So...the socialists knee-jerk reaction to their dissolving budget is to announce FBT changes which has had a huge effect on a few companies, including MMS, which has had the effect of wiping 45% off the share price. But, always looking for a contrarian investment, this could be the buy of the year. Who do you reckon will win the election?
I was amazed they got that high tbo I was a client many years ago before they floated and didn't think they did such a great job Back then I thought the fbt rules made no sense - less tax the more you drove I knew people going for drives from melb to Sydney just to get their Kms up Petrol wasted and more pollution for nothing But I know nothing of their current business I steer clear of investments that rely on govt rules that can easily change Like high end numismatics - change the super fund rules and watch values go bang
Roger Montgomery is averaging down on this one.. http://rogermontgomery.com/fbt-fairly-badly-trampled/ DYOR I don't hold and have no opinion either way
How's this for a funny ruse. Scott Phillips from Motley Fool Australia sent out an alert to subscribers a week nor so ago advising BUY McMillan Shakespeare when it was ~$1 less than right now. For the cautious investor he suggested the following hedge. It largely depends on whether Libs get in right? Tony Abbot is on record that they won't fiddle with the relevant clauses of the FBT. Recently the odds were improved with the announcement of the election, meaning parliament won't sit till fresh government, therefore Rudd won't be able to rush through the FBT legislation,which would put Tony in the more luxurious position of whether to repeal a revenue lucrative tax change or not if he wins. Tactic? Go to the TAB or whatever, lay off a bet on Labor winning at good odds. Then go out and buy a wad of MMS, Ya can't lose! If Labor gets in your SP crashes but you clean up at the TAB + you get MMS dividends. MMS still worth something if the FBT advantage goes & proven management
Excerpt: By Scott Phillips - August 7, 2013 "Members might be aware that some of the betting agencies are offering juicy odds of a Labor victory. We believe option 3 would see McMillan Shakespeare's share price recover to near pre-announcement levels, but there might be some (imperfect) insurance available to members who placed a bet on a Labor victory. Hedging your bets in a good way Let's assume a couple of completely hypothetical outcomes (please note these aren't guaranteed outcomes!): 1. If the changes are passed, McMillan Shakespeare shares fall from around $9.20 today to, say, $4.50 2. If the changes aren't passed, McMillan Shakespeare shares rise from around $9.20 today to, say, $16.00 3. You can get odds of $4.50 for $1 on a Labor victory through a major betting agency On a purely hypothetical level, the maths suggests the best return would come from just buying the shares and letting the probabilities play out. But there's still around 1 chance in 3 that our thesis won't play out. In short using the above hypotheticals, if a McMillan shareholder put a $750 bet on Labor (at $4.50) for every $5,000 of McMillan shares they owned (at today's price): 1. The chances of a negative outcome halve from 1 in 3 to 1 in 6; 2. The upside of a Coalition victory will be slightly less 3. The downside of a Labor victory will be eliminated; but 4. The downside of a Coalition victory that resulted in the FBT changes still being passed would be slightly worse the shares would likely fall and you'd lose the bet Put through the probability model, the result is that this 'hedged' strategy delivers a slightly lower weighted return but with a much lower chance of a negative outcome. Trading off a small amount of upside for a much lower chance of a negative result sounds like a good deal to Joe and I. Let's flash back to our original assumptions. If the changes go through, that McMillan Shakespeare shares would fall to $4.50. And if they don't, they return to their pre-drama price near $18. Based on the stock's current price and the odds ahead of us, we think McMillan Shakespeare's shares should sell for more than $13 a 50% gain from today's price. If you applied a $750 hedge against a $5,000 investment in McMillan Shakespeare's shares, though, your expected payoff is around 44%. That's only a small turn lower than your unhedged payoff but substantially less risky."
