Fear Gauge, page-33

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nzgeo

691 Posts.

31/01/17

18:39

Post #: 22262735
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Originally posted by Dr.Who ↑

nzgeo. I find the subject of valuation fascinating. I agree with you that the markets appear over valued in the main but I say that just from gut feeling that global stresses will boil over not from a sophisticated model of valuation.

Not having a pop at your post, as I say, I agree about a bubble. It is commentators/analysts in general that I question about valuation.

What factors contribute to deciding value of a stock?

I'm not questioning the various models PE, DDM, FCFE, ROE coupled with plowback/growth etc. It is just whichever way it's cut value is based on the future and no one can predict the future with any certainty.

Those that have read my posts know my views on most analysts in the fiance industry. They latch onto buzz phrases and stale models making figures fit whatever outcome they want to portray - in the main, all designed to impress and earn fat wages. Like any industry there are a few analysts/commentators with excellent crystal balls but they are few. Most analysts are no better than average Joe on HC at picking an outcome yet many people are still led by their convictions, I believe. The Morgan Stanley stock pick on Aconex as a buy the day before downgrade and 45% drop depicted my notion perfectly.

A post about nothing really from me. Just wondering if others have a fuzzy notion of what constitutes stock value?

At its basic it must be the cash a company generates for its shareholders year on year for the foreseeable future, and beyond that a guess of perpetuity, discounted back today at a rate of return expected for the holding risk. Sounds reasonable but at the end of the day it is all guess work - the more effort put into understanding the industry/company the better the guess should be.

But guess it is. Be wary of anyone that preaches over value or under value, the world is growing and third world is becoming second world therefore wealth is growing year on year.

Closer to home. Can S&G produce sustainable 14% net profit on $900m revenues growing at say 3% per year? If it can then a little dilution to bring gearing back to about 40% (with a help from receivables/nihl) will hardly matter. It is the future that counts, a guess yes but then so is everything else.

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I'm more concerned about global macro risks at the moment, than looking for individual company opportunities... so I have been selling down my portfolio to wait in cash. "investing" is easier when the "market" is going up.

Could be 6, 12, 18 months before I redeploy that cash.

Here is one indicator I respect

http://archive.fortune.com/magazines/fortune/fortune_archive/2001/12/10/314691/index.htm

SGH Price at posting: 25.5¢ Sentiment: Hold Disclosure: Held
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Fear Gauge, page-33

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