WHY SWM shares will deliver multi-bagger returns by September 2025 (a) SWM is a transformed digital growth company priced like a 'cigar butt' investment
Normally when you come across a disrupted business (think Blockbuster Video, Salmat or Kodak) it is a business which is structurally challenged and is often referred to as a ‘melting ice cube business’. Often it still has strong revenue and free cashflow however the market is not prepared to ascribe a decent growth multiple to its share price on account of its diminished prospects.
Buffett would refer to these types of shares as cigar butt type investments – where you can pick them up for nothing and there’s one or two puffs of value left to be extracted.
SWM at these current market prices is priced like a cigar butt despite remaining profitable during the longest per capita recession in Australia’s recorded history! As I previously explained here (https://hotcopper.com.au/threads/why-swm-is-worth-more-than-1-50-per-share.7836870/page-200?post_id=73114820 ) you could treat SWM like a cigar butt investment and sell its parts off (TX Australia, SWM Ventures, West Australian Newspapers, ASX:A1N 20% stake, Seven Studios etc) and still receive multi bagger returns. Protection against loss of capital matters and when a listed business has multiples of its share price in net asset values this provides the rational base upon which to invest.
But if you were to look at SWM as a cigar butt type investment you are completely missing the bigger digital transformation that has taken place… (part 2 coming soon…)
SWM Price at posting:
15.5¢ Sentiment: Buy Disclosure: Held
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