What return can you expect on Freightways shares?
Recently, we wrote about the return a long-term investor might expect to earn buying Australian listed equities at today’s prices. The note, which can be found here, concluded that returns in the region of 7.5-8 per cent might be a reasonable estimate – somewhat lower than the returns earned in the past.
The fact that this expected return is lower than historical levels raises a challenge for a disciplined investor seeking to own high quality business trading below intrinsic value: how do you determine intrinsic value if the return hurdles that were previously applied are no longer valid? Let’s explore the issue using a stock example that has been part of The Montgomery Fund portfolio for many years – New Zealand-listed Freightways Limited (FRE NZ).
Tim joined Montgomery in July 2012 and is a senior member of the investment team. Prior to this, Tim was an Executive Director in the corporate advisory division of Gresham Partners, where he worked for 17 years. Tim focuses on quant investing and market-neutral strategies.
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.
