What are you watching and why? A few of mine are Regis RRL Troy TRY Kingsgate KCN Convergent Minerals CVG Perseus PRU All of (cept maybe CVG and PRU) will survive easily if we scoop down for a while in the POG. Im also looking at Tandou (TAN) Larimide (LAM) Paladin (PDN) Grain Corp (GRN) and a few etfs
On my shopping for stocks is my only current shareholding Credit Corp (CCP). Its Australia's largest debt collection company. Its continuing to post record profits year after year and I expect to see good earnings growth in the next 2-3 years. Its currently trading in the $9+ range. If it drops to $8 per share I will top up.
Credit Corp is far superior to Collection House. Better management, stronger balance sheet (i.e. less debt) and nearly double the return on equity. Plus Credit Corp has more long-term growth initiatives underway. I hold Credit Corp but not collection house.
the fedral government blocked the take over of Graincorp by an American ag company. Announced today I wanted to pick some up under $8 but it didnt get down that far. It recovered by about 9% off the lows to close 20% down from last close their last div payment was 20c per share, and their mid term prospects are pretty good imo. Put it this way Graincorp was good enough for a big American company to put a bid in for.
I had a quick look at Graincorp's latest preliminary annual report. Its a mediocre business with a fairly average return on equity. Also the report stated the net tangible assets for the company is $5.62 per share which is the maximum I would pay for the shares. The only reason people are buying the shares at this price is if they expect grain output and export volumes to rise substantially in the future. Or alternatively if they think management can improve the profitability of the business. I'm not confident enough that either of these things will occur. Silver Sanchez the value of Graincorp could potentially be a lot higher to ADM than passive minority shareholders like you because ADM could potentially add strategic value to the business whereas you cannot so its not an apples to apples comparison. By the way SilverSanchez I just had a look at the Tandou annual report. The business is very capital intensive and the cash flow statement is quite frightening.
I think some people evaluate cyclical commodity stocks the same way the evaluate say 'Apple'. Mary Buffet talks about this in 'Buffetology' Pardon the pun but you gotts compare apples to apples. The hard part of the cyclical stocks is that the worst time to buy is when they 'look good' on the reports, reports are hindsight articles. So yes Tandou, Grain Corp, Rualco and those varieties of commodity stocks (with their supporting industrial stocks) dont always look like you should buy them at the time when its good to buy them. There are different traits needed to invest for big picture, as opposed for more popular yearly return. The rate of return metrix for example, on a commodities stock is like an exlimation mark for the investor who took a risk 12 months prior. Whereas for the non-commodity stock the rate of return is a full stop at the end of a long sentance for the investor who does not like risking as much. So to use the same benchmarks from these two very different classes is a mistake in my opinion. Like in the history of war, if your enemy are using Guerilla tactics, the worst thing you can do is combat that using conventional warfare - just see the Vietnam war for an exapmle. By the time you mobilize to where the enemy WAS you are not where the enemy IS. Ive been watching grain corp since 2012, and ill wait a bit longer. The M&A activity is an indicator of belief of the future for the sector, by those who's life is the sector.
Socks and jocks FTW ! I'll be looking to dump NCM in favour of one the goldies that Sanchez mentioned. Haven't decided which one yet. Also looking for a solid dividend payer - say ANZ or WBS. Fair warning to all - this will probably mark the top of the market and it will all crashing down the day after I buy . But we do need to improve cashflow in our portfolio.
Silver Sanchez cyclical stocks need to be valued on through the cycle profitability I agree. However commodity and related stocks (including agricultural commodity related companies) typically earn a mediocre through the cycle return on equity. So for Tandou and Graincorp even if return on equity rises in the future (reasonable chance of occurring) they will never earn high returns on equity through the cycle, therefore to get a acceptable return you should pay a discount to NTA for Graincorp and a large discount to NTA for Tandou. Look at Fleetwood which is highly cyclical. It was trading at multiples of book value a few years ago and is now trading at a discount to book value. A company like Fleetwood is probably worth book value. Where a cyclical company can earn above average through the cycle returns due to being a low cost operator like BHP Billiton its worth a premium to book value. I can't ever see Tandou being worth more than book value (not to say the share price won't go above book value)
