The lower valuation multiple is good for the buy back, and all...

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JoeGambler

7,139 Posts.

2000

17/05/24

13:03

Post #: 73877812
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Originally posted by Burgerbuns: ↑

I see your point(s) and an investment in Aristocrat isn't an investment for everyone. I recently heard the following conversation;
Q: Would you buy Aristocrat?
A: Based on ESG...No, I wouldn't buy shares in Aristocrat Leisure.
Q: What if you didn't apply an ESG filter. Would you still not buy shares in Aristocrat Leisure?
A: If my sole purpose was to make money, then yes...I would buy shares in Aristocrat Leisure.

There's risks in every investment. Every investment that you own today isn't safe. Every single one of them carries a ball of risk. Just depends on your risk tolerance. In terms of regulatory risk, that's just scare mongering. Gambling has been around as long as prostitution. I don't know what it's like in other states within Australia, but here in Western Australia, we have the TAB. Guess who runs the TAB...Racing and Wagering. Guess who OWNS the TAB - The State Government of Western Australia! That's right, the Government owns a gambling business.

In terms of ESG and regulatory risk, look no further than the safe banks in the ASX. People have short memories. Banks charging fees to people who have been deceased for years. Telstra screwing old widows after their partner passes away and charging a reconnection fee because the account was in the name of the husband who passed away (this happened to my mother). Mining companies who rape and pillage the earth that they don't even own and destroying communities in which they operate. I've used those last few words deliberately and after having been employed by Australia's largest company for 6 years whilst facilitating their induction program, this was the type of hyperbole that I used to spit out on a daily basis. What about fossil fuel companies? How would you rate SOL's ESG policy? You should read it, it's highly amusing. Listed investment companies like AFIC won't touch Aristocrat because of ESG, but recently upped their stakes in Woodside and Santos. Go figure.

Hypocritical. That's the stock market in a nutshell. Everyone is in it to make money. And that's what capitalism is...the motive to make a profit.

Quite frankly, what's happened with the movement of Aristocrat's share price has pretty much just boosted it to where it should've been in the first instance. This stock has always been worth more. When you look at it's valuation right now, it's still cheaper than companies that have a big fat ZERO in their NPAT column and cheaper by a huge margin for the growth companies delivering 15% annualised returns trading at PE's that vary between 50 and 100.

To your point about how Aristocrat will never trade at lofty PE's. If you're invested in ALL, it means that at some point, you'll always be able to buy it cheap or at reasonable valuations (which is still reasonable today). Who'd have thought? an ASX20 growth company compounding into tomorrow (and for the past 10 years and likely the 10 years prior with no thanks to the GFC) that's trading cheaper than a supermarket - which by the way is also currently under some sort of Government scrutiny.

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The lower valuation multiple is good for the buy back, and all else being equal, the shares will still rise broadly inline with earnings growth.

The ESG discount is a pain now that I own the shares, but it also means that there is a built in margin of safety when I purchased, because the multiple cannot get a lot lower before "value investors" step up.

I am also hopeful that there will be times in the future that the multiple will expand beyond the low 20s, hopefully I have the foresight to offload some at that point. However, easier said then done!

Last edited by JoeGambler: 17/05/24

ALL Price at posting: $45.49 Sentiment: None Disclosure: Held
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