We’ve had some success (and luck) in tech stocks this year – 5GN, WZR and Z1P have all been multi-baggers. CV Check (ASX:CV1) is another tech stock we’ve been buying recently that I think is a candidate to have a similar type of run. CV Check is a Human Resources (HR) technology... Show More
A little over a year ago I wrote about CountPlus (ASX:CUP) and outlined why there was significant strategic value in their relationship with the CBA owned, and much larger, Count Financial.The details are in that wire but the quick version is that Count was enormously reliant on CUP as the... Show More
I wrote about 5G Networks (5GN) back in December. Since then the company has entered the Data Centre market, raised $8m and a number of new funds have joined the register. So it is worth an update on what is happening at 5GN and where things might be heading from here. Melbourne... Show More
What a difference 3 months can make. Investors are nervous with the main Aussie index off about -13% from its highs amidst talk of a bear market. But in small cap land, we are already there. The Emerging Companies Index is down by more than -20% this year, meeting the... Show More
In investing, sometimes you just get them wrong. The thesis breaks and you’re forced to recognize the error and adjust accordingly. Unfortunately, that appears to be the case with Millennium Services. Show More
A couple of months ago the Capital H Inception Fund acquired a stake in IAB after they disclosed the possibility of 'material transactions.' It seemed fairly clear that the Indirect business was worth a lot more in the hands of an acquirer than what the public market was willing to... Show More
It’s been a while since I bought a stock trading on a PE multiple of 3x. There was one in 2012. Another in 2015. Both were, with a bit of luck, multi-baggers. Show More
The listed independent platform providers – HUB24, NetWealth, Praemium and OneVue – have been stellar performers in recent years. It’s not surprising when you consider the favourable environment they’ve been operating in. Show More
A year ago I posted a wire offering 6 pieces of advice rarely given to private investors and SMSF. This wire is a follow up to that article. If, as a private investor or trustee of an SMSF, you can take away just one piece of valuable information from this... Show More
Since the Royal Commission kicked off hardly a day has gone by without Australia’s largest financial institutions in the news, for all the wrong reasons. Some of the accusations are quite shocking and make for great headlines. Show More
Thanks Mark and Guy. FC, thank you for the feedback. CUP took a little bit of time but is now playing out in line with the original thesis. I'll get some right and (unfortunately) some wrong too, but if I've shared my thoughts publicly and the facts change I'll do my best to update them as quickly as possible. Hopefully the winners more than offset any errors. Glad you're enjoying the wires, I'll write about a new company shortly.
One more update here: with the CEO now gone that represents, in my view, a breaking of the above thesis. While there are a few paths that might lead to a higher share price (sale, take private, recap, etc), the removal of the Chairman and now the CEO, (the latter being the one I backed to turn MIL around) means I simply got this one wrong.
Hi Angus, the announcement was a bit vague and seemed to hint at a potential guidance revision at the AGM. Sounds like the new board is completely clearing the deck, including any promises from the previous board. So unfortunately the risk appears higher now, in addition to the uncertainty around what their intentions may be. Hopefully they provide a bit more clarity around the new board's intention at the AGM.
One aspect of the above thesis that I didn't see coming was the board tussle this month. In the interest of keeping anyone who may be interested updated on my thoughts, below is an excerpt from the Fund's recent quarterly investor letter discussing MIL: "At the end of the quarter there was a board shake up as one of the original founders joined the board and another pushed for the removal of three directors. The return of the founders should in theory be a positive for the business, but it needs to be done with as little disruption as possible. In this regard the avoidance of an EGM is positive, but the removal of the Chairman is a surprise that creates short term uncertainty. This has seen the stock give back some gains. You could make the argument that the Chairman presided over a period of shareholder value destruction (which would support the case for the incoming directors) but he was well credentialed, supportive of the existing management team and committed enough to put his money on the line, buying 4.9% of the company on-market. What he now does with his large holding, the intentions of the new board and any resulting key management changes are all unknowns. This short term uncertainty creates some cause for a review of the position to determine the implications for the investment thesis, which is currently underway. That is countered by the fact that despite the short term uncertainty the upside from a successful MIL turnaround remains substantial. As such we intend to remain long term supporters of the company."
Appreciate the positive feedback Parth!
Bill, Venkata, John, Hanh, Cindy, Chris & David, Thanks everyone for the feedback. Much appreciated and glad you enjoyed it!
Thanks Alan, appreciate it.
Hi Mark, absolutely. Very possible and if it happens would be transformational for CUP. But it requires CBA to essentially rollover and exit at all costs without looking at other ways to maximise the value since selling to CUP would mean CUP are the only possible buyers and they’d get a fantastic price. Given the bad press around Count etc that may be possible, but I would have to assume CBA will look at ways to maximise what they get for Count/CUP stake in which case the other scenarios come into play. Then need to factor in the timing of when CBA want to offload Count (later this year) and if/when CUP are in a position to do it. The stock will need to be a lot higher for the numbers to work. But the hiring of a team like Genesis does suggest something big is in the works, eventually. Whether it is Count or something else. But agree with you, it’s possible.
Hi Jim, SGH wouldn't be my first comparison! People businesses are good businesses *if* you get the incentives right. Acct and advice have big barriers to entry, high returns on capital, sticky clients, etc. And the new model where principals own equity in their individual firms, in my opinion at least, is highly scalable. Under this model the larger the CUP network grows the stronger it becomes. This looks like a turnaround at the inflection point of transitioning to growth, which can be a good time to take a look as you can get earnings growth & multiple expansion. But, lets see how it all plays out as management need to deliver now.
Good point on the reduction in supply of quality advice when demand is increasing. There is more at play here too, with new education standards professionalising the industry, but that will kick off a big reduction in adviser numbers. On balance, the quality of advice will increase. The fire sale of bank-owned advice businesses post RC is not a bad thing though, they are good businesses when well run, not just for the sake of distribution. There will be big opportunities coming out of the RC for investors keeping their eyes open.
Bob, I hope you put the proceeds into something else that went up, but selling too early after more than tripling your money is a nice problem to have!
Hi Huiyi, Thanks for the positive feedback. On your point about when exactly to sell - I considered writing an article on that topic but I simply couldn't because I'm still figuring it out myself! And I'm not anywhere close to mastering it. Unless the market just offers you a price that is too good to refuse I think the best you can do is understand the business as deeply as possible so you have an idea when the underlying drivers are changing. And sometimes even if you get that part right the management team will just keep delivering regardless, so understanding their level of motivation and incentives is key too. The main reason I've sold something over the years has been to invest in another idea. That has often paid off but in situations like MNF (and others) I would have been far better to just sit and do nothing!