There is a saying that I heard ages ago from a Fund Manager in Sydney who said that ‘everyone hates your research idea until it doubles in price’. Great saying and this is a great stock!
Negativity towards SWM at 15 cents a share represents a failure to understand the intrinsic nature of SWM and what drives its profitability -it’s a cyclical business with massive operating leverage. By its very nature this means that it will experience dramatic booms and busts.
As stated by SWM Management when asked about ad market recessions ‘...TV is the first to go and the first to come back.’
We’ve already experienced the longest per capita recession in Australia’s recorded history. Now with interest rates set to be cut in the coming months we will experience a boom that is led by our digital businesses. At less than 3x current earnings (or 1.5x Mid cycle earnings) this is an obviously strong buy.
SWM Price at posting:
16.0¢ Sentiment: Buy Disclosure: Held
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