What companies are we looking at? (18/11/2014)

7 Comments

1. 

   Andrew Longden
   November 28, 2014 at 11:00 am:

   Hi Roger & Co

   I understand you are both a fan and holder of Challenger (CGF).

   The announcement today re: DSS and redefining of the Care Annuity has resulted in a hefty slump in the market price. This news has caught me (and possibly everyone?) off guard.

   Do you view this as a short term speed bump? What is your assessment of the situation and the consequences for CGF and the resulting impact of the intrinsic value of the company?

   Kind Regards,

   Andrew

   • 

     Roger Montgomery
     November 28, 2014 at 12:18 pm:

     Hi Andrew, Legislative risk is always an issue for businesses like Challenger, FlexiGroup, MacMillan Shakespeare and may others. Some investors simply rule out any company where Government featherbedding has been evident. We will meet with the company and better understand the risks to the rest of the business but given the FSI’s suggestion that annuities could be mandated for super funds, we are leaning towards a speed bump. Of course our view could change in a moment and if we are trading the stock we won’t be able to discuss it.

2. 

   Tony C
   November 24, 2014 at 9:19 pm:

   Hi Roger

   Personally i have no problem shorting a stock and watch the short sale list the ASX and others provide to take advantage of short sellers covering there short sales.
   I know many professional traders who would never go home without at least some shorts on to balance out there portfolios
   I see nothing unethical about it at all and as you often say, It takes two people to make a market and the only true way to find out why the market went up or down today would be to ask both the seller and the buyer why they did what they did
   The idea that nasty short sellers are some how pushing down the price of a stock seem wrong too, as the short sellers had to first borrow the stock helping to provide liquidity in the market and they have to buy back the stock at some point to return to the lender
   It also help lower brokerage costs to retail investors.
   There is potential high risk in shorting a stock but as a happy member of the Montgomery Fund i would like to see you either introduce short sales to the fund to hedge risk as well as enhance returns or start a long short fund so i could add to my investment with you and your team

3. 

   Tony C
   November 23, 2014 at 9:41 pm:

   Hi Roger
   Again thank you for the repeated warnings about mining services and Iorn ore

   I have often wondered why the Montgomery fund is a long only fund as you were one of the few who picked the end of the mining boom.
   You could have deployed a small amount of the cash you hold in the fund into shorting well everything in that sector as well as mining services and enhanced your returns the in the fund considerably

   Tony

   • 

     Roger Montgomery
     November 24, 2014 at 12:04 pm:

     Hi Tony,

     Thanks for the encouraging words. I am interested to discover that there is some acceptance of short selling as a strategy to enhance risk adjusted returns. Obviously not all investors share the same view but there are very large and reputable managers such as Platinum that use short selling to take advantage of such situations.

     • 

       Simon Stewart
       November 24, 2014 at 10:50 pm:

       Hi Roger,

       Hi Team, please don’t go down that path. There is integrity in what you do, finding high quality businesses at a discount to intrinsic value and investing in those companies, hence rewarding good management and building a better future. Short selling is just gambling on the demise of a business or sector. Might make you some money but benefits no one else. Personally I would like to see it banned making the stock market a lot more stable place to invest.

     • 

       Roger Montgomery
       November 25, 2014 at 2:52 pm:

       Thanks for that feedback Simon. Sincerely appreciated.