Reading the posts on this thread I am reminded of the history of Altria (of Philip Morris fame).
When smoking was completely vilified in the late 1980's the price of Philip Morris was decimated. Curiously, although the price was savaged, the profits rolled in year and year after year and a dividend payout rate of 6%p.a. - 8%p.a became entrenched throughout the whole of the1990s and into the 2000's.
As fate would have it, between 1990 and 2010, "a dead in the water" tobacco company outperformed the tech heavy Nasdaq.
Investment performance must be measured by each investor against their own, personal cost of the investment. In my view, both PTM and MFG are currently priced similar to Philip Morris, even if FUM were to reduce by another 25%, each business can comfortably pay a 6%-8% p.a. dividend (at current prices).
One can only imagine if they do not lose 25% of FUM, the yield will be substantially higher and the SP of each will probably recover.
I never, ever buy shares for income it is a space where value can rarely be found, except in a crisis. My very best positions have been incredibly efficient users of capital and reinvest to grow their business in multiples not percentages. Most non-dividend companies fly under the radar since both large and small investors are infatuated by dividends.
In a massive irony, I have found myself hopelessly overweight MFG and PTM and now continuing to accumulate at sub $12 and $1.80 respectively.
My analysis of the pristine Balance Sheets and very sticky ongoing revenues leads to the conclusion that I should own them for their income and bugger capital growth or SP gains, as they are no longer required to achieve an adequate risk adjusted return on the capital I have invested.
Having averaged down all the way through the 2022 turmoil, I am still heaving in the red on a cost basis, but each will yield over me well over 6% if dividends were trimmed by 15% from current payout levels. Each incremental dollar I invest at lower prices not only carried less downside risk, it becomes yield accretive.
To suggest these businesses simply shrink into oblivion appears a shallow analysis of the nature and competitive space investment managers work in. At a low enough price, the become M&A targets and/or MBO propositions. I suspect over the next 18 months both the companies in question will attract one or other of these outcomes. For long term investors (not traders) the simple and most likely succesful way to play these stocks is to just be there when the action happens. Avoid the noise of the crowd, especially the cheap seat experts on HC. Collect your dividends while you are waiting, as these will undoubtedly lessen the pain.
In a market where prices are likely to continue to fall and profits are under severe downgrade risk as a result of lower global demand/spending, I feel reasonable comfortable building a bigger and bigger position in MFG/PTM as these guys are very good at finding and extracting value. In a raging boom, paying for growth is counter intuitive when the cost of capital was free. In a more normal world, more normal valuations are being struck. "Cheap" tech stocks remain incredibly expensive, while "cheap" value stocks get even cheaper. These are the conditions a value manager lives for, wanting only for time and the patience of investors to validate longer term value. Indices can drop to any level as they are moved by momentum and price and have nothing to do with value.
For those with no grey hair, read the lyrics to The Byrds "Turn, turn, turn" and understand them in the context of 5, 10 and 20 year time horizons. Sometimes making real money takes that long, follow the path of CSL to see how a 100 bagger is formed.
Each to their own.
GLTASH
MFG Price at posting:
$11.99 Sentiment: Buy Disclosure: Held
(20min delay)