgomery
      :

      Hi Ken,

      To avoid confusion, you better use KQR (Ken’s quality rating). I will take a look. WIth gold rising by $9/ounce per day, I am not surprised the rising tide has lifted your boat.

      • Ken Milhinch
        :

        Roger,

        Sorry for that bit of copyright infringement, but I couldn’t resist. KQR from now on. This company has zero debt, excellent ROE, no intangibles on the books and good cash flow. Sovereign risk (mine is in Phillipines) is the only down side I can see, but labour costs are low as a consequence.

        Regards, Ken

      • Roger D
        :

        Just vaguely curious of yours and Roger’s IV for MML. It does seem to be under intrinsic value atm though. Thanks

        -Roger D.

      • Roger Montgomery
        :

        Medusa mining (MML) is a gold producer (production in the Philippines). Typically difficult to value because of the cyclical nature of commodity prices. Granted gold is reaching a lauded status – the likes of Jim Roger’s predicts Gold at $2000 per ounce within the next ten years – but despite the fact my valuation is higher than the current price, you are really speculating on the price of Gold. SOmething I am not fond of doing. I wouldn’t mind reading everyone’s thoughts on Gold of course, so don’t resist.

      • Ashley Little
        :

        Hi Roger, Roger D, Ken and David

        My thought on gold,

        It is someting we dig out of the ground, melt, then put in a vault, It really has zero value expect for Jewelery and (so i have been told) mobile phones.

        Gold is now probably trading as a currency not a commodity at the moment but it’s long term inflation adjusted price(value) is closer to $600.

        Price follows value so eventually it’s price will represent this. I certainly can’t tell you when this will happen but I know with great certainty that it will.

        These are my thoughts on gold. and as a post script you never get rich buying things at is popular

      • Matthew
        :

        to add to Ashley’s comments – I was reading the Sunday paper this past weekend and I saw a full 2-page spread advertising a gold buying service.

        Do you think you could find an advertisement like that 5 years ago? Draw your own conclusions.

        Any time a price goes sky high it reminds me of another stratospheric object – a famous space telescope. The two rhyme nicely.

      • Ashley Little
        :

        Hi Andrew,

        Good one mate,

        I am a bit slow and it took me awhile to get that one

        Hubble – Bubble

        still giggling at it

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