I don't agree that buying in to cheap assets is folly particularly when those assets are as tangible as forestry. I don’t think you can be comparing the assets of an agricultural company with those of an oil company. Yes, the forestry assets may not sell at full book value but they won’t sell below 14c in the dollar either - the price that we are paying for them. In my view for a long time there has been too little focus on net assets and too much focus on growth through debt and that is one of the major reasons the world is in crisis of late. My approach is to try and buy a dollars worth of value for 50c whether that value be in earnings or in assets. Times like these present the opportunities.
When the market is under pressure, I believe the best approach is to go after those stocks which have been savaged rather than buying the popular ones.
The article below which was in the weekend papers puts a similar view and I strongly agree with its approach:
In tough times buy into stocks that have been pummelled rather than those that are strong. In the former case the damage has been done. In the latter it may still be on the way. Yes, you might make some mistakes in some of the struggling ones but others will recover several fold.
I know that pretty well all shareholders in this stock have been hurt. While I have just come into it, I have been punished in similar stocks. My first purchase of Capral when adjusted for reconstruction cost me $15.40. They are 20c today. I am sure many of you have had a similar experience with this one. But I do think that there comes a time when many stocks fall too far and the opportunities are there. Elders fits that category in my view. At some time what it needs is for shareholders to say "this has gone too far" and to sweep away the pessimism. I am hoping that right now can be that time.
We don't need to wait for the preliminary annual report particularly as the update was only issued three weeks ago and after the close of the full year period. API is due to report within the next week and shareholders there didn’t wait for the report. The API share price has risen in anticipation of that report. Whether right or wrong, shareholders there have elected to buy now and read the results later. By waiting you risk missing out.
GPASAS
ELD Price at posting:
26.5¢ Sentiment: Buy Disclosure: Held
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