The ASX presents us with a conundrum. A few conundrums in fact. There are three main groups of stocks: hammered but structurally challenged, seemingly cheap but cyclical headwinds, and the expensive defensives. Show More
Some US homebuilders’ share prices are down more than 50% this year. A large cohort of the global auto sector is trading at 6 to 8 times earnings. These sectors are highly sensitive to economic growth — cyclical rather than defensive in the industry lingo — so the share price... Show More
I doubt Tabcorp shareholders will be too happy this morning. The chair of their board – you know that thing that is supposed to represent shareholders’ interests – is on the front page of the paper lambasting a shareholder vote against executive remuneration. Show More
Being a contrarian can be a lonely existence. It involves doing nothing for long periods of time. And then when you do something, you are usually going against conventional wisdom at the time. But loneliness is not the hardest part of the job. The hardest part is being an obvious... Show More
It ain’t over yet. Round 6 of the Financial Services Royal Commission, set for September, is going to focus on insurance. An investment in the Forager Australian Shares Fund, Freedom Insurance (FIG), has been called to appear. The revelations are likely to be ugly. Show More
I have a friend who is mildly wealthy but not gainfully employed. He has been a customer of the same bank for the past 40 years. Like me, he doesn’t own a house. Unlike me, he has been thinking about it. Show More
We’ve been making our case on Livewire for investing in oil-related stocks since 2015. It’s been an arduous journey that dates back to 2013, but with the recent oil price strength, Livewire got in touch to get our updated thoughts on the sector. Show More
Well that was an interesting update from pet and vet company Greencross (GXL). New CEO Simon Hickey only joined the company in February. So clearing the decks is not surprising. But this one is a doozy. Show More
My advice has been consistent over the years: get your portfolio allocation right and let us worry about the timing. It’s fair to say it’s a piece of advice widely ignored. Show More
Too many companies are milking, not nurturing, their competitive advantage. That might help this year’s profits, but the long term impact can be damaging. Show More
Some of the red flags at Big Un were obvious. Perhaps the biggest was the change in auditor, from PKF to the highly illustrious accounting firm Rothsay Resources. And the business model was sketchy. There were “characters” involved. The stock failed the sniff test. Show More
Fair enough. I haven’t used it for years. And I don’t like it. Which means I’m predisposed to seeing signs of decline when they don’t exist. But Facebook’s latest results at least give me some evidence to work with. Show More
You are probably wondering what the hell happened this week. Friday’s relatively minor retreat in global stock markets – apparently due to increasing concerns about inflation and rising interest rates – suddenly became violent. Show More
Everyone wants to buy stocks for attractive prices. But why would anyone want to sell at that same price? Finding bargains is the key to successful investing, but it requires delving beyond the obvious. In this video, Forager's Alex Shevelev talks about some of the useful insights we glean from... Show More
In March this year, copper miner MMG announced that it had sold its Century zinc mine in Queensland for the grand total of $1. That $1 didn’t go far though. MMG agreed to pay the purchaser $34.5m to cover the costs of rehabilitating the depleted mine site over the subsequent... Show More
Isentia’s shares were trading at $3.50 this time last year. Yesterday the stock closed at $1.05. There’s nothing unheard of about a 70% share price fall. Forager investors have experienced a few of those over the years. What’s interesting about this one is that Isentia was supposedly a “high quality”... Show More
Four long and mostly painful years. That’s how we feel when reflecting on for Forager’s investments in the oil slick. There have been a couple of successes, one disaster and an inordinate amount of volatility. Show More
Reporting season is a circus. For most businesses, more than half of their net present value will come from cashflows more than 10 years into the future. Why do we focus so much on one six month period? Show More
My parents, some investors, politicians and a large number of journalists seem very concerned about me. I’m one of the renter generation, and everyone seems worried about us because they think we are going to retire without a roof over our heads. Show More
A few investors have noticed Forager’s recent sale of our substantial holding in Reckon (RKN). We will provide more details in our September Quarterly Report, but to head off a few questions we have been receiving, our rationale can be summarised into four reasons. Show More
Sydney Airport has been a wonderful investment multiple times for me. It's probably in the same boat as Transurban though ... I'm not sure it's going to be quite as defensive (at these prices) as people think. A lot of air travel is discretionary, and they have pushed it hard on the retail front.
Hi @Justin. Outsourcing the administration is straight forward. Link already performs that role for most of the industry funds.
Thanks Daniel and Sangela. There are humble fund managers out there ... they just aren't very good at selling!
@Alex, you are right there are many nuances but your analysis sums up the crux of it. It's not just resi property of course, any long duration asset has benefited from the same.
Hi Spiro, I wrote a piece on home ownership a while ago: https://foragerfunds.com/news/retire-happy-comfortable-property-free/ The short answer is that there is a large gap between the 2% net yield on a residential property and the return I think I can earn on equities.
Good points. I didn't ever spend much time on it. If the language is promotional, I give it a miss.
Hi Jim. The capital raising is real - I've never seen that part made up. I just wouldn't put too much faith in it as a positive sign. If fact, with something like Getswift, it can be a very effective way to cash in on the hype you have created. You can't sell your shares - that would freak everyone out and the founders are often restricted in any case - but you can use the high share price to get some cash in the bank. Even if the product turns out to be near worthless, Getswift's founders now control a company with almost $100m cash in the bank (for now).
I hope you are right and I am wrong. I have no financial interest and the more Aussie tech successes the better. But don't think for a second that because there is institutional money involved it has to all be legitimate. Check out the 1PG announcements and capital raise from 2015 if you need a good example.
I think most investors would prefer a 40c loss to a 45c loss. They new investors don't pay the performance fee, it was already accrued in the price they paid. You are right that 10c cash gets paid out, but on the day they invested they already got a 20c discount because of the accrued performance fee.
Mostly valid points but your point on the accrued performance fees is incorrect. The gross value of the portfolio has fallen 25% in your example ($2.00 down to $1.50), whereas the investor has only suffered a 22% loss (1.80 down to 1.40) thanks to unwind of accrued performance fees. Had the fee been paid out prior to investment the unit price would have fallen to 1.35 instead of 1.40. The less frequent the payment of performance fees the better (for investors).
Hi Hayden. We haven't been able to do anything different from others. We were kicked out of a place a couple of years back and moved to a better place 200m down the road. A hassle but a weekend's worth of hassle. We don't have children and neither of us have any interest in spending our weekends renovating ... so uniquely placed to be long-term renters. Depends who you are leasing from but my guess is a financial owner would be open to something longer as long as you were happy to sign up to annual escalation.
Thanks Karyn. Good points. My question is still whether that $1bn worth of their own infrastructure justifies the $6bn worth of intangibles implied by the share price. It might, I'm just asking the question. Btw a comment over on the Forager blog suggested they have thus far have only 16k active connections to their own FTTB infrastructure.
Thanks Charles. That all depends on what I think they are going to do with the money they keep. If a company cuts its dividend and I think they are likely to fritter away the additional retained earnings then yes, it would decrease my valuation. But if I am confident they can reinvest at higher than my required rate of return, then my future cashflow stream (and valuation would be higher). Berkshire is a good example of a company that has never paid a dividend but has compounded the money internally at a very high rate. As I said to a reader on the blog though, it's important not to get too scientific about these things. If the stock is cheap enough it should be obvious. If you are adjusting discount rates or reinvestment rates to get an answer that works, then it probably isn't cheap enough. The general point was to focus on the business, not the share price. Cash returns are a great example of proof points, because you have the money in your pocket, but a company that had dramatically increased its sustainable earnings power would be just a good an example of a investment playing out to plan.
Thanks for the comment Alan. Spot on. We write down a road map at the time of investment and review it every results. Sometimes we look fascicle but it is a worthwhile exercise.
Fascinating stuff. I heard Kerr Neilson say something similar about his fund investors once. Has anyone done a broad study on the Australian market? We're probably self-selecting but our clients have historically put more money in during downturns.
On Buy high, sell low? -
Great stuff Chad
The big issue with these statistics is that they should be weighted by accessibility. Did you try and get some Baby Bunting? Sealink perhaps? These offerings - which were clearly attractive investments - were massively scaled back (I'm talking 99%). So if you apply for every float, you will get lots of stock in the duds and almost nothing in the good ones. The average investor's return is not going to be anything like the average float return.
Well ... whether it is good news or not remains to be seen! Let's call it a lucky start for now.
Just a quick caveat here. The share price was less than 40c when we recorded this video, 57c today. Not the same option value it was.
I still think it's a an interesting space at the moment. We're on the record as recent purchasers of S32 and are taking a good look a Whitehaven. Even if they are good investments from here, though, it won't change the fact that billions of dollars worth of shareholder wealth have been invested in projects that are never going to earn an economic return.
Yep, same concerns re "foggy" accounting (as Rolls Royce referred to their own books this week). I wasn't sure there was something wrong, but I was sure that there was a lot of leeway for accounting estimates. Still not proved yet, though.
Good point. I was referring to my cohort of smaller actively managed funds, but should have made that distinction.
The one thing they teach everyone at fund manager school - you are NOT allowed to smile
As a (much) smaller direct to investor fund manager I agree wholeheartedly with the logistical hurdles for direct investors being the number one problem. ASX's new mFund is a potential solution we are supporting wholeheartedly.
I had an interesting conversation with a woman after the presentation - she works for SSM competitor UGL and reckons NBN round two will be lucky to be more profitable than round one. We'll see, but some interesting insider's thoughts.