Value.able: Forget the Index
Buying shares in the right businesses will help investors avoid being caught in an index that is going nowhere. Read Roger’s article at www.eurekareport.com.au.
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.
Grant Duggan
:
Hi Roger ,Ash or anyone who might be able to give me some guidence on how to value gold companies, i have tried in the past as i have a reasonable understanding of value investing but still a fair way off the mark. I am confident there are some good companies out there and the potential to make some money with the current climate in the position it is in. So other then purchasing scaffold which i am not in a position to do so at the moment i would appreciate any tips or advice in this area. By the way Ash and others my last column was no disrespect to accountants at all. Thanks to all for making this such agreat blog.
Roger Montgomery
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Hi Grant, We have invested in a few and been delighted with the results. You need huge margins of safety (that means long mine life, domestic exposure, diversified sources etc and of course a margin of safety in the price..)
Ash Little
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Hi Grant,
If it helps I use discounted cashflow model to value Gold stocks.
No disrespect to Skaffold because I understand Roger and his fund don’t own it but you can see the problems with using a perpetuity to value a Gold company with the IV Skaffold has on RMS…..When you overlay long mine life, domestic exposure, diversified sources etc like Roger has mentioned his formulae is fine. I just prefer using DCF.
No problems poking fun at Accountants BTW. I do it every day.
Roger Montgomery
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You MUST require very very large margins of safety.
SC
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Hi Steve,
To get an idea of how far NST has come, check out this video presentation the MD made last year. Market Cap was ~50m.
http://www.brr.com.au/event/frame/69416
Ash Little
:
Yes SC,
It has been a good ride,
I remember Roger wrote a post about Gold early in the year which to say caused gold fever on the blog is an understatement. At that time I had been very nervous about miners but had also been following Roger and Jim Rogers for awhile and thought I would do some research and digging. My hope was to find what we all know now is Silver Lake…Alas; I was not smart enough to find this one.
Thankfully my digging uncovered NST which I thought had done really well and looked bloody cheap. Luckily I purchased a few and it has been fun to be on the ride. This was more luck than good management as I was using a derivative of Rogers valuation formulae to value gold miners……..It was showing through the roof IV on some of these Gold stocks. I know now you should not do this………Perpetuities and gold mines should never be mentioned in the same dinner conversation.
I have done a reasonable amount of research in this area now and I know a lot more about mine life and proven and probable reserves etc etc then I did back then……..NST was so cheap I probably still have invested in them if I knew then what I know now. But it was not a cheap as I first thought.
We have had an arguement on another thread about whether value investing should include a Marco view. My mind goes back to Charlie Mungar who was quoted as saying that all investing is value investing……..Berkshire is a hedge fund………Of course they take Marco into account (sorry to destroy some many people’s images) What they talk and what they do are 2 different things…..(ha-ha expect to get killed by these comments)
I put in the above comments because after researching things I believe that most of the western world is totally bankrupt……..Euro Usa and Japan represent about 65-70% of World gpd ………..and they are all broke( yes this includes German…they can’t afford to recap there Banks)……… I note the Euro announcement on the weekend………..This should have been done 10 years ago……..and it still has debt rising…..Debt need to be repaid and it will be bloody painful.
All this is very bullish on gold long term (It just won’t be a straight line)……The only thing I can see in my head is the totally collapse of the euro and money printing like we have never seen. (Matches debt levels….which we have never seen these b4 either).
Ok Ok back to NST……Yep thought it was cheap……….and it probably wasn’t at that time so I was lucky. I certainly don’t think is cheap now………There are a couple of others that are really cheap in my view……….If you want to do some digging you may find some good ones. I am sell NST and buy another one or two………You can find them as well so happy hunting.
Roger Montgomery
:
Re-capitalisation? The banks might be used to bail out the governments! Just wait and watch, it has already started…with bank pension fund accounts. Portugal has transferred more than 5bln Euro from pension fund accounts to the government. In the UK the banks have increased their holdings of govt debt by almost 100% to 102bln pounds in September. There was an article a little while back in the WSJ citing Italian bank execs who said they were being bullied if not blackmailed into buying government debt. Italy at its budget raised CGT but not on government bonds – making them relatively more attractive to own.
Ash Little
:
Hey Roger
Banks recapping governments??????
Surely you are not serious………Not on my Maths….
The Banks in Euro are broke……….Mostly but not only because they have purchased AAA rated bonds government bonds that will default……………… and they bought them on ridiculous leverage……They are more broke than the governments”…..How can they possibly recap the governments. As Dale Kerrigan said…….”Dreaming”
It is like saying Alan Bond will recap Crissy Skase in the 1990’s……….Just not going to happen.
Perhaps the Euro Governments can borrow more money and inject that into a new body that can lever it up and inject it into the Banks who can then lever it up and Inject the money into saving their and their governments balance sheets?……Musical chairs anyone?
Roger Montgomery
:
It’s happening already…A recapitalization of the may be necessary next as Kyle Bass noted overnight: “Europe’s banks have three times as much leverage from equity to assets that U.S. banks have,” he says. “Spain, by looking at a snapshot on a piece of paper looks like they might have a manageable scenario, but when they recap their banks they won’t have a manageable scenario and they have to recap their banks and so do the rest of Europe.”
Bass says Germany — considered the economic powerhouse of Europe — is no better: “[Germany currently has an] 82 percent on balance sovereign-to-debt GDP today…in a post-recap world Germany will be north of 100 percent and will also be in a very difficult scenario.”. He was discussing the “imminent collapse of the Euro” and as Durdin notes: “This leads to only a bad and worse outcome for Europe, as the cataclysm plays out because the banks do have an alternative to raising capital – shrink the balance sheet. Deleveraging is already going on in a number of countries, with loan-to-deposit ratios dropping in recent months in Portugal, Spain, and Italy. This reduces the capital needs of banks, but fairly quickly starts to cut into the muscle of the financial system. The banks have little alternative but to keep holding sovereign debt in the short term, since it is the collateral for their borrowing needs. And as we have been so vociferously explaining recently, should they be forced to delver even more, and sell reduce these sovereign assets, then the daisy-chain effect of de-hypothecation on shadow banking will not end well for anyone.”
Ash Little
:
As Jeremy Gratham said in his recent news letter
“I have no particular insight into the problems plaguing the eurozone, but I can recognize a terrifying situation
when I see one. The appropriate response is surely to be more cautious than usual.”
Ash Little
:
I though I might give you all a good Kyle Bass quote.
“Develop your own opinion. Go look at these numbers. Don’t listen to me.The key is to do your own work.”
John C
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Hi Ash. I too have held and sold NST, plus also IGR & DRA, and made profits on all, and currently hold RMS, KRM & MML (all 3 being in the bottom 4 of the lowest cost per ounce gold miners on the ASX, with low or no debt). MML has been dropping more than most in recent days, so I may buy some more…
Roger Montgomery
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I am told by some the sell off in some gold stocks was related to the unwinding of an options trade and another dealer explained it was due for some stocks due to their failure to be included in a gold index. The difference suggests both are wrong…
Ash Little
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Hey John,
I like others. One in particular……….Keep digging
John C
:
OK Ash – PLY – Polymetals Mining? 5th lowest cost per ounce producer on the ASX (out of 45 odd companies), an A1, with a 39% safety margin?. If that’s not it, I’ll need some sort of hint… I don’t own any PLY but I’ve had a good look at it.
I do own some RCO (Royalco) but they’re more of a gold royalties investment company than a gold miner (although they are trying to do a little bit of exploration as well). I like their payout ratio policy (as long as their income stream keeps on flowing)… which is the main reason I bought into RCO – I also like their business plan – quite a different type of gold company. As long as they invest wisely, and the gold price stays high, I think RCO is a good alternative for exposure to gold (a few “Ifs” in there I know).
Ash Little
:
Hi John,
No not Polymetals. No hints till the new year……..sorry
Not RCO either but I think this one is good as well. The big advantage they have is they are exposed to Gold on the upside but don’t have the exposure to cost increases that money printing will create as well.
Royalties from gold?????……………Should be golden
John C
:
OK Ash… Kingsgate (KCN) is looking cheaper lately, and they’re worth looking at for yield (expected higher payout ratio in future years), however, I doubt you’d care too much about dividends Ash, and their ROE hasn’t been great lately, so… my next guess (after PLY above) would be…
SAR (Saracen Minerals), an A1 with a 32% SM, with a ROE and ROCE both above 30%, and no debt. They are also exploring and producing here in W.A., not OS (so no sovereign risk, other than our own skittish, back-flipping, poll-driven pollies). The Elliot’s Lode drill results earlier this month were encouraging too. They have multiple prospects and resources within a relatively confined area, and also near major support and infrastructure (Kalgoorlie). No hints of dividends on the horizon (can’t blame them for that at this stage of their development), and a middle-of-the-road cash operating costs of around $800/oz.
That is my only real concern with SAR, when there are 26 ASX-listed gold miners with lower costs and 8 of those are sub-$500/oz. Still, the chance of the gold price coming back to below $1,000/oz must be pretty slim, so costs of $800/oz is still pretty respectable (there are 18 ASX-listed gold miners with high costs than SAR – the highest two being over $1300/oz). I’ll not necessarily going to buy any SAR, but they’ll be on my watchlist now. Are they on yours Ash, or have I struck out again?
Merry Christmas!
John C.
Ash Little
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Hi John,
Hope you had a xmas,
Yes SAR is on my watch list…I like it is a very well run company but I don’t think it’s cheap.
They higher cost producers do have a higher leverage to price movements, Both up and down.
Chears
John C
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Happy New Year Ash! It’s now January. How about that hint?
Ash Little
:
Happy new year John.
The company is curently not a producer but are in the process of commisioning the plant. They are having lots of problems which will be fixed at some stage…..When they do it’s a 5 bagger.
The Mine is not in Australia and it will be a RED letter day before I give any more clues………Smiles
Enjoy ur posts and hope 2012 is a goodie
John C
:
Hi Ash – no “Reply” option under your comment below – assume due to lack of column space – so am replying here – Your hint led me initially to PRU. Once they sort out the issues at Edikan, their outlook should be excellent… However, PRU are big… and obvious… so I kept looking… and your RED reference led me to… NMG – Noble Mineral Resources – with their Bibiani project – also in Ghana – although the “red” link is tenuous – their COO, Peter Johnston used to work for Red Back Mining – and I realise also that the RED reference could just be a RED herring!
I wonder if that’s the same Peter Johnston who is on the board of Silver Lake Resources? Anyway, my guesses are PRU or NMG. I believe NMG has the higher upside potential, although the Skaffold C5 quality/performance rating is a little off-putting – I guess the only way is UP!
PRU not much better (at C4). Both companies have good potential catalysts for re-ratings and SP increases once they achieve succesful commissioning of their respective mine plants.
That’s it for me for now Ash. Thanks for continuing to reply. I very much enjoy your posts, hints and comments too. Happy twenty twelve! If we went from the eighties to the nineties to the naughties, what are we in now (apart from “interesting times”) ?
Ash Little
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John,
Look for something with Sprott on the share register.
RED is no Herring
type into into comsec and see that you get
John C
:
Thanks Ash – I got it – FINALLY! You had to SPELL it out for me tho… Had a lot of fun googling Eric Sprott and checking out some of SAM’s Australian investments (including SLR, RMS & NGF). I have to agree tho that RED tops the list. I just sold 7,000 CCP (making a $2,000 profit) & bought 20,000 RED – thank you for the tips/hints – all of them! Sorry it took me so long!
My current gold holdings now are: RMS, RED, KRM, MML & RCO, and the first three would be my favourites, and probably in that order. I notice Sprott (through SAM) has 17.6% of RMS too, and their recent operational issues (crusher down, lower grades during Dec Qtr) have provided a nice little drop in SP (I’ve topped up again).
Cheers!
John C.
John C
:
BTW, I am encouraged by RED’s First Production status reports to the ASX. Having worked in Bauxite/Alumina refining (in WA) for 8 years (in the eighties), I am well aware of how common minor engineering mods (to conveyors, chutes, feed aprons, etc) are, and how much they can improve efficiency of production. There’s usually not so much focus on them as there is here tho… The disclosure is all good IMHO.
John C
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A quickie: I note PRU declared Edikan commissioning complete today (10th Jan) and their SP shot up 8.6%…
John C
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Another quickie… NMG announced Mill dry commissioning (pre-commissioning at Bibiani) today (1st step) and jumped 8.65%… These explorers moving into production are worth watching!
Ash Little
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A good little silver miner around too John.
Will have first poor in next 6 months.
See if you can find that one
John C
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CCU? There aren’t many pure silver plays on the ASX, and Wonawinta should have 1st pour by June/July. ARD might also be worth looking at once Kempfield licences and approvals granted (maybe late 2013?). The others (AYN, SVL) are already producing. For now, CCU looks the goods. I note their MD has almost 11% of the shares on issue, so good to see he has skin in the game. Added to my watchlist. Thanks again Ash!
John C
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Was that promising Silver company that you mentioned Cobar (CCU) Ash? I wish they’d stop going up in a fairly straight line – up 44% since their 49 cent low in December – obviously I haven’t bought any yet, but I’d like to – I’m hoping the share price might stumble some time between now and first pour mid-year…
BTW, I’ve sold my MML and put it all into RMS now – couldn’t resist Ramelius at 94 cents last week. Looks like a major shareholder has been selling down (or out)? Hopefully not Mr. Sprott!
Ash Little
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Yep
CCU it is
John C
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Ta Ash. Thought so. I bought a small position in CCU at $0.735 on Thurs 2nd Feb. I can always increase that position if they do drop (hope so!)… Wish I’d bought in in December!
I’m up 15% (+$4960) on my 20,000 RED in a couple of weeks – not bad!! I can only imagine how well they might do once commissioning is declared complete… Based on what I saw with PRU and NMG recently, and noting the superior quality of RED, it should be a pretty sweet ride! Thanks again!
Ash Little
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First pour for RED today John,
Problems apear to be solved……yippee ki ah.
Andrew
:
Nice post Ash, can’t really comment on much regarding the gold companys etc as where you made the decision to delve into the world of gold mines, i decided to let the industry as a whole (at least in the short term) go through to the keeper as it was outside my circle of competence.
Warning, the below may contain what appears to be gibberish to some, unrelated to others but hopefully some others may gain some value as i did from reading Ash’s post.
You make a few good points, the one about gold mines and perpetuity is a good lesson and something to consider when valuing these type of company’s. I have been reading some research by A.Damodaron (thanks whoever posted the link) about investing in hyper-growth stocks as well as some other valuation techniques as this is one area i am interested in but don’t have the required knowledge or mental models to do so.
It is also a good example of what people should be doing in the area’s they invest in. You recognised a “weakness” (for lack of a better term) and than knuckled down and learned so that it can now fall into your “circle of competence”.
Also, i won’t hammer you regarding your buffet and Berkshire comments. i agree with you. I have just finished re-reading the snowball and it has enough examples there of where WB made a decision with a macro view. the comment you posted by Charlie Munger (who i think doesn’t get the kudos he deserves, all investing is or should be value investing. Whilst i am on Charlie, i reccomend (if it is ok by you Roger) his lecture on “Worldy Wisdom and the Art of Stockpicking” where he talks about having a series of mental models to help you.
Whilst not at the level of Charlie with his engineering, science and math models, i have over my investing education journey developed a lot of other models that help me in all facets from analysing companys to identifying attractive companys (some which were developed from watching Channel 9’s coverage of test match cricket).
But i will stop now as i am going off track, i am sure we can discuss how creativity and reverse-engineering other ideas can help you in investing another time.
Long story short, nice post Ash, it was very informative and another example of what makes this resource such a valueable one.
Roger Montgomery
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More than happy for you to refer investors to Berkshire’s brains trust…
Steven
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Hey Roger,
I was watching YMYC on Wednesday night and noticed you are buying Northern Star Resources. Whats your IV for NST and also Vocus. Vocus is looking severely unloved at $1.30 but given the management and prospects of this company and where the share price was is looking quite good value now.
Thanks Roger.
Roger Montgomery
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Any independent views on these?
Brad
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My understanding is voc owns capacity on southern cross 1&2, re sells this capacity and adds value to this service with data centres and dark fibre.
ROC is > 25% and no debt, although the iru’s are held on the bal sheet as a liability, like a lease.
Revenue should grow >20% pa for the next few years but margins are under a bit of pressure. Management didn’t provide guidance at the agm.
Management seem straight up and candid and at current levels stock looks very cheap.
Roger Montgomery
:
Here’s an excerpt from a column I wrote in March. I have left out the valuation and quality paragraph as it has changed as has our position.
“By now you have probably heard enough about audience fragmentation, declining revenues and duelling billionaires to put you off the media sector for life. But there are opportunities in this constantly evolving space that you would be silly to ignore.
To some investors, toll roads are irresistible; for the most part they represent unassailable monopolies with the kind of price elasticity that makes retailers envious. There’s another type of asset that can be quite comfortably compared to a toll road: the undersea cables that connect Australia with the rest of the world.
Between Australia and the United States, cable operator Southern Cross Cable owns two such “toll roads” – one that runs from Sydney to the US via Fiji and Hawaii, and another, for redundancy, that runs to the US via Auckland and Hawaii.
In our cyberspace example, Southern Cross Cable is like the owner of the toll road and the carrier is like the toll road operator. Through the purchase of “Indefeasable Rights of Use” or IRUs, the carrier gains exclusive and non-revocable access to a defined amount of data transmission bandwidth on the cable.
Think of it like this: when you go shopping you drive your car on the toll road to the shopping centre, park your car, complete your shopping and return home on the same road paying a toll each and every time you use the road.
The internet is different in one respect. Rather than just using the service twice a day you are using it many, many times throughout the course of a single day. Sending emails, watching videos, monitoring share prices and using the GPS system in your car all require constant use of these networks, which you pay your ISP or mobile phone provider for. The ISP then pays the carrier.
The interesting thing about the roads on the internet is that traffic growth is mind-numbing. In 2010 alone, Australian internet traffic rose more than 56%. And that’s before we start talking about the National Broadband Network or cloud computing – which is like an offsite hard drive – that most users will soon begin migrating to.
The sky really is the limit because if you own the cables or the IRUs you don’t care which company is the market leader in movie downloads, car classifieds, holiday bookings or restaurant reviews. You just want them to do more of it.
Vocus (VOC) is a listed company that you may not have heard of in a space you probably didn’t know existed, but it’s a company I like. As regular readers of this column will know I like high-quality businesses at discounts to intrinsic value that not many people have heard of because this means that possibility of significant price appreciation towards intrinsic value is high.
Vocus is a carrier that has an IRU by Southern Cross until 2025. This IRU is the main (intangible) asset on the balance sheet and typically they are debt financed, in this case vendor financed at low US interest rates.
In September 2007 James Spenceley sold his family home to fund a wholesale telecoms start-up that launched in 2008. In April 2010, Spenceley entered into a binding sale agreement of Vocus for $20 million. Under the agreement, Vocus reverse listed via the First Opportunity Fund (FOF) a listed vehicle managed by Investec Wentworth Private Equity. Three years later, Vocus Communications owns and operates global voice and data networks to rival many larger competitors. It has more than 100 customers – often retail ISPs, including Vodafone, iiNet, gotalk, Internode, TransACT and BigAir. It enjoys outstanding customer satisfaction.
Scalability for this business is obvious. Each new customer requires very little additional infrastructure or staff so capital intensity and labour intensity are characteristics that are reduced if not completely absent. Increasing demand and long-term contracts provide the twin benefits of a rising tide and annuity-style revenues.
It’s not hard to see that the speed of success for such a venture relies on industry relationships and know-how. Management appears to have the right qualifications, as well as a lot of experience building networks and running IP backbones.
David Spence, former CEO of OzEmail and former managing director of Unwired, took on the role of chairman, providing much-needed listed company experience in addition to technical knowledge.
Founder and chief executive James Spenceley’s 12 years experience prior to VOC, included responsibility for buying and connecting COMindico to the US via the Southern Cross Cable and engineering that company’s wholesale product.
Non-executive director Stephen Baxter was the founder of Pipe Networks, which was acquired by TPG in April 2010 for $373 million; and executive director Mark de Kock managed the technical design and launch of Qantas.com.au as well as the automation of several stock exchanges.
I reckon there could have been more risk backing Larry Page and Sergey Brin to create Google.
Vocus recently acquired the Sydney and Melbourne Data centres of E3 and retained E3 founder Jon Eaves’ services for four days a week – the other day spent presumably at the Brisbane date centre Vocus did not buy for its $5.9 million at six times earnings.
For the half-year to December 31, 2010, the company signed a contract with Vodafone NZ to supply all of its international data capacity on a multi-year term once the NZ telco’s current supply contracts finish. This most recent and high-profile deal underwrites the company’s overheads. It can now go out and get higher margin business.
Vocus reported 92% growth in revenue to $13.9 million for the half-year. EBITDA (something I refrain from otherwise referring to and something the brains trust at Vocus should also do) was up to $6.4 million – 35% up on the figure a year earlier of $4.7 million and close to the previous year’s full-year result of $8.1 million. Net profit after tax (which is something I do care about) grew 54%, from $2.4 million in the first half to $3.7 million in the six months to December 31.”
Ray H
:
Vocus has also recently added capacity between Perth and Singapore on the Sea-we-me3 submarine cable. The company claims that it will offer the lowest latency route between Australia and South East Asia, a competitive advantage that will become more important as telcos move into video calling.
The details of the capacity (bandwith, cost, life etc) were not disclosed. Vocus also said that they have signed their first customer on this cable, but the name of that customer and the terms of this arrangement were not disclosed either.
As a holder I am pleased with the direction the company is going but a little bit more transparency would be nice.
John C
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Hi Brad – you say VOC has no debt. Skaffold disagrees and so do several websites. Haven’t they taken on debt to fund their latest data centre aquisitions, or are you saying that apart from the IRU’s, they really have NO debt? I have NOT spent much time researching them yet, but at this early stage, I’m getting a bit of conflicting data about VOC. I notice that some community members also had a concern or two about the most recent Vocus Annual Report figures also (a couple of months back). Skaffold would suggest that VOC is actually still trading above current and near-term IV, so no MOS. What have they missed?
LukeS
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If you can sell bandwidth and storage profitably then that is a great place to be for a while yet. I have been doing internet stuff for over 15 years and the acceleration at the moment is amazing. We have a retail site that had a fantastic Christmas in 2010 and we are tracking to double that in 2011. Lots more traffic, lots more people, lots more bandwidth. And the growth of traffic from smart phones is just awesome. Our stats say iPhone by a long way in front and all the rest are scratching for the crumbs.
Selling bandwidth and storage profitably is the key.
LukeS
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And a very merry Christmas to Gerry Harvey. I have been meaning to thank him for a while. When he started promoting the internet as where it was all happening there was a noticeable lift in traffic. Ho Ho Ho.
Roger Montgomery
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I believe he will be waving a cheery ho ho ho from the helipad.
Roger Montgomery
:
Indeed! Thanks Luke.
LukeS
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Here are a few more numbers. I own shares in Apple and Google. I believe this will be the Apple decade. And Google is the only game in town.
We have a high level of traffic to our website and so these numbers are statistically significant. If some other site owners are visitors to your blog they may wish to confirm these percentages.
How people get to our site
Search traffic
Google 82%
Bing (Microsoft) 3.7%
Mobile devices are 14.5% of traffic to site. This has really only happened in the last 12 months. Apple has over 60% at the moment.
iPhone 37%
Not recognised 25%
iPad 24%
Samsung Galaxy SII 2.1%
Samsung Galaxy S 1.9%
iPod Touch 1.3%
Roger Montgomery
:
Interesting stats Luke.
Matthew Smith
:
Hi Andrew,
I agree with you and as Seth Klarman said, “Its a great time to be a value investor. The competition seems to have gone away.”
Brad
:
I have more stock ideas than money, may the bear market continue for a little while longer!
Grant Duggan
:
Not sure if its on the topic,but thought i might share that i went to my accountant last week to complete my tax,and he quickly pointed out even though it had been my first full year involved in shares,he highlighted to me that i had done well by making and taking profit. However if i continue to dabble in those little speckies such as Vocus,TSM and credit corp there is no way i can keep winning, and sooner or later the odds will catch up to me. And maybe concentrate more toward bank shares and the likes of BHP, i thanked him and said each to their own.
Roger Montgomery
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Hi Grant, and then you gave him a copy of Value.able for CHristmas. I am not sure you accountant is operating within the law if he is giving out financial advice without a financial services licence? I am sure he has one.
Matthew Smith
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Hi Grant,
There is are many a great business out there that profits significantly on margins – I would suggest perhaps not writing off the banks & insurers completely from your view.
Check out Fairfax Financial Holdings for a great insurer and Wells Fargo for a great bank.
Andrew
:
I stopped listening to accountants (Sorry Ash, your different, your also a commenter here) about anything investing wise a long time ago.
One of mine seemed more interesting asking me for advice on stocks and also kept telling me i should invest in a property to save some money on tax despite the fact i would have had to borrow 90-100% of the purchase price. Leveraging myself up that much to save some money on tax just doesn’t make sense.
Still, for most people who do not follow a set proven and profitable strategy and follow it well, he is right, eventually people who speculate (which he is thinking you are) will catch up to you. Hopefully you follow the philosophy well and you can prove him wrong. Soon he will probably try and pay you for stock advice.
Roger Montgomery
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Negative gearing: Losing a dollar to save 50 cents.
Ash Little
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Yes Andrew
Never take advice from your accountant about growing your wealth,
They can save you some tax but some of these strategies are wealth destructive. I have seen people do silly things just to avoid paying tax.
Andrew
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Buying shares in the right businesses. it seems so simple doesn’t it, yet as has been said, some take to the idea of the type of investing we do and others (even some who try) just can’t.
It seems an entirely logical idea, if you buy companies that are high in quality than they should perform well, if they perform well they should see their profit and value rise where as a company that is not quality will have declining performance and hence declining value.
I think the reason some don’t take is that they cannot comprehend why in the long run the market is a weighing machine. It has been pretty much proved that in the long run share price follows value but i think people need to know the catalyst as to why that happens and they can’t work this out.
As you have mentioned Roger, i am not too worried, the less people value investing out there the easier it wil be for me and unlike some other strategies, the runs are on the board that value investing works.
I have been having a great time recently thinking about some broader issues and concepts in regards to investing and it has helped me sit back and become even more comfortable with my strategy and helped me even further distance sharemarket noise from my method. Value.able has been a great first step on what has since been a very interesting journey.
Roger Montgomery
:
Delighted to hear Value.able has become the foundation stone.