From my experience markets are not perfectly efficient because...

From my experience markets are not perfectly efficient because us humans are not perfectly efficient. Bias springs eternal from the way we humans view the world and particularly in times of greed or fear investors regularly throw out the baby with the bathwater.

Calling SWM an ‘absolute no brainer’ at 15 cents a share is my way of clearly articulating that the share price has gotten to such ridiculously cheap levels that the odds are so heavily skewed in favour of investors buying at these prices. SWM right now could be sold for scrap and it would still deliver multi-bagger returns. Seven Studios alone brings in $40m EBIT which is now effectively tax free due to the producer tax offset changes which recently came in. Even giving a 10x multiple to this single business unit in line with other studio transactions would make it worth more than 1.7x the entire market cap of SWM.

The reason investors such as Collins Street Asset Management have recently purchased SWM is not because SWM is an efficiently priced share but because it is inefficiently priced and hence they are able to earn a greater return than the risk being assumed. The Australian economic cycle (and the RBA interest rate cutting cycle) has already turned the corner and the SWM share price factors in none of this dovish RBA tilt which occurred yesterday.