Millertime79: On BRG, I have no idea why it was having a...

Millertime79:

On BRG, I have no idea why it was having a “blistering” day.

I focus on making sure that if anything is blistering, then it is the business itself, on the tried-and-tested assumption that share price is correlated with underlying business performance.

In terms of the long-term investment attributes for BRG, I earlier in 2012 waxed lyrical on this matter, but I suspect the HotCopper system stores dated posts up in the ether somewhere.

I will undertake to access these and re-post for you.

In keeping with HotCopper protocols, I will do so under the BRG symbol.

[As a footnote, I happened to notice the share price is doing a bit of "de-blistering" today]


Persistentone:

Your point about whether large capex programmes will add or destroy shareholder value is well-made.

However, with enough company track record, and indeed industry precedent, it is possible to come to an adequately informed view on which to derive valuation.

For example, if ARP builds a new factory in Thailand, I’ll wager that its payback period would be measured in just a few short years, while if BLD builds a new tile factory or a new laminates facility, then I’d be inclined to believe they are converting a dollar of shareholder funds into somewhere between zero and 50 cents, based on track record.

As for never selling; yes, that shouldn’t be taken completely literally. I phrased it that way so as to emphasis the mistakes many Individual Investors make in selling too soon through lack of understanding or lack of conviction in their investment rationale.

And the consequence of this is, which Individual Investors fail to appreciate, is the sacrifice of much wealth through what I describe as a Wealth Slippage Trifecta: the triple negative whammy of 1) forgone capital gains, 2) crystalised capital gains tax liabilities, and 3) higher transaction costs.

I think the most pertinent point you raise when it comes to long-term, fundamental, intrinsic-value growth investing, are the twin abilities of recognising where you have made a mistake in assessing a business (because it WILL happen), and then having the discipline to disengage from that investment in a clinical manner, detached from emotion or confirmation bias. Before “a small loss becomes a big one” to quote you.

On BKL and WHG, I will reply when I have some time, because I think you’ll missed one or two critical points in discerning the apparent WHG ROE. There are some legacy issues that are bloating WHG’s balance sheet, which makes the denominator in the ROE equation meaningless. I’ll quantify on the WHG forum when I have occasion.

Finally, in terms of doing this sort of thing on a for-fee service basis, it has no interest to me.

For starters, I have enough money, and anyway I prefer making a contribution to society through commenting – presumptuously and sanctimoniously, some might say – on forums such as this, being invited to talk about investment literacy to high school students, and by attending investment clubs to share my experiences when I am asked to do so, which is three or four times a year.

It helps to ease my guilt about being a dirty rotten capitalist.

(And, no, the irony is not lost on me that helping others be better dirty rotten Capitalists somehow assuages my angst about being one, as my wife points out!)


Loki01:

You’re right, I forgot about MYR, in which I was a shareholder some time back. I have to admit to being very slow to discern the trend to online (being an olde-worlde type shopper myself – or non-shopper, more like it). I cannot help noticing that since I liquidated my holdings, the stock has roared ahead some 25%!

Thanks for the resources rebuttal, but I will never be convinced. You mentioned that for resources sector investing “one needs to keep informed of more data or at least different data to just data related to the Oz economy.”

Trouble is, that’s exactly what I DON’T want to do. (And because I see huge major financial institutions employing all manner of economists and commodity analysts located across the corners of the globe, and even they seldom get it right, I am convinced that it nobody should try to do it...I believe it is a flawed approach).

Instead, what I want to do is to buy shares in companies that can flourish, prosper and grow their Free Cash Flows no matter what the “data” does.

I’m proudly Data Agnostic – theres's too much stress and hassle worrying about some PMI number in China, or about whether the A$ is at 1.05 or 0.75, or whether or not the Fiscal Squiff (sic) gets sorted or not. I look for companies for which those are non-events because their business models are robust enough to withstand all storms.


Dejavoo:

Yes, I’ve looked at CAJ in the past and I recall it coming up with some mixed aspects.

Some aspects of the company I really liked – the accounting quality was good and conservatively stated (I reckon more aggressive audit committees could engineer significantly higher profit outcomes); the financial statements read very clearly, with good disclosure in the Notes to the accounts, especially for a small company.

The accounts are relatively uncomplicated, with negligible related party issues, and manageable off-balance sheet financing, namely $14m in total operating lease commitments.

I also liked the alignment of the board and senior executives (very modest salaries, but plenty of skin in the game).

What I didn’t like was the composition of the board, per se, which I think is both too lightweight for appropriate oversight, especially when a clear acquisition strategy is involved. The board in not independent, and has no independent chairperson.

What I also don’t like is the apparent flagrant disregard for equity capital, with new issuances taking place too often for my liking given the apparent cash-generating abilities of the business

(The latest SPP – which effectively served to replenish the dividend paid out – makes no sense to me.

If you declare a dividend, then it should be reflective of a distribution of surplus capital to the owners of the business, not a mere step in a circular flow of funds. Essentially, they’ve paid and dividend, then subsequently asked for it back).

As for the business model, well, there is so much happening in that space for these guys – acquisitions, MRI licencing, new Teleradiology legislation, bulk billing trends, etc., – which make it a bit difficult to me to really form a view of how durable the business will be going forward. I'd want to see some more steady-state operating conditions.

The thing I like least of all is what I describe as the overly promotional stance of the MD. There is waaaay too much focus and emphasis for my liking in the various announcements and presentations about the company being undervalued, and how well the share price has done in the past and how much scope there is for further share price appreciation.

I know it might sound like a petty comment, but I want executives to focus on BUSINESS aspects and draw investor attention to how management is managing and growing the business. The share price will take care of itself.


Golden:

I have not come across EPD before. It sounds to me like a bit of an ASZ reincarnation? Given I had an unhappy experience with ASZ – IT companies I find difficult to differentiate, I’m not sure that EPD will be something that attracts me.

But I’ll peruse the Annual Report at some stage and read some of the recent presentations to see it presents any attributes that make it investment-worthy to me.