SOL

1.56%

$34.48 washington h soul pattinson & company limited

News: SOL Norway sovereign fund excludes three more firms from portfolio, page-30

First 30 Last

Share
Profile

Follow
G650er

564 Posts.

44

18/02/19

14:50

Post #: 37472410
Share

Originally posted by madamswer: ↑

"when you say add 10%
are you saying the ROE should be 16% instead
of 6%, or are you saying 6.6%?"

Instead of the annual ROEs for the past 10 yrs up until 2018/07 being:

8.5 6.5 5.7 6.0 6.1 3.9 6.1 6.6 7.9 10.5

the ROE history should be:

18.5 16.5 15.7 16.0 16.1 13.9 16.1 16.6 17.9 20.5

If you can't understand why this is the case, then imagine the simple example in which you are the sole shareholder in a company into which you inject $1.0m of your capital (i.e., your equity), which then gets invested in a portfolio of stocks, which are held for the long-term and which pays around $50,000 pa in dividends (i.e., a 5% dividend yield).

In each year, your company's P&L income would only reflect income of $50,000.

But the value of the portfolio of stocks your company owned would be 10% (i.e., $100,000 ) higher.

By how much has your wealth gone up in that year?

Answer: $50,000 + $100,000 = $150,000;

i.e., a 15% Return on your $1.0m of Equity Capital.

That's what is happening at SOL: the P&L only shows the income component of the investment returns being generated, and not the increase in the capital value of the investments being held because capital gains are not recorded as income until the investments are sold.

Viewed yet another way: if SOL had to - for some reason - sell out of all its investments in one particular year, the resulting capital gain which now would appear in the P&L in that year would be of such a magnitude that the ROE would suddenly be a great many hundreds, or even thousands, of percent. And that very large ROE in the one single year would be a reflection of the deferred capital gains from all the many preceding years (decades, actually).

.

Expand

This is complete garbage.

The unrealised capital gains/(losses) do indeed flow through the income statement.

Otherwise the balance sheet would show the 'portfolio' at cost not financial assets at fair value.

SOL Price at posting: $29.29 Sentiment: None Disclosure: Not Held
Upvote

0 Great analysis

Reply

Top Stories

BHP

BHP dips as WA nickel suspended after A$6B hit; losses eased by US CPI and forewarning

Bitcoin investors need to know the risks

NIM

Nimy to raise $1.21M to explore 'newsy' WA targets

ASX hits all time high out the gate on Friday trades following bullish US inflation data

I88

Infini soars 50% as company reveals it could’ve just made uranium history – redefining what it means to be “high grade”

Week 27 Wrap: ASX hits all time high; CBA shares' two realities; US inflation hits 3% ahead of China plenum

MDI

Nanocap Middle Island Resources kicks off Barkly copper-gold drill run – a potential IOCG-style NT project

AII

Almonty locks in govt agreement for tungsten oxide plant in South Korea

IMM

Immutep reports strong response rate from immunotherapies treating carcinomas

SKS

SKS Technologies wins US$90M award to supply power to international hyperscale data centre in Melbourne

There are more pages in this discussion • 89 more messages in this thread...

First 30 Last

Add SOL (ASX) to my watchlist

(20min delay)
Last $34.48		Change 0.530(1.56%)		Mkt cap ! $12.44B

Open	High	Low	Value	Volume
$34.23	$34.50	$34.15	$8.116M	235.8K

Buyers (Bids)

No.	Vol.	Price($)
1	94	$34.45

Sellers (Offers)

Price($)	Vol.	No.
$34.48	7374	4

View Market Depth

No.	Vol.	Price($)
1	94	34.450
1	150	34.250
1	500	34.220
1	146	34.200
2	35	34.000

Price($)	Vol.	No.
34.610	450	1
34.690	425	1
34.700	1000	1
34.800	2907	3
34.900	187	2

Last trade - 16.10pm 12/07/2024 (20 minute delay)

SOL (ASX) Chart

News: SOL Norway sovereign fund excludes three more firms from portfolio, page-30

BHP dips as WA nickel suspended after A$6B hit; losses eased by US CPI and forewarning

Bitcoin investors need to know the risks

Nimy to raise $1.21M to explore 'newsy' WA targets

ASX hits all time high out the gate on Friday trades following bullish US inflation data

Infini soars 50% as company reveals it could’ve just made uranium history – redefining what it means to be “high grade”

Week 27 Wrap: ASX hits all time high; CBA shares' two realities; US inflation hits 3% ahead of China plenum

Nanocap Middle Island Resources kicks off Barkly copper-gold drill run – a potential IOCG-style NT project

Almonty locks in govt agreement for tungsten oxide plant in South Korea

Immutep reports strong response rate from immunotherapies treating carcinomas

SKS Technologies wins US$90M award to supply power to international hyperscale data centre in Melbourne

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News

News: SOL Norway sovereign fund excludes three more firms from portfolio, page-30

Top Stories

BHP dips as WA nickel suspended after A$6B hit; losses eased by US CPI and forewarning

Bitcoin investors need to know the risks

Nimy to raise $1.21M to explore 'newsy' WA targets

ASX hits all time high out the gate on Friday trades following bullish US inflation data

Infini soars 50% as company reveals it could’ve just made uranium history – redefining what it means to be “high grade”

Week 27 Wrap: ASX hits all time high; CBA shares' two realities; US inflation hits 3% ahead of China plenum

Nanocap Middle Island Resources kicks off Barkly copper-gold drill run – a potential IOCG-style NT project

Almonty locks in govt agreement for tungsten oxide plant in South Korea

Immutep reports strong response rate from immunotherapies treating carcinomas

SKS Technologies wins US$90M award to supply power to international hyperscale data centre in Melbourne

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News