fund managers view, page-15

Like most of you, my portfolio took a belting. I find that during times like this it is easy to make a rash decision and live to regret it. Whilst I will not invest fresh capital at the moment, I will not burn existing investments I have given the fundamentals have not changed today.

In fact, like a few other posters here, I am more convinced there are significant short term forces at work that are not related to fundamental valuation variables and have caused this excessive market reaction. I think that any company making money from regular operations that has undertaken significant risk mitigation strategies (such as hedging and locking in fixed price EPC contracts) should be valued on measures such as operational earnings (both current and forecast forward earnings).

For SAR, the POG at say A$1,400/ oz will still yield a profit. At the current level of circa A$1,550/ oz SAR will have a gross operating margin of >A$550/ oz. And, based on their expected guidance for output of 130,000 oz this financial year (and growing next year), SAR's gross margin still should be $71.5m for FY13. That means, based on todays closing price, SAR is trading at a PER of 2.8 times for FY13. That's pretty damn low if you ask me.

Mr Market always knows best... but it also offers up juicy opportunities that are too hard to resist. This is one of them.

As I said above, I will not put new money in now. I will simply wait until some sense of rationality returns to valuing SAR.

Patience will be rewarded.