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When to sell shares

Media Room, On the Internet | Comments (57)

When to sell shares

You can’t buy shares in a business and hold them forever. Business is dynamic and unfortunately many of those listed on the sharemarket are destined to be liquidated, or go into receivership or administration. Companies disappoint operationally, their prospects become less bright, they take on too much debt, pay too much for an acquisition, or their share price simply rallies far above any reasonable estimate of value. How then can you hold these shares and expect to do well? Read Roger’s article.

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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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57 Comments

  1. Harry L
    :

    Long time lurker, first post please be kind.
    Background: SMSF income investor holding
    AMP,APA,ARP,BHP,CBA,CCL,DJS,GUD,QBE,TLS,TOL,TTS,WBC,WDC,WES,WOW,WRT.
    Doing my own research, some stocks above recommended by “advisors” some are mine after reading Rogers Books Edition 1 &2 about 5 times and constantly use them as a reference. Great work Roger.
    Have developed my own spreadsheet for IV and fundamental analysis using the RM principles outlined. Recently sold LEI, MND and STO to preserve profits. Looking to pyramid into some of my existing holdings but when trying to evaluate APA (as well as alternates in the utilities sector) come unstuck in the analysis as APA and I suspect others use Cashflow when determining POR instead of EPS. Can anyone shed any light on how one might evaluate IV for APA? PS I have tested using operating Cashflow in lieu of EPS to determine POR. Am I on the right path here?

    Best Regards

    H

    • Mike
      :

      Hi Harry,

      Being kind, I’d suggest you do IV calc’s on the following stocks you hold.
      AMP, CCL, DJS, TLS, TOL, TTS, WDC, WES & WRT.
      If I had to make a guess, were many of these recommended by an adviser?

      While many of these companies have decent dividend payouts, you also need to be conscious of the value of their shares. Its not much good if a company pays generous dividends, but their stock price follows their value down. You may end up with a negative or low return after dividends.

      • Harry L
        :

        G’day Mike, thanks for taking the time to respond.

        Many of our stocks were acquired “with advice” near the bottom of theGFC. Fortunately we went to cash and selected a “fee for service” advisor after jumping out of Managed Funds at the start of the GFC (better luck than good management) All before we knew about RM & Invaluable.
        We have conducted IV reviews on all our stocks, though we do have some questionable performers, we did get some at great discount to IV. We need to keep our heads, be patient and as WB said, do not loose when you exit.
        Thanks for your views on degrading stock price. You are absolutely correct, and we have devised a spreadsheet which looks at combined Capital and Dividend profit/loss which helps us to manage the condition you mention.(See books by Roger Kinsky)
        Thanks for the advice.

        Best Regards

        H

    • Andrew
      :

      Hi Harry,

      Sorry i can’t offer to much help with the above but will give it a look. I was interested in hearing your point of view in income holdings.

      I am a value/growth investor so i don’t particularly know much about what makes an income one attractive other than perhaps a high dividend payout ratio.

      I would be extremley interested to hear your thoughts on what you look for as to a good income share investment. What is your criteria? Has value.able and this blog helped or changed anything in any way.

      I am looking to alter my scoring system so it can be tweaked from typical value and income type of investments. I personally think that rule number 1 which ever way of investing you want to follow is to “Buy Quality Companys” and i am sure you are no different, but what other elements are you looking for?

      Thanks in advance and if anyone else wants to share with me their thoughts.

      • Harry L
        :

        Hi Andrew:

        Any insights you have regarding APA value would be appreciatted.

        Wife & I are in pension phase in a SMSF.

        I understand the view regarding dividend paying vs profit retention within a company and agree with RM and WB that a company which retains its profits is more valuable than one which pays a dividend.
        However, the market in todays environment, (at least among the liquid stock >$300m)
        seems to be trading sideways with a potential to trade up in the longer term. Whilst by no means an expert, (indeed, very much a learner) my aim has been to select stocks using “Invaluable” theory, basic Fundamental analysis, some Charting and trying to eliminate speculation while delivering a fully franked return> 5%.
        Possibly “pie in the sky” but if a stocks IV and fundamentals stack-up, then a FF return @ 5% (better than bank) while awaiting growth works for me. Otherwise, we sit safe in the bank or bank stocks, until the opportunity presents itself. (look at GUD)

        Hope this helps

        Best Regards

        H

    • John R
      :

      Hi Harry,
      Infrastructure stocks are difficult – I use operating cashflow. Using Rogers methodology you are likely to get a low value. I use a discounted cashflow model but still struggle to get valuations I have confidence in for this type of company.
      regards
      John

      • Harry L
        :

        G’day John R.
        Thanks for the response.

        Infrastructure stocks are difficult.
        However they do seem to be the classic defensive stock.
        You are correct. RM’s methodology does project a low value. I did notice in the annual report that APA do not use the classis POR formula of DPS/EPS but, DPS/OCF.
        I have read before, that Dividends are paid from Cashflow and NOT Earnings, which might explain why Dividends appear in the Cashflow Statement. If this is the case, than the POR formula of dps/eps needs some thought. Can the two erivations be used interchangeably?
        In addition, I do not fully understand the company structure. The APA Group consists of two income Trusts. Australian Pipeline Trust and Australian Pipeline Investment Trust. each of which is separated by the consolidated and trust entities. This is not to mention the interests they have in Envestra, Hastings Diversified Fund and others.
        At least it seems like it is fully Australian owned, unlike competitors with overseas interests. Seems also to be a good extension of the LNG/Ethane gas play currently in motion, which gas some growth and good dividend.
        I spent today looking at Rogers Balance Sheet Cashflow evaluation model pp152 in Edition One. That opened some insights into how they are using their Capital, but without a baseline it is difficult to test the veracity of the workings.
        Poor ROE and good Dividend seems to be par for the course. Plenty of money spent on what seems like worthwhile growth, but very difficult to analyse.

        I understand the old cliche. “If you do not understand the business, you shouldn’t be in it”

        However, this type of business seems to offer a lot. This presents the challenge to try and understand. Perhaps there are those with brighter heads on younger shoulders who have some insights.

        Many thanks

        Best Regards

        H

      • Roger Montgomery
        :

        Hi everyone,

        I have talked about the special case of infrastructure recently on Switzer and used Transurban as the example. After further contemplation and a long chat with one of the founders of CP2 I have some clarity about where this sits in the spectrum of investment opportunities. Depreciation is the issue. In concept depreciation implies an asset with a finite useful life and even a final value of zero. In the case of a road, depreciation is therefore irrelevant. This is the opposite to the circumstance airlines find themselves in. In that case, the depreciation chanrge UNDERestimates the cost of replacing the aircraft. In the case of a road, depreciation overestimates the cost of maintaining it. Have a look at maintenance costs compared to depreciation for Transurban… To properly analyse an entity like Transurban, one needs to look at each asset (road) individually mainly because the debt attached is non recourse to the rest of the entity. Finally one shouldn’t be too concerned about the low rates of return on equity. Long term investors like pension funds are looking for these types of returns. if they can get a steady CPI+5% they would be ecstatic. They are not aiming for 15% or 20% returns and so the low but stable ROE suits them…

      • Steve I
        :

        Roger,

        First time, but I’ll have to disagree with you on this.

        I actually think this goes against every value principle there is. I heard you mention Transurban on YMYC and it startled me.

        Lets have a look:

        Transurban takes a clip off tolls and therefore relies on both population growth, increased travel per person and willingness to utilise tolls. First of all, this does not sound like something that protects against high inflation and oil prices and therefore it something that is probably suited to ‘the good times’ – you know, strong economic growth, credit expansion and low inflation. We are not in ‘the good times’ any more and won’t be any time soon.

        First of all, in more difficult times, people are more likely to travel less, use tolls less and use mass transit. All the while maintenance costs can continue to increase. I’ll wager you that this is as good as it gets for quite some time and from here on in, it will get even harder for this type of business.

        So, regardless of whether the economic environment suits an investment in such a company, lets consider the financials.

        Top line revenue:
        Revenue has grown from $0.22cps to $0.63cps from 2002 to 2010 (roughly 185%).
        To achieve this, Transurban has increased long term debt from $1.5 billion to $4 billion dollars (roughly 160%) and also had a 200% increase in shares outstanding.
        From 2008 to 2010, revenue dropped from $0.67cps to $0.63cps, with a 15% increase in share issuance and 3.5% increase in debt.

        Shares outstanding:
        Increased from 515 (m) to 1,414 (m), or 175% increase.

        Debt per share:
        For every share outstanding, they have maintained roughly $3 per share over the whole time period.

        Equity per share:
        From $4 per share in 2002 to $2.75 per share in 2010.

        Cash flow per share:
        From $0.103 per share to $0.274 per share, or 166% increase.

        Earnings per share:
        Total combined earnings per share from 2002 to 2010 is -$0.61 per share.

        So, the argument could be made that this sort of structure is for the benefit of growing dividends. Total dividends per share from 2002 to 2010 is $2.85.

        Share price in 2002 was roughly $4.25 and current share price is $5.29. The average dividend yield over this period (based on original purchase price in 2002) would have been roughly 7.5%pa.

        So, the value of the business has clearly not increased at all during this period, all growth has been achieved via debt and share issuance. The benefit for this has been reasonably high dividend yield. Do you know what this sounds like to me? A ponzi scheme. It sounds like the US Government finances.

        I would argue that this sort of business structure will rely on continuous increases in debt and shares in order to pay more dividend goodies. However, debt and share issuance are not unlimited.

        Also, what happens when revenue growth stops growing in line with debt. I would think that this is now happening and here lies the big risk. We are in a global credit crisis. The business model relies on continuous growth in capital (both debt and equity) and this is unsustainable.

        I think that there are big risks here, with the benefit of a 7.5% dividend yield. Given that CPI is currently running at 6%pa and growing, this model will probably die out.

        I’ll respectfully disagree with you Roger that this is a good investment unless the investor is seeking negative real rate of return. In addition, I think the low rates of return on equity are a considerable concern. The reason is that the low return on equity relies on cheap capital. Cheap capital does not last forever.

      • Harry L
        :

        Hi Roger and Steve:

        As the instigator of the APA query, I do appreciatte your insights Roger, but would suggest that Steve is covering off on the very issues I need to understand to properly evaluate APA as a long term viable “Cashcow” I don’t want to plow more money into APA if the Growth & Dividend is not sustainable.
        Given the complexity of APA, can anyone offer a Valuation method which ticks the boxes?

        Best Regards

        H

  2. Andrew
    :

    I have never quite got the whole, i don’t want to sell for tax reasons. i’d prefer the tax man to want a piece of my capital gain than feel sympathetic towards me for losing money.

    My reasons are as follows:
    -I no longer like the company
    -The company is no longer quality
    -I am made an offer too good to refuse ($18.00 for TAH anyone?)
    -Oops i made a mistake
    and finally
    -I can think of a better use of the money

    I am not a person who believes in building wealth for wealths sake. Every now and again i will have another reason for needing some cash which i think is more important to the intrinsic value of my life and will sell shares for that (starting with the least quality).

    • Rob
      :

      I agree, Andrew, except the day my broker rang me to take profits on a stock I’d held for 364 days. We waited a couple of days.

  3. Lei Lei
    :

    Trying to further understand VOC. If they own the lease of the cables to America..does that mean that the companies that require the bandwith have no other option but to use VOC? This does not seem correct..I know I am missing something here…but what is it!

    If VOC is the only company with the lease of the cables then how do people who dont buy from VOC get their bandwidth?

    Are there other companies out there that are offering the use of different cables?
    If so, who are these companies?

    • Andrew
      :

      Have a look atthe VOC prospectus, i have supplied a link which someone on here forwarded to me a while ago when Roger wrote about them in valueline, i also suggest searching for this blog post as he was very helpful. It helps explain it a bit more. I am still increasing my knowledge on this company to see if it fits my criteria or not.

      Basically, from what i can see so far, there are different networks laid out underneath the sea.The prospectus has diagrams and information on who owns them. These networks lease the cables to companies like VOC who on sell that to service providers.

      http://www.vocus.com.au/investor/FOF-Prospectus-20100517.pdf

    • Brad J
      :

      Hi Lei Lei,

      VOC are not the only wholesaler, but the only one that doesn’t compete with their customers giving them a competitive advantage. Would you like to be competing with you suppliers in the same market or would you prefer to buy from a supplier that has you interests at heart? Hope this helps.

      • Andrew
        :

        This is a good point, the bigger players have their own networks so VOC are targetting the smalelr and medium players. They don’t want to have to rely on competitors who can use their own access to undercut their service.

        VOC can then as Brad says, act purely in the interests of their customers or at least give the perception of it.

        When the access period is coming to an end they should simply just sign up to a new agreement so it is a risk but i don’t think it is a big one.

    • Lloyd
      :

      My take on it – it’s all in the IRU’s! Constrained and finite installed capacity (at least until someone lays a new trans Pacific fibre optic cable), growing bandwidth and volume demand and a few players with the existing transmission capacity rights locked up under IRU’s into the future for the life of the existing cable. Other players also have capacity rights, so it becomes a marketing game in a market that is growing 30%/annum – plenty of room for everyone with capacity rights to make money with such growth, so margins are reasonably secure… and if the existing capacity limit is hit before new cable investment, then the sky’s the limit.

  4. Gary Conlan
    :

    Hi Roger,
    I should say and all the graduates who have written so much interesting and educational material over the months. This is my first post, have read the book, most of it twice and slowly getting my head around the formulas and where to find the information.
    Gold has been talked about lately with KCN mentioned on a couple of occasions. To me it seems one of the best producing miners with low costs and good potential. Their price has dropped lately perhaps due to early rains in Thailand.
    I have an IV for 2010 of $8.04, 2011 $5.62, 2012 $18.66 ( got slack & used Etrade)
    Of course, as mentioned by others forecasting gold stocks is wrought with uncertainty but I can’t see the US getting over their difficulties for quite some time meaning gold should stay strong in the short/medium term at least.
    Appreciate any feedback.
    Regards
    Gary C

      • Jim
        :

        Hi Gary

        Congrats on your first post. KCN has also been on the acquisition hunt especially with Dominion as well as the rains. There seems to be a feeling they have paid too much

        Cheers
        Jim

  5. Ian
    :

    Hi All,
    Just wondering what are your thoughts on the current share offer by MCE? They seem to be buying new offices and generally expanding. Also it seems there has recently been a substantial change in holding notice from Aaron Begley. Does this change the management of the company significantly enough to warrant caution? $8.50 is still below my calculated IV with a reasonable MOE so this should make it a buy but does the Begley move mean that the quality and performance of the business is set to decline which could make it a sell? Perhaps I read too much in to these things but I would appreciate any insights others may have.
    Regards,
    ian

    • David Martin
      :

      Hi Ian – I have not been too concerned about Begley selling down and i do recall Roger saying that he has often made money from purchasing shares that founders have sold – for memory he bought TRS from the founders in the $2 range.

      He has also said when Sally MacDonald was selling down some her shares in ORL that “unless you can use your shares as an ATM there is no point in having them…” i have probably misquoted you Roger but i think the sentiment is there.

      i am currently over weight to this stock and the decision to purchase more is now tough – but i was tempted the other day when they traded below $8.50.

      The fundamentals of this business are excellent and given where oil is likely to go I see no reason to be concerned – but this is my opinion and naturally i would welcome other views.

      David Martin

    • ron shamgar
      :

      Hi Ian,

      even after the sale the Begley family owns 40% of the company so their motives are still aligned with the business/shareholders. (who knows maybe Aaron needed to renovate his house or buy a new Ferrari?)

      What you should consider are the following:

      1 how much exposure of your portfolio you wish to allocate to this company?
      2 would you buy shares at 8.50 if there was no SPP offer?
      3 what is the likelihood of the price dropping below 8.50 in the short term?

      Lots to think about GOOD LUCK!

      • Jim
        :

        Hi Ron

        Excellent summary of the MCE issues. The other relevant issue here is if the SPP is raising $6 million, then it will take only 400 people asking for their full allocation to be fully subscribed.

        To me, there is more likelihood of getting more shares from a dip in the price than the SPP.

        Cheers
        Jim

      • Greg Mc
        :

        Absolutely, Jim. Logically, anyone who was planning to take up their shares in the SPP should already have done so on market either today, or a week ago when the SP was down in the 8.30s.

      • Ash Little
        :

        Great Stuff Guys,

        As others may have guessed I really like MCE

        All that said the high dollar will have an effect. The company has said somewhere (don’t ask me to find where) that $A over $US will have an impact.

        That said the long term trends remain and may present some buying opportunities

    • Andrew
      :

      Without hearing directly from the guy it is hard to tell why he is selling. There can be many different reasons for the CEO to sell shares. Sometimes they just want to furnish their house or buy a new one. You could send yourself crazy trying to interpret these bits of data.

      Your main concern should be whether you think the quality and future prospects of the company have changed.

      • Brad J
        :

        The problem with MCE and the Begley family is that they are not very experienced with having their company listed on the ASX. They should not have paid out a dividend if they needed more money to further expand. The sale of their shares was also bad timing in my opinion but it is an insignificant percentage of their total holding. The combination of these has made people question their intentions when before they could do no wrong.

        Luckily for us, they have built a successful business over many years with a significant Moat. They are the envy of the industry. So as value investors this could have created a significant opportunity to buy shares at a discount to IV. WB has made billions out of negative market sentiment. Aaron said on Switzer that they are a conservative company, so if they exceed market expectations in the future we will look back on this as a buying opportunity. I own MCE and will not be selling anytime soon.

    • Jonesy
      :

      I try not to take too much notice of management selling shares because, like everyone else, management can have multiple reasons for selling (they need the cash for buying a house, paying kids tuition fees, buying a new car etc etc). Alternatively, there is only one reason why management will be buying shares – ie that they believe that they are underpriced.

  6. Richie
    :

    What I meant to say is that property may ignore the fundamentals (high consumer debt ect) for a property price decline.

  7. Richie
    :

    It’s funny steve I totally agree with your point of view and have for a long time. I’m starting to believe that the Aussie property market will continually be supported by a. Mining b. Sentiment c. Government d. Banks. I think for some reason the government would rather see the stockmarket fall than the property market (domino to the banks) seeing as it’s ingrained in every Aussie (the great Aussie dream)! I believe property will ignore the fundamentals way after the last bear gives in.

    • Steve I
      :

      I agree with what you are saying Richie but it cannot ignore a credit limit ceiling. I think we are there right now. Next step will be higher interest rates which also cannot be ignored.

  8. Rici Rici
    :

    My methodology for selling is simply the inverse of buying.

    I start to take a position (ie buy) when i believe that the share price is significantly under the market price. I add to that position when either:
    (a) the margin of safety increases; and/or
    (b)my conviction in the future growth of intrinsic value increases.

    I start to decrease positions using the inverse of the buying methodoligy.

    Both buying/selling occur in stages rather than total addition/subtraction of capital.
    One other point: when it comes to capital gains taxes. If the underlying asset has been held for less than 12 months i take the increased tax effect into consideration when it comes to making a sell decision.

    ie the ‘imputed sale price’ is [‘a’- increased tax cost]

  9. Grant Duggan
    :

    Roger and Room
    A big thanks Roger for all your contributions,on and off the blog. Roger you must feel a geat sense of achievement from the feedback that you receive from all that have read the book,used the blog,attended seminars and tuned in on all the media presentations. Still not sure how you fit it all in,but have to say THANKS and hope that myself and many others who use the blog can continue on this journey that you have taken us, for a long time to come.
    By the way a nice plug for Sally and the team in the Sunday paper this morning with the Govenor General showing off her new Oroton purse.

    • Lloyd
      :

      Probably impolitic of me to say so, but the GG showcasing Oroton accessories sounds to me like the demographic kiss of death for the brand. Ouch!

  10. John M
    :

    Hi Roger,

    Thank you for your continuing efforts to educate and inform investors. I loved your Switzer discussion on the current pitfalls of prospectuses and what is needed to be changed to protect the average investor from bad investment decisions.

    Once again you haved displayed the knack of tackling a complex issue and breaking it down into understandable bite sized morsels that anyone could understand.

    Thankyou

  11. Michael
    :

    Hi Roger and Blog group,

    Thank you for your shared knowledge and experience. It is the first time I have added to the blog but have purchased the book and followed the blog for some time, have learned lots and realised just how much I have still to learn.

    I agree that the topic of “time to sell” is very important one and should be covered in more detail so we all understand the more fully. So Roger thank you for this article.

  13. Richie
    :

    Calling all valuable grads!!!
    Can anyone give me a valuation/opinion on finbar group, FRI. They seem to me to be ticking the right boxes, but in a sector that may be recieving some bearish sentiment ATM. Opportunity????

    • Steve I
      :

      Hi Richie,

      As per company details:
      “Finbar Group Limited (FRI) is a property investment and development company with a core focus on the development of medium to high density residential apartments and commercial property within the state of Western Australia. The company holds interests through subsidiaries or by jointly controlled entities.”

      A strong component to valuations is earnings and the expected future earnings will drive the future valuation.

      In Australia, we have experienced for over a decade a property boom and bubble funded via debt and overseas investment. It is my view that we have reached somewhat of a debt limit and we cannot take on further private debt. In fact recent evidence suggests that the deleveraging that started in the GFC that was halted by the additional first home owners grant stimulus has now started. Recent lending stats showed the lending applications the lowest since 2002 or so (from memory).

      In addition, much of the apartment purchases, particularly in Sydney and Melbourne, was from overseas investment coming primarily from China. This has dropped off substantially in the past year from their views that prices are now too expensive. The relative strength of the Australian dollar will continue to strengthen this view.

      As property prices weaken, there is a cascading effect. Decelerating prices mean reduced demand for new property.

      From The Australian:
      “CHINESE buyers have deserted billionaire Harry Triguboff’s Meriton Apartments, with sales to Chinese owners and investors dropping from 30 a week to 10 a week over the past month.”

      “Our (real estate) market is the Chinese market, just like coal and iron ore,” Mr Triguboff said.

      If you think that property prices and demand will continue to be strong and that credit demand will continue to grow, then Finbar is probably very cheap.

      However if you think this is not the case, then it could potentially be very expensive and intrinsic value could decrease significantly in the coming years. Look, we are in a credit crisis. There is too much debt. We cannot have debt continually growing at a pace faster than economic expansion. It is unsustainable and it is the reality that we face. Growth of credit is the lifeblood of property developers.

      Personally, I wouldn’t even bother with a valuation as it won’t be correct. Earnings will be falling, in my view, and intrinsic value to follow. This is not the sort of business that I would want to hold until it has hit the bottom. I prefer companies with either stable or growing earnings as I can then forecast a value which is either reasonable or conservative.

      Some might contend that you should not worry about the sector and to only think about the business. Is this a business that has a wide moat and can ride out, even grow, through these fundamental issues? This is the question that you need to ask.

      • Ron shamgar
        :

        Steve, u have taken the words out of my mouth! We r in total agreement on this topic. Cheers

      • Matthew R
        :

        I agree Steve

        For me, & for the same reasons you mentioned, predicting Finbar’s future is a 7-footer – too hard

      • David Martin
        :

        Couldn’t agree more.

        Decmil on the other hand design, build and commission temporary and permanent facilities including accommodation villages, administration buildings, maintenance and storage facilities and civil concrete work for some of the world leading resource companies.

        Among othet things thier work covers mining camps, residential homes, units offices schools and hospitals.

        Work in relation to the Gorgon construction village with the construction of the 3300 persons village on Barrow Island .

        Work with Thiess in relation to the construction of temporary warehouse, transportable buildings and workshops.

        Work with Fortescue regarding the Kandama accommodation village to design and construct an 800 person resort style village

        I recognise it is not a property play in the traditinal sense but it makes more sense without the risk that property devlopers take on.

        Just my view

      • Andrew
        :

        Nice post Steve, have to agree.

        Finbar has been a company that gets mentioned here quite regularly, i have noticed. I need an identifiable competitive advantage in order to justify an investment. There may be one with Finbar but i can’t see it, and if it is there it might not be the type i find attractive. When people are willing to pay extra for a “Finbar” property i might start taking notice. Trump has done it with varying degrees of success (with little according to some and the most success anyone in the world has ever had according to him) but i am not sure if the aussie property companys have it in them to put this amount of effort in.

        The construction game is a hard one to predict and there are so many factors that can impact the future earning potential, weather is one such risk to future earnings and this is something man cannot control. Then you have the uncertainty of where to next after you finish X building, population trends, risks that could come from changes in legislation etc. I know these guys build for a living so they will be better able to spot and take advantage of a potential profitable development than me but their is too much uncertainty. Needless to say though, property is an aussie obsession and the demand will be there for ALMOST any location. I can’t comment on Finbar’s core market which i believe is WA but here in Sydney the future is building upwards and not outwards in my opinion so the future is there for a high density residential developer, but alas i come back to the fact that my belief is speculation and i am still uncertain whether if it is true Finabr are that company or what Finbars future will look like in x years time.

        I want something a bit more certain.

        So i find myself, not unusually agreeing with Matthew, Ashley and yourself Steve. I just can’t with any certainty predict the future earnings and I can’t see enough of a competitive advantage either.

  14. Tiago
    :

    Roger, sorry for writing something that has nothing to do with the post, wanted to share with the community how funny was Peter’s call on Victoria’s Closet!! I couldn’t stop laughing!! Watched your money your call show last week, I havent watched for a very long time, did they pull your ears?? few years ago when you were in there and someone asked you about a company XXX that was small exploration company worth 5 cents, you would say: what do you know about this company? answer: my friend gave me a tip. You would smash them!! and telling them that they were better off going to the casino and more fun…Was entertaining, I was expecting one of this answers on the show last week but unfortunately you didnt throw one of them.
    Good talk on prospectus tonight, always teaching us and very entertaining sometimes.
    Take care

  15. Rob Walker
    :

    Very timely Roger, just did some house keeping and closed some positions this afternoon. Companies sold due to price higher than IV and a couple I just got wrong, any way net outcome was better than I have achieved in a long time thanks Value-able.

    cheers

  16. darrin wong
    :

    HI Roger

    Another great post. How often should we be updating our portfolio and what is the first sign from a stock that we should think of bailing?

    cheers

    darrub

      • paul
        :

        Hi fellow bloggers
        Just remember to keep it simple and you will reap the rewards.
        Over recent times I have cleared my portfolio of name stocks (top 100) and replaced them with good quality growth stocks I have managed to identify thanks to this site and I have never looked back.Name stocks are for the masses and not for me now. If I think a business still has a competitive advantage I will hold until that changes. This has worked for me so far.
        KEEP the fine posts coming , its a very long long weekend.

        Cheers all

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