Global macro: Stock to watch – Magnetek (MAG) trading at NASDAQ.
The company, which provides electronic power solutions to automate heavy machinery, have published an astounding 36% profit since last year’s report. And they have been solid in the earnings dept. One of the fields that Magnetek is pioneering, is renewable energy.
The stock is currently trading at $2.00 a share (after a 3.36% increase from last friday’s trading session). Currently, Magnetek’s market capitalization is of 62.62M.
I have a number of reasons to believe that the stock has enough grounds to develop. Additionally, Matt Schifrin, one of the Forbes ‘gurus’ and also vice president and investing editor for Forbes Media, have recommended Magnetek Inc. on the 17th of February as one of the good penny stocks to buy in 2011.
Read the Forbes full article here.
Please refer to the respective disclaimer @ the first post on the blog for details on the basis on which you may use the contents of this page.
I’ve been in my favourite bookshop last Sunday, and when I was paying for two books, the cashier looked at me astonished and said: “that is a dangerous combination!”. I’ve purchased one book about ‘history of advertising’ and one about ‘modern economics’.
Indeed, I had to agree. I’ve worked in the advertising industry before and I am an enthusiast of economics. Both channels, allied with politics, can surely imprint grievous aftermath.
Advertising media is often overlooked by left-wing theorists. But the advertising of politics is correlated with a country’s economics outcome (see Berlusconi’s ‘media ownership’). The power of media and the issuance combined with accessibility of information is colossal.
To date, consuming has become a religion with all the rituals alike. It is unbecoming. Long ago were the days where a product was built to last. That is what the guys from Madison Avenue (and everywhere else) are promoting with grace (and effortlessly, like Donald Draper in Mad Men). An average person living in a cosmopolitan environment is targeted daily with around 3,000 brands.
Producers such as China, have a massive input in today’s disrupted consuming behavior. The largest suppliers of almost all end-consumer products, their giant production capacity, the cheap labour, and a very small marginal profit. The rest of the world is buying, or, demanding it. Advertising agencies strike again.
Inevitably, its not hard to notice how imperative and bold today’s ads are. And indeed simplicity works. Copywriters are skipping the fluffy vernacular and going straight into you. Edward De Bono warned us.
‘Sound political thought and sound political life will be found only where [utopia and reality] have their place’ (E.H. Carr 1981, p10).
The scarcity of some of today’s ‘voguish’ commodities is greater than ever. Commodities, namely oil and natural gas, which has aggregate value built in almost everything these days.
I’d like to positively think that we are marching to a betterment in our economical dynamics (considering Adam Smith’s theory of the ‘invisible hand’) and that we are more concerned about the environmental impact of the world’s disordered growth. However the decay of our wellbeing is more than a consequence of our heedless, unplanned, uncalculated population surge and moreover, our consuming habits.
Because of this, we are recklessly exhausting our already limited resources. Steve Jobs releases a new gadget every 6 months or so, making the previous versions simply useless, outdated, building up the pile of trash.And this is it. Abusively disposable, as opposite to our grandparents’ ‘buy only long lasting’ products.
We are creating rubbish faster than ever. But to build something wasteful, we might use tons of energy. One example is a tire. To craft a standard truck tire, it is necessary 22 gallons (or 83 liters) of oil.
The world is approaching the Peak Oil production sometime in the next decade (hence the name of the phenomenon, the point in time where the maximum petroleum extraction is reached). Lucky enough there are unconventional reserves of oil, that may deliver the ‘Texas tea’ a little longer, but it still limited. The chart has a sharp bell curve and there is nothing we can do, except to stop usurping it.
But there is no surprise here. Experts are already considering this event when assessing the uncertainty associated with future monetary value of petroleum prices. Also Morningstar’s analysts already consider the terminal decline of oil production when projecting future cash flows and business positions.
Thomson Reuters published last year an interesting article about the issue and how the bankers from the energy sector are adjusting greater gains despite the shortage (actually, because of it).
The complex ecosystem of financial variables and models, such as prices, interest rates and shares, as opposed to those concerning the real economy, is dealing with oil as a product only, not considering the extent of the impact and unbalance it may cause.
The big question is not really when we will run out of oil, because eventually we will. The question is how much it will cost us (not talking about money here).
Will there be enough renewable energy to go around? Well, sadly it seems that we will have to see the last drop of oil before we start taking action.
Please refer to the respective disclaimer @ the first post on the blog for details on the basis on which you may use the contents of this page.
Now the worst of the crisis is over. After making some careful research, I suspect that 2011 will be the year where commodities and international equities will be driving the results of institutional investors.
Equities across the globe rose high last week. Portugal’s bond sale (debt-easing) have built some confidence and the S&P 500 is on a new high after months. In late December, the US’s CPI have shown a 0.50% rise, which offers even more confidence that the inflation will not be around the corner very soon.
Australians can take advantage of the global recovery by ‘shopping’ for investment opportunities and bargains overseas. I don’t want to go on the countless offers of real estate in America because that is not exactly what I mean by opportunity. Although this can be a great idea if you are well-acquainted in the US, I’ve read somewhere that someone from Melbourne have purchased a property in Chicago for a few grand, but he was not aware that he would need a bulletproof vest and a two barrel shotgun to go collect his rental money. Hassle!
By opportunity, I mean Exchange Traded Funds (ETF’s), mutual funds, quality stocks (small, mid and large cap), and perhaps any undervaluated securities that can be found overseas after some research.
America is not the only one to be rising in 2011. Most European countries (after the debt resolution burden), plus the emerging Brazil, Russia, India and China (BRICs) are expected to have a solid growth, most likely in the second quarter of the year.
In Australia, the housing market is growing alongside with investments and consumer spending. China’s demand for Australian commodities is also contributing to our economical status. We are on the other end of the cycle. The world is coming out of the dark while Australia and a very few countries are on a ‘price consolidation’ territory.
There is a belief that the current strength of the Australian economy will have its costs. The Reserve Bank of Australia (RBA) will most certainly increase the interest rates, besides the strong Aussie dollar. High levels of foreign government debt in Japan, the US, UK and other European countries are going to make bank costs rise, leaving the RBA’s with the decision of making the cash tighter. So naturally, things are expected to be quite steady here in Australia throughout the year. Not to mention the plunge that the Queensland floods will cause in the medium term perspective.
To take advantage of the global growth, one good strategy (not suited to all investors) is to purchase ETF’s that tracks specifically international equities. Mutual funds are also a good option. Here is the 2011 CNN’s list of the 70 best ETFs and Mutual Funds, it’s worth a look. Most of the funds have a minimum investment amount.
Russell Investments and Vanguard Investments also offer a high-caliber range of solutions, such as mutual funds and US and Global indexes for benchmarking. Their products might not be suited to all investors, but leastways it is a good source of information.
By funding an account based in US dollars when the exchange rates are favourable is also a good measure to lock in the best rate, that you could use for future acquisitions. HSBC and Citibank offers this type of product but the appreciation will be minimal. The ‘dollar cost average’ might be a good approach.
In terms of super, you can talk with your FP/Superannuation fund manager about the possibility of switching some of your holdings to international equities. THe US economy could be a basket case at the moment but as one of the richest (still) countries in the planet, it won’t be forever. Look for hard assets. Large corporations hold more hard assets. Analysts calculate a company’s intrinsic value deriving a portion of this value from the value of its hard assets.
Powershares QQQ Trust (QQQQ@NASDAQ)- An ETF that tracks the 100 largest non-financial NASDAQ’s listed companies, based on market capitalization. The California-based giant Apple (AAPL), which represents around 20% of the fund will publish quarterly results tomorrow (Australian time). Let’s keep an eye on it!
Please refer to the respective disclaimer @ the first post on the blog for details on the basis on which you may use the contents of this page.
I am inclined to believe that the equity market will most of the times outperform any other type of investment opportunity available. Although the logic behind this statement comes from analysis of past performance, usually the history repeats itself.
Logic some times is not in line with the financial markets. If you ever traded during the American non-farm payrolls data release (the report card for the US ’financial health’), you will understand.
Why people still believe in the stock market? Because it is profitable! Even if you have a moderate-conservative approach, you will be rewarded over the years (if you can avoid the tempting Margin Loans).
Despite all that, I like to purchase equities, to analyse feasibilities, to trade ideas of business ventures and so forth. It sounds cheesy, but I have a passion for the business mechanics, and how that contributes to the society.
Environmentally savvy companies, long-lasting quality products, innovative ideas and prime-standard services. These are my initial guidelines to even consider a stock before the purchase.
It is the pride of being part of the growth in these companies that soothes my capitalistic being. Their potential to make good use of the money I have invested, and thereafter, send me dividends as a ‘thank you for your business’.
Bear in mind that equities, by all means are far more volatile than the average real estate opportunity or the cash products. Real estate are ‘safe as houses’, of course!
But there are also many people who believe that to start a new business is a much more viable and a less audacious activity, than investing in the stock market.
Opening a business, depending on the circumstances and your planning, could be tragic. Around 80% of the newly open businesses in the market, shut the doors in the first 3 years. Another 50% close down in the next 10 years.
But people also rather leave a hundred percent of their savings into a 5-6% yield savings account than investing. That is safe, conservative and ultimately boring.
The high-yield savings account is probably the backbone of every experienced investor. We all need to leave the bulk of our savings into a high-yield savings account but if you are clear of debts and have savings capacity, you should start thinking about redirecting a percentage of your income into a managed fund (indirect investing), purchasing shares via a full-time broker or via an online broker. I’d suggest the first two options if you are too busy or simply not interested in the financial markets. There will be a ‘servicing cost’, but it is the price to access the expertise of these vehicles.
In other words, you can make your money work for you. If you are not comfortable with equities, there are also other very interesting range of investments available these days.
The idea of wilderness and doom and gloom when it comes to buying stocks, is a dogma from the past. But a lesson we’ve learnt. Again, stay away from Margin Loans and have a plan outlined and you most likely start seeing your money grow. It won’t happen overnight, but the compounding effect will surely make a difference.
Often times I also like trading. The ‘speculative opportunities’. They are very short-term positions held to profit from a specific situation (if not, extremely short-term e.g., event-driven trading or the art of scalping).
You can’t beat the market (think HFTs) so don’t try to reinvent the wheel! I honestly think that speculating applies in special moments and hedging, only. Daytraders without financial education are a different class of gamblers (not to mention the number of people making money by teaching other people how to make money…ironic? not quite)
Speculating into the derivatives field involves a major financial risk, but some traders are very profitable. They practice educated trading. Using calculated methods and identification of movements, interpretation of patterns, and making volumetric projections.
It is not only about the numbers, it is also about psychology. It is about ‘what are the big guys doing? What is the ‘sentiment’? Warren Buffet (how cliché, I know!) used to say that you can’t win a baseball game watching the scoreboard. You have to watch the game! And some times I let the market freak out and just sit back and watch it.
Trading the financial markets require understanding the importance of a tactical ‘modus operandi’ when analysing data or other factor that could influence the overall expectations of a trade.
Almost everything can affect the price of an asset. The hurricanes season in the US can affect the price of a currency in Asia. If Curtis Jackson aka ’50 Cent’ talks about a company he is investing in, the price of that stock skyrockets 240% gain. It is fast!
The basic rule of engagement is to have discipline, patience and trade unemotionally. Cut the loss quickly, set up the trade beforehand, follow the briefing, report your trades (and learn from it), research like a rocket scientist attempting to win the Nobel, and so on. It’s knowing when is the ‘sweet spot’. The momentum. The breakout. The pullback. Is knowing when to go ‘techs’ when to go ‘fundies’. It is a diverse universe of psychology attached to mathematics.
This is the real inhospitable territory whereas the rule is to survive (preserve), to achieve the mission (acquire) and win the battle (aggressive targets, moving the stop-loss). But remember, just join a battle if you have something at stake, otherwise you can hurt yourself, badly. And every CTA and other pro-trader have a clear idea of risk management.
To analyse and plan your asset allocation and how this could benefit you, consult an accredited financial planner.
The year 2010 has come to an end, and after a rather festive than thoughtful weekend, I have finally got to sit down and write again. I might say that writing is not my strong suit but I am surely enjoying it.
I’d like to thank all the readers for the support and emails I have received. I will reply to all the questions, no matter how simple or complex they are. Thank you!
This blog was born in November 2009 and since then it has been a pleasure to share with you my standpoint. I have been consistently researching and writing enough throughout 2010, but 2011 will deserve more attention, and a particular focus on the international scenario.
Also, 2011 has finally begun and everyone is talking about the Aussie dollar hike, the European recovery debacle, et cetera. Questions, questions, questions. We all have questions and it’s certain that no one has the answers. At least no one that will do us the favour of telling us :)
In 2010 we have come to quite a few good stock picks, and they have thrilled great results so far.
One stock that I posted on Twitter last year is the NVIDIA Corporation (NVDA @ NASDAQ). I did not write about this stock here in the blog but the company, who manufactures visual computing technologies, has closed a deal with Apple to supply the graphics board to the new MacBook Air.
NVIDIA Corporation has been one of the pioneers creating graphic boards for computerized gadgets, which always have been in great appeal due to the advances in the visual media and products, such as games, animations for television, movies, online videos, advertising, mobile phones and so forth. (read the full article via my post on 25th October 2010, NVDA price closed at the time at $11.91, current price $15.40 USD)
Here on The Oyster Project blog, considering the post date’s price versus today’s price, the stocks I have mentioned are all currently giving returns above the expected (except for one, QBE Insurance Group which we will discuss further ahead), as follows:
- BRK-B @ NYSE – Berkshire Hathaway class B (post on 13th November 2009, price close after the split $71.90 -up 3% on the first day, the 21st January 2010, current price $80.14 USD);
- MQG @ ASX – Macquarie Group (post on 8th September 2010, price closed at the time at $34.44, current price $37.01 AUD);
- FMG @ ASX – Fortescue Metals (post on 14th October 2010, price closed at the time at $3.98, current price $6.79 AUD);
- WDC @ ASX – Westfield Group, and its newborn sibling – WRT @ ASX – Westfield Retail Trust (post on 22nd November 2011, WDC price closed at the time at $12.07, current price $9.58, however if you had bought the stock you would have received an equal number of WRT stocks, currently trading at $2.57. Therefore, the total amount of holdings in the group would equalise an estimate of $12.15 AUD per share, after adding both units);
- MYR @ ASX – Myer Holdings - I suggested that this stock will not be a good option to invest in, and thereafter it should be avoided. If you have not followed my idea, you will be probably losing around $0.20c per share at this point in time. The stock has had a poor performance, as expected. (post on 11th November 2009, float price offer at $3.75, current price $3.55 AUD).
One stock that is underperforming since my post is the QBE Insurance Group. I still believe that this stock will rebalance its price to levels above $23 dollars a share, as I am considering not only the price action and technical aspects of the trade, but also value-investing. This is a top-notch stock undergoing a dark period. The insurance sector have been beaten up lately by a number of unexpected events and they have been the backbone of a number of enterprises and administrations and I would only start scratching my head if there was a decline below $14 a share.
I still believe that QBE Insurance will recoup their lost ground as it is widely spread by analysts that 2011 will be the year of recovery for some economies such as the US.
QBE has most of its capital and assets exposed to the Greenback. The timeframe I proposed for returns is of a least (minimum) of 2-5 years (long-term buy) to minimise volatility.
Now what can be expected to happen in the global economy in 2011? How about the Australian economy? Assumptions are evil, but we have to make them. As I wrote previously (see the post here) I understand that the Aussie dollar will have a quite stable year, defining a new standard for the currency as a reflection of a strong economy and consecutive gains in the mining, energy and resources sectors. The country has no outstanding debt and certainly a bright future. There are some worries about a housing price bubble but I think this is a psychological problem that we have been undergoing for decades. I simply cannot picture the house prices walking backwards (read Ascent of Money, Niall Ferguson), although it is fairly possible to have a ‘cyclical’ devaluation. This will depend on cash rates and other factors but most analysts point out that there will be an average of 5% gain this year.
The currency correlation matrix for the second half of 2010 have shown that the Aussie dollar has significantly disconnected from the other currencies and it is currently tracing a path of its own, padded by the strong resources sector. The gold has shown an above-the-average correlation to the Aussie on the same period, however the volatility of the former always had substantial impact on the latter.
The currency have reached 1,0198 USD. A smidgen just above parity. That is the new record high in decades. I don’t know whether or not if the Australian dollar has enough fundamental reasons to sustain this price but the market is pushing it forward. I will take the risk to say it doesn’t.
CommSec Chief Economist Craig James said to Money Magazine:
We expect the A$ to ease to $0.99 cents around midyear and ease further to end 2011 at around $0.92 cents USD.
2010 will be remembered as the year of recovery for the Australian economy and 2011 will possibly be the year of recovery for the US and Europe and seemingly the year of stabilization for the Australian economy. The All Ordinaries is expected to reach 5,400 basis points and our terms of trade near a 110-year highs. Chris Caton (Chief Economist from BT Financial) and John Sevior (Head of Equities of Perpetual Investments) see a bright future for the Aussie dollar and they believe it will remain between $0.87c USD and $0.95c USD.
Despite the illustrative information of performance, no accuracy is guaranteed and I obviously do not know your financial situation, or if these stocks are appropriate for you. These days the market does trade in a very fast pace and there are HFTs (high-frequency trading) electronic trading robots who will very likely be always ahead of the average investor. Around 5 years ago a trade order was placed in nearly 10 seconds. Today a trade is placed in around 0.7 seconds. The markets have changed drastically (and still changing) so you need to find an expert qualified to advise you.
I highly recommend you to seek a Certified Financial Planner near you, to assist and to define your investment risk profile. It is fundamental to know your risk tolerance and which asset classes and investments are suited to you.
We are entering a new economical era where consumables are more and more disposable and the access to ‘buy’ is an urging need. Like in the pre-second World War period, we are being pushed through mass consumption.
Not long ago, we used to upgrade our electronic devices or laptops every few years and now, for example, Apple is launching a new gadget every season!
The developing countries and their growing population are demanding more. There are more providers of capital and more users of capital interacting with the market. The production of goods have spiralled to a giant scale, infinitely higher than we would ever expect a few decades ago.
People are buying the idea of living like there is no tomorrow and the picture is getting narrower for the ‘average Joe’, who seldom get to save after paying for his mortgage or credit card. These are called ‘the new dynamics’.
With rising prices in commodities such as oil and food, I expect China (and the other nations from the BRICs) to have a substantial impact on the global competitiveness this year, but I will save this matter for another post.
Happy New Year folks!
Recently, a lot of people have been asking my opinion about the Westfield’s demerger and the new Westfield Retail Trust offer. I will briefly explain the reasons behind Frank Lowy’s decision and what I think about this IPO.
The Westfield Group (WDC @ ASX), previously named by the conjunction of Westfield Holdings, Westfield Trust and Westfield America Trust, is now redistributing pro-rata units to a new entity, in order to list a new security exclusively focused in the Australian and New Zealand retail real estate market.
A portion of the Westfield Group stapled unit will now represent the new Westfield Retail Trust stapled unit. The group will distribute part of its operations and allocate some of the financial resources to the new retail trust. For every 4.23 units of the current WDC stapled units, the current shareholders will be entitled to one Retail Property Trust unit. Both structures will still be connected as a joint venture and the Westfield Group will be held as the responsible entity.
In this case particularly, I believe that the process of raising capital through the IPO is a great idea, considering a medium to long-term approach. The group, under the sharp eyes of the chairman Mr. Lowy, have shown an outstanding management performance and Westfield’s assets are very hefty.
I am not and never was a big fan of IPO’s (like Marcus Padley would say “If IPO’s were good they would not be offered to you”) and obviously the proposal delivers an over-optimistic expectation that the group will distribute capital to its members and will generate almost-instant capital growth. But this is not the mom-and-pop groceries store we are talking about. The brand is well-known and people buy it.
This will potentially create better value than its current structure and there is a necessity for this type of security. Also despite this, the potential of the retail real estate market in both Australia nad New Zealand is clearly in demand and have been solidly growing.
The offer will distribute $7.3 billion of capital to members through the creation of the Retail Trust. The PDS informs that the scope initially is to raise up to $2.0 billion out of the IPO and another $1.5 billion from the eligible Westfield securityholders. Also the Offer is underwritten for up to $1.75 billion.
Talking about the Westfield Group’s units, I’ve seen that quite a few stockbrokers have downgraded the stock to a HOLD recommendation and some warned a SELL.
I don’t see a reason for panic and if we are talking value investing, there is no reason to sell the security, unless you want to time the market. The risk indeed have increased as the Westfield Group’s asset allocation will be mostly exposed to the overseas markets (with 55 centres in America and 8 in the UK). However, due to its strategical location within these countries, Westfield’s structure in the US and UK is consistent and the business is well-positioned compared to the other retail giants.
The group is in a strong financial position and one of the largest listed real estate retails in the world. The levels of gearing are acceptable and the group’s EBITDA was always above the average. One thing Frank Lowy has shown is how to implement sustainable growth.
Fortescue Metals Group: The stock market is recently coming to a small plunge, which I understand to be fairly normal after September’s short rally. One stock that I found to be performing well at this point in time is the Fortescue Metals Group (FMG @ ASX). They had a remarkable growth in the last 2 years since their first deal to start exporting iron to our neighbours in China.
The shipments of iron to Asia are forecasted to be growing at a fast pace in the next decades, as the demand for primary materials by the economic giant -China- increases significantly. The technology boom and the massive production capacity of China explains the demand.
Fortescue Metals Group is the operator of a mine in Cloud Break and also have interests in Christmas Creek, Mount Nicholas, Tongolo and Solomon. Considering the growth potential and solid management of the company, the price of the stock is relatively cheap.
Technically, the stock is strong. Today they reported a dip of 9% on the iron shipments for the September contracts, however the investors still seeking to buy the stock, which closed up 1.27% (being almost 5% up at some point at today’s trade).
We have seen the stock rallying for the last 2 weeks hitting a 52 week-high. This has also a correlation with an optimistic sentiment from the Aussie dollar appreciation.
In 2008 FMG reached $12.13/share (5-year chart):
The AUD/USD parity: Today the market closed with the pair trading at 0.9969. I wrote about the possibility of this parity to be happening in stages on the 19 of March 2010 post. I still expect a bullish season until the end of the year’s data release but the price correction will be sharp.
So what is going to happen if the Aussie does hits the USD$1,00 mark? Well, fundamentally it is a very complex scenario with ‘pros and cons’.
With a strong Aussie dollar, the Australian exporters will suffer and the government will not be happy about the Trade Balance (hence the interest rates rise to come). It is an enigma but technically I presume that the market is ‘testing’ that mark.
Once the cross is made, trading desks and hedge fund managers will start pulling triggers. So you can expect a ‘choppy’ game featuring around that line. We all know that the Aussie is overpriced, overbought and the US is walking (or limping) slowly out of a recession. It is odd and perhaps the plausibleness of such prices to remain at this level is a strong opponent to the current situation.
Simplistically, if we trace a line on the USD$1,00 mark and analyse all facts that influence the forementioned pair (governments and their fiscal policies, central banks and their monetary policies, history facts, risks likelihood, etc), what are the chances of the Aussie to remain with a reasonable sustainability above this line?
I would be far more confident in a $0.96 mark in the short term, and $0.78 to $0.92 range for the Aussie for the longer timeframe.
After having a closer look to this company’s management style and to its financial data, I understand that these shares are coming at a very reasonable price.
The ‘techs’ shows that the price have braked a support from its $35.5 in July earlier this year. In fact, there is still some ’room’ for another drop, however I am considering today’s closing price ($34.04) as a long-term buy (ps.: please note that this is not a recommendation to buy the security).
This is the result of a sequel of stumbles that Macquarie Group had and foremost for its profit downgrade publication. It was a sharp downgrade and caused a significant distress as speculators and other ‘players’ started to short-sell the stock, leading to a much further decline.
Analysts and shareholders are not used to see concerns as such in regards to Macquarie Group, as they have been publishing astonishing profits while many others were whining at the apex of the ‘credit crisis’.
Indeed they are a solid group and do represent a fair slice of the financial companies in the Australian market. They are a very diversified institution with interest in satellites communication, infrastructure, airports and aircrafts leasing businesses, investment banking, etc.
Macquarie Group’s share price is currently on a 52-week-low. Being optimistic, I would rather buy at a ‘discount’ then when the stock is performing better than the average. The stock reached $80 in November 2007 and $57.40 in October 2009.
Despite all the price action I think this is a similar case to QBE Insurance. They have a proven track of success but the media and the shareholders have had a high expectation in the short-term when this company has a potential for the long-term time frame. It is quality and diversification.
Macquarie Group FPO is certainly not for those who are ‘timing the market’. This stock is for those who want returns with ’time in the market’.
The last weekend (thanks to Mr. Rajczyk) I had the opportunity to find out about this beauty: The SS DELPHINE Yacht (currently anchored in Monaco)
The yacht is a classic 1921′s style, with 257 feet and because of its solid engines that work almost silently, it was once requested by the US Navy for their operations (being named USS Dauntless, and later rechristened by the Princess Stephanie of Monaco, as SS Delphine again). Distinctive opulence.
The boat is completely renovated and was found rusting on a dock by the millionaire Jacques Bruynooghe who ended paying a bargain for it. However, renovations costed up to three times more the original budget. He made the purchase in less than three hours of its discover.
All the polished bronze, the wood detailing and the luxury concept inside the yacht creates a vintage atmosphere that enables any one to feel like in the years of its creation.
More of the SS Delphine can be found at
QBE Insurance (QBE.ASX) – These stocks had a recent downturn when the oil spills in the Gulf of Mexico issue arose. In fact, QBE has no direct responsibility in the environmental impact but they do cover some of BP’s operations in the area. Also the company has a massive exposure to the US market/currency due to its overseas operations and capital. So far, nothing to worry I would say. These are high-quality shares and they will still outperform other companies within the sector as they have one of the most respected and solid managements around and a very strong future perspective. Their history of successful acquisitions says it all in terms of expansion and ambition. The share price risk would be considered moderate and would not suit all investors, but this is a long-term investment view.
Mining Tax: Our new PM Ms Gillard and Deputy Prime Minister Wayne Swan let things got a bit loose. The Miner’s got partially what they were claiming for. A reduced tax impact (from 40 to 30 per cent) but it still to be applied only for the majors (iron and coal) and existing mines. Other miners were concerned not to be included in the negotiations. Rio Tinto, BHP and Fortescue Metals were the ones approached for the discussions.
Oil and coal seam gas directors are not so happy as they are still into the existing Petroleum Resources Rent Tax and taxed at ‘Kevin Rudd’s’ 40 per cent. Conclusion? The government will be behind in $1.5bn in revenue, compared to the previous ’40% one-size-fits-all’.
ASX’s All Ordinaries Index still a bit lower than usual trading at around 4,200. A lot ot reasons behind this price action, including the ‘not so good’ company’ reports in the end of this Financial Year in Australia. Maybe it is a good moment for ‘stock hunting’.
After the fresh 9-month low by the ASX 200, some investors are concerned if the index did break the support level. Yes, it did. The index was bouncing on the 4,500 mark and the drop took it to the 4,305 on the 24th of may 2010.
The next support levels are around 4,060, then 3,737 then 3,120. However, support levels are only a reference for traders, and I personally do not believe that it could hit these lows.
Today the index is trading at around 4,347 which is a good signal after the sharp decline of the Hong Kong index. The Hang Seng recovered considerably well overnight and that does make a difference.
Okay, I have to put a word for the recent tax scheme scandal announced by the Australian government, which freightened the investors in one of the most, if not the most promising sectors from Australia (as it has been for the past 100 years) – The mining sector.
I still believe the mining companies will have a considerable growth through the next 100 years. That is a fundamental vision.
We have big competitors out there for iron, nickel, bauxite, aluminium, copper, gold etc, but the Geoscience Department that map and compares our production with the rest of the world shows that Australia’s Identified Mineral Resources (AIMR) still have a massive onshore potential for energy and mineral resouces extraction.
The ‘super profits’ tax replaces the royalty tax scheme. The tax – a 40% levy rent of Australia’s resources, if adopted by the government has the ability to generate billions of dollars. It is a huge tax compared to the current 17% tax rate (but far lower than other Australian industries like construction at 19 per cent and finance at 29 per cent), but it is a wise move for the economy.
The current Royal-system taxes the companies if they make profits or not. On the new scheme, essentially based on volumes, as a concession to the higher tax bracket mining companies will be able to avoid taxes if they are not profitable. The governement still can make up to 40% refund in some cases.
It can slow the extractions and scare investors, harden the competition with other production countries and might even get a few mining companies out of the business (like Rio Tinto’s CEO has been publicly concerned), but the overall revenue can help to maintain Australia’s economy strong, for a while.
“Firstly, the RSPT will replace the existing system of state royalties that miners must pay on the minerals they take out of the ground. Secondly, where a mining project is unprofitable, the miner can carry forward losses and transfer them to profitable projects, or claim a 40% refund if there are no such profitable projects. As a final sweetener, the Government will create a 30% tax break for exploration and development undertaken by smaller miners” James Thomson from Smart Company
The mining companies were recently affected when the government announced last week to start taxing their profits instead of their volumes. The shareholders sentiment had a hit and the shares had a slight drop.
But I go further. The PM believes the Australian people do deserve to have part of the mining companies profits taxed, so it can be re-injected into governement projects, as they (the Australians) actually own these resources.
If the government has this point of view, they obviously know that the infra-structure and mining in Australia in under a massive development and this is a tactic to get some revenue out of it.
Overall, the resources sector represents almost 20% of the ASX market by capitalisation, and almost one third of the companies listed.
Companies operating in Queensland (like Conquest Mining) and Western Australia (like BHP Billiton) must be at least on your watchlist. Fortescue Metals is also very very attractive in Australia today, and I personally do appreciate their potential.
The Goldman Sachs and the SEC debriefing call scared the investors last week. We know that the market (and its speculators) is (at most) driven by fear and greed. And last Friday (16th April ’10) was one of those scaring days for most investors. The Dow Jones, Nasdaq, S&P500, Oil and Gold had a drop. The Dow Jones Industrial Average had a good fall with the publication of corruption scandals in the heavens of Goldman Sachs (following by GS shares slumping more than 12%).
It is also a case of volcanic ashes falling on Wall Street. Another source of disruption of the markets recently is the Icelandic volcano eruption which is costing the Airline companies that provide the Atlantic Ocean cross, a massive figure of $200 million dollars of revenue a day (hello short-sellers! there is a big opportunity here for a short-term downside…and I don’t think the Airlines are insured for ‘volcanic woes’. Watch for British Airways and American Airlines).
Matter of factly, natural causes promote fear and doubt, and the hurricanes season in US is yet about to start and ground natural gas and US oil prices and some commodities.
The gold was also affected. It had a 2.12% drop last Friday. But, shouldn’t the gold be rising apart the financial market as it has no (direct) correlation with any government and/or financial market?
That is an old logic and does not apply to the new markets era. Today the traders sentiment, including the gold traders, is illogic (fundamentally, given that the US dollar had an insignificant change, it wasn’t a currency issue towards the gold). So what is it then? Certainly, psychology.
And honestly, who cares? The Mr. Market, as gracefully referred by Benjamin Graham, couldn’t be careless.
The important lesson is to trade the facts unemotionally and this is good news for some ‘gold-diggers’.
Instead of attempting to arise the debacle of how QBE shares are absolutely ‘premium-grade’ value-investing, I would like to introduce Frank O’Halloran, the CEO of QBE, who started in the company in the mid-seventies as a financial controller (which we can believe that knows it’s financial operations from the inside-out).
Hall of Fame induction for QBE supremo
1 February 2010
QBE Chief Executive Frank O’Halloran has received the highest international recognition of an insurance executive – induction into the Insurance Hall of Fame.
Mr O’Halloran’s work in crafting QBE into one of the world’s top insurance companies, with a market capitalisation of $US22.5 billion ($25.1 billion), was described by the International Insurance Society President Michael Morrissey as “nothing short of remarkable”.
QBE has made more than 125 acquisitions in 20 years under Mr O’Halloran’s leadership, is represented in 45 countries and derives more than 75% of its income from outside Australia.
Mr O’Halloran will be officially inducted into the Insurance Hall of Fame in Madrid on June 7.
QBE’s share price was re-adjusted in Australia after the company’s results release a few weeks ago. The profits were below the expected considering QBE’s quality and performance. But the numbers were still good. If those were the results from AMP or another insurance operator, the analysts would consider that they outperformed.
The share is trading at $20.96 today (21st March 10) and it is considered very cheap. For a medium/long term perspective, these prices tent to increase due to strong management, the increased demand for insurance services, the company acquisitions (QBE has formally lodged its interest in acquiring the commercial insurance operations of Dutch financial services group ING Groep).
Frank O’Halloran told the WSJ the group had A$2.5 billion available to fund the acquisition. This would certainly boost the prices as well.
If you have time, check the performance of this stock in depth. It is a good chance for yielding dividends and capital appreciation.
Some folks out there believe they have seen (and tasted) everything. When you go to a bar you look to the top shelf and try to make up your mind on what you will drink and, if you are appreciate a good rum you most likely will find Bacardi, Mt. Gay, Appleton (if you are lucky enough) and Captain Morgan. But this rum you certainly won’t find easily. It is not a ‘top-shelf’ rum. It is liquid gold.
I’ve met some whiskey connoisseurs at a ‘Whiskey 101′ meeting, and he said that the best way to drink a matured spirit, is with a dash of natural water. Less than a third of whatever is in the glass. It cuts off the burning and brings up the flavours.
If gold could be drank, I bet it would taste pretty much like this beautiful Guatemalan rum. Ron Zacapa is not made in the Caribbean like many others. It is also not a molasses-based rum, it is instead made from the pure sugar cane honey from the first press of sugar.
Despite the distinctions in it’s composition, Zacapa is a darker-than-average sweet rum. Usually the good old rums are amber colour, but this beauty is deep rich brown. It does tastes like honey and cocoa to the finish. It is a beauty.
In fact, the Ron Zacapa Centenario 23 Anos has won the highest rating ever for the spirit from the Beverage Testing Institute (BTI) with a score of 95 out of 100 (exceptional) – www.tastings.com
The only rum I can compare to this level is the Zaya Gran Reserva 12 years which I have been very fortunate to try with my mate Leo last year.
I wrote some time ago that if we break the Global Credit Crisis forepeak, obviously, the chances of the Australian Dollar reaching the greenback were absolutely high. A simple breakout to around 0.9300 and consequently to around 0.9600 on the AUD/USD would be enough to trigger investors and investment banks to start acting, meaning that the parity could be close to happen.
Even if the idea of parity with the US dollar brings a sense of pride for the Australians, there are benefits and deficits.
The key benefits will be the purchasing power of the Australians, and for that matter, the acquisitions Australian companies will be able to make overseas with a stronger currency, also the investors will have more access to cheaper stocks , consumers spending more, and a lifestyle improved and with less inflation. But we know that spending creates liabilities and debt, but on a second stage. Also, Australians will find traveling abroad less costly.
A strong Australian dollar also encourages investment in aussie equities and corporate bonds among foreign investors. Foreign investors are attracted to aussie assets given the overall strength of the local economy.
For the exporters its not much of a good deal. Australian products will have to face competition with cheaper products on the overseas markets and, and for maintaining a large production of basic materials, it can impact the Australian economy.
The tourism in Australia will slow down with a stronger AUD and the housing market will be affected (as the foreign demand towards housing investments in Australia is around 15%)
For the U.S., however, a weaker currency could affect Australians indirectly. A stop on the cycle of declining prices, commonly known as deflation, would be a concern. According to some analysts, there is a economic effect to consider. If deflation is a root of problems, if that country lower the exchange rate, that could be an effective method of defence for the US economy.
I haven’t been on for a while since I was working on a complex project for a friend of mine but I’m back to share more information as usual. I appreciate all the positive feedbacks I have received on my email and would like to thank some readers: monkeytrade, brownblaze, jasminmees and Joshua from the Wall Street Journal and Marketwatch communities. I’m absolutely impressed with the daily stats of this blog! Thank you all!
Investors and speculators have to take a closer look at carry trade in the currency markets. The Carry Trade is a strategy that involves capturing the interest differential between a pair of currencies being traded. In fact you can make ”free-money” apart from the profit extraction you are already making when trading a foreign currency pair with a unmatched interest rate. Buying ‘cheap money’ is the main key.
Basically we can say it is a trade where you borrow and pay interest in order to buy something else that has higher interest. The carry return is the bonds of the country you are acquiring the currency from less the interest costs of the short-term borrowing.
A good example is the New Zealand dollar along with the Japanese Yen. The carry trader would borrow Japanese yen and then convert it into New Zealand dollars. After the conversion, the NZ bond would be bought for the amount paid, earning 8%.
Therefore, apart from the actual trade profit, a 7.5% return on the interest alone after taking into account the 0.5% that is paid on the yen funds. If the price does appreciate, the gains will be further more.
So let’s say that the trader ‘sits on that trade’ for months and months, and he still haven’t made one pip of profit out of that trade.
By the time he settles the transaction, the amount of the difference on the interest acumulated would be enough to take the transaction as a good win. Fund managers love this strategy.
It is absolutely necessary to stick to a good money management strategy and proper techniques to entry/exit of a trade and when considering the market price and yield. GL
Well, you can say you have seen here before. It was too good to be true having all those stocks/index rising high above the rim. The full story is on the previous post ’2010. The beggining of a new era.” Maybe is time for the short-sellers start pulling triggers.
In fact, two things could happen in 2010. A sharp pullback (which in my modest opinion is more likely to happen) or a price consolidation (which could happen, but I just cant imagine the markets moving sideways for too long). If the latter happens, either way, the next move will be a big fat bull.
Everyone knows that after a storm comes the calmness. We can call 2008 and the first-half of 2009 as an economical storm.
Now with the consumer’s confidence increasing, the cycles are spinning fast, and it even seems to hit the overbought territory. But no panic as the economy still limping out of a recession -not sprinting- so very unlikely we would have a significant crisis again, maybe just a ‘pullback’ pattern for recorrection of inflation, etc.
It might happen in the medium-term as the US Fed is keeping the cash rates lower… so no worries for now. People will still be using the loan system to keep the economy sustainable.
When the prices are high, smart investors tend to wait. Good bargains will come if a pullback happens. The stock market is currently hitting 52-weeks high in almost all the top traded stocks.
Every stock will look good now as it’s not that hard to outperform in a bull market. But for a safe-value investing, is better to look for shares that had a ‘good underperformance’ last year and hit them when their price eventually falls. That is the entry point.
The best tool to find these opportunities is a good stock screener and a lot of patience. Checking for dividend yield, a low p/e ratio, a low trading volume -yes, you don’t want to have big speculators from Wall Street involved on your shares-, a high net profit margin, a low 52-week RSI, a low debt to equity ratio -check their sales and obviously a consistent high revenue growth year over year.
Emerging markets like China, Brazil, Mexico, India and Russia are quite attractive. I prefer to deal the basic materials from these markets. It’s solid and you have more liquidity as their prime resources are supplied globally and traded in high volumes.
I believe that outside the resources/mining sector, QBE Insurance Group Ltd (QBE) is one of the best value shares in the Australian sharemarket, at the moment.
It is a high-quality stock and is mildly underpriced (not bargain priced), therefore, I sustain that their price will continue to increase due to the constant demand in the insurance field.
With more than 120 successful acquisitions in the past decades, this group is growing solidly. Besides the world’s climate changes, floods, bush fires etc are concerns that makes insurance not being an option anymore.
In 2001, Harry Hindsight alerted on QBE’s absolute low price shares. Only $4.90 a share. By February 2007 half of the lot he previously bought was sold by $30.75. A stunning 579.69% of price return.
I have to agree that after this enormous valuation, a price correction was necessary. Between 2007 and 2009 a lot happened in the financial sector, however, QBE still one of the best performance shares in the ASX today.
In spite the fact that QBE is a profitable exporter of financial services with a major exposure to the US and with 70% of their holdings in that country, a USD depreciation would be a negative point for QBE.
The deal is, get the right price and the momentum, not taking too much risk. If you own an insurance company for a long period of time, you might come across a couple of major losses (like 9/11), but a good insurer with a good management can surely succeed.
Since Dubai opened their doors for foreign property investing, the federal government and property ownership, Dubai became an Oasis for the wealthy visitors from Asia and Europe. Apparently in Dubai, demand would continue to outstrip supply.
The real-estate prices in Dubai have slumped by almost 50%. About $430 billion worth of construction projects have been rolling and its a small country with a population of only 4.5 million. The local banks and government where favouring the ‘easy credit’ rule and ‘open-mind’ in the only Arab state where the economic development worked…fast!
Massive residential complexes, offices and business skyscrapers are arising every year on the main road the cuts the U.A.E. and it seems like the Las Vegas main strip, where Abu Dhabi is the industrial reality. Polo clubs, top grade events, marina residences, sophisticated hotels and restaurants, entertainment…and a mass of investors eager to buy.
But what happened now? Is Dubai really in a meltdown? Yes indeed. As we know, the markets suffer a psychological effect. All the announcements of the debts and the financial losses affected the money injection in the area.
Since Dubai’s debt-standstill announcement, a lot of buyers stopped honouring their payments, generating a second wave to the country’s stats. Most people is fearing that the money will fall into the bottomless pit of Nakheel debt (the architects of Dubai:
I always considered Dubai a “bubble”. They are good if you get in early enough. But dont stay long! And property is usually a long-term driven investment strategy. Well, ate least we know that if we find the bottom, the bulls are out.
The Forex market seems to be pretty bullish since March 2009 for the Euro and for the Aussie dollar when bought with the United States dollar. The Weekly and Monthly charts are clear.
The forecast for the AUD/USD shows that around Christmas this year, we might have the currency hitting the resistance from July 2008 (considering the retails boost season), reaching the peak right before the GFC, obviously if something major dont detour the current pricing behaviour.
These pairs are marching upwards and the volatility is only being correlated to the index news releases, usually with minor impact on the trend.
The European currency is in a slower move, must probably because of the directly relation with the GBP/USD which seems to be slightly bullish and recently moving sideways with a more volatile price action.
It’s a good time for investing in american assets. And we might see a massive breakout if the Aussie dollar hits 0.98400 price.
I believe going long in the AUD/USD might be a good strategy, but nothing can guarantee the target will be hit.
The World Bank (lead by Robert Zoellick and currently formed by 186 member-countries) is one of the main sources who publishes yearly the list of where the wealth is being accumulated.
The list is calculated with the countries gross domestic product (GDP) at purchasing power parity (PPP) per capita.
The head of the list is Luxembourg, followed by Macau and Norway. (yes, Macau, the small country which James Packer planned another version of the ‘Crown Casino’…isn’t it a bit risky considering Macau’s law structure still not fully acceptable regarding gambling?)
Australia is on the 13th position and the UK is on the 15th. Japan holds the 18th position, France the 19th and Brazil is on the 64th. The bottom of the list is the Democratic Republic of Congo.
The exponential growth of the world’s accumulated GDP, after the Industrial Revolution (which was the most remarkable capitalist movement) was clearly targeted by the 2008′s GFC.
The most interesting thing about this list is having the developing countries facing the obstacles with a lot more confidence comparing with the growth on previous years.
This is the case of China (check the Hong Kong’s Hang Seng Index progress lately) and Brazil (The cover of The Economist this month speaks for itself).
A good example of the brazilian growth expectation is on one of the most powerful investors portfolio: George Soros. He reaffirms this statement when his firm holds almost 48% of its portfolio on brazilian Petrobras (PBR) when others have an average of only 3% of their capital in a share.
The ‘champagne-stocks’ are more likely to appear in these countries than in the developed world as in the latter, the bubble already burst.
‘Value-seeking’ investors also should insert some of these developing-countries companies in their watchlist. It certainly wont hurt.
People often have a thought of rum being a harsh spirit to mix with Coke (the old Cuba Libre).
But rums can be very sophisticated and a good rum taster can educate others about it.
Some are incredibly expensive like the bottle of ‘Wray and Nephew’ a Jamaican Rum from 1940 auctioned for around fifty thousand USDs. (did the bidder ever opened the bottle?)
Their flavours, like wine, are geographically distinct and some say that the Jamaican rums are the ‘champagne of rums’.
One that I have absolute no words to describe is the ultimate 12-year dark ’Angostura 1824′. It’s just superb!
They are matured in ex-bourbon caskets from Trinidad & Tobago. It’s very smooth, almost like a liquor and flavoured. After a few sips you will be able to recognise the rich flavour blind-folded.
The herbs formula in this fine rum are kept at locked doors. The Angostura was invented by Dr. Johann Siegert, after he lived in a city in Bolivia called Angostura.
Siegert’s operation started in Bolivia then it was relocated to Trinidad, and has since been bought and sold several times, including by Bacardi.
The Angostura make their own 1919 brand rum, and also produce ’10 Cane’ for Moet-Hennessey.
Many countries from Caribbean, Central and South America produces good rum, including Puerto Rico, St Croix, Dominican Republic, Trinidad & Tobago, Jamaica, Turks & Caicos, Barbados etc.
The classic ‘Bacardi Oro’ series and the ‘Bacardi Reserva 8-years’ from Bahamas are two classic examples of a superb spice and flavour.
The very well-known Bacardi Limited Group has been producing the ‘dark amber’ rum in Nassau, Bahamas since 1965!
Other good examples of remarkable dark rums are the Jamaican ’Appleton Special Gold’ , the ‘Havana Club 7-years’ , ‘Myers’ and the ’Mount Gay’. Also try the ‘Cruzan’ line of rums…they are wonderful.
I actually can’t wait to taste the original ‘Sailor Jerry spiced Navy Rum’ from its famous tattoo-artist.
The ingredients in the rum can vary radically. From molasses, vanilla to the richest and most exotic local herbs.
I personally prefer the dark rums. The main islands have standards about colours when naming their rums. They are more smooth it goes perfect with a meal like seafood or simply by itself with lime and ice.
Yes. The Texas Private Equity Group (or TPG, the private equity behind Myer’s capital) had their NAB bank account frozen.
The Australian reports that one of TPG’s accounts had AU$200 million raised from the float and now there is only AU$45.
The ATO says they had frozen the account because there is a $452 million tax bill outstanding.
Apparently the bill is related to its cash windfall from the float.
TPG, Blum and the Myer family bought the Myer with $500m in cash from Coles Myer in 2006 and had already recovered their entire investment in dividends.
Not bad for a 3 year investment, I might say. Since listing in ASX, the shares have fallen from their $4.10 initial price to $3.92 yesterday (12th of november 2009). Could this IPO be a ‘turkey’?
The media will only be trustworthy when they detach from their advertisers. Marketing corrupts. Brokers were even commissioned on 1% per sign up for the Myer shares. The picture of Jennifer Hawkings brings quite of a good impression. No surprise for me. Let’s keep an eye on this case.
Here is a good opportunity!
Identifying stock splits can be very profitable, not to mention the Microsoft case. If you had 100 stocks since the first split you would probably have around 28.000 Microsoft stocks today.
The consolidation of the price usually happens straight after the fall. There is no doubt that after this ‘natural drop’ on the shares price, the recovery would be a matter of time in solid companies.
Now is Berkshire Hathaway. The 79-year-old chairman have never split their stocks before. And as far as I am concerned about their operations, it might be a good turn.
Published on Tuesday, 3 Nov 2009 | 3:58 PM ET by Reuters:
If you always wanted to invest alongside Warren Buffett, but found it too expensive, you now have your chance. Buffett’s decision to conduct a 50-for-1 split of Class B shares of his Berkshire Hathaway lowers the price of entry for ordinary investors who long found it prohibitively costly to buy the stock.
The split is one piece of Berkshire’s $26 billion takeover of Burlington Northern Santa Fe, and is intended to make it easier for shareholders of the railroad who want to swap their shares for Berkshire stock to do so.
Berkshire Class B shares [BRK.B 3402.50 7.50 (+0.22%) ] closed Monday at $3,265. After a 50-for-1 split, they would cost just $65.30.
Class A shares [BRK.A 102149.00 --- UNCH (0) ] of Berkshire trade around 30 times the price of the Class B shares, or around $100,000, and are not being split.
The split will obviously need the approval of the other shareholders. Many experienced traders take the chance on stocks split, and there is one that I admire mostly for this ability: Lyn Summers.
Well, in the worst scenario, if you own Berkshire Hathaway shares, at least you will have “free passes” to the annual Berkshire gathering (the ‘Woodstock for Capitalists’) and if you are smart enough you can maybe get to know Mr. Buffet!
Okay, Cigars are one of the things I cant live without -thanks to my dearest friend Fab ‘Gauloises’. I’m a big lover of the real Cuban classics (like Hoyo de Monterey, Cohiba and Montecristo) and also the Dominican (like Ashton, Cuesta Rey, Davidoff and Macanudos).
Dave from Room 101 Cigars, had brought to Sydney these beauties and I had the absolute pleasure to try one of their most robust specialties. The creator behind the brand is Mr. Matt Booth, a well-known designer from Los Angeles that produces luxurious and alternative custom-made jewellery.
It was definitely a great shot to invest on an enterprise in Dominican Republic and Honduras. The Hollywood-based brand is blended by Camacho Cigars, branded by Franco Vesconi.
Samuel Spun from Ilumino Cigar News Australia:
The Cigars come in 6 sizes and are all named after US telephone area codes (reminding me of Ludacris’ classic hip hop ode to his many ‘girlfriends’ across the country).The cigars are the 213 Corona (LA), 305 Robusto (Miami), 323 Toro (Hollywood), 404 Torpedo (Atlanta), 702 11/18 (Las Vegas) and the 808 Bertha (Hawaii).
This is my personal opinion on the Myer Holdings case. You should be able to decide how to manage your own finance and/or seek professional advice. All the information I present here is available from several public sources.
This case is definitively attracting attention of the Australian media, most likely because the marketing involved in the campaign (including the former Miss Universe, the Myer brand ambassador Jennifer Hawkins).
Some people mention there is a ’stag profit’ on the price mentioned (but not established yet) when lauching the shares for ASX. Besides, I have to agree that Myer Holdings have a better than average corporate success history, with ups and downs since founded as The Myer Emporium Limited in 1900.
In 2006 the company was sold (including its major building in Melbourne) to a consortium of private equity firms, including the TPG and Blum Capital as well as the Myer family (after the split from the Coles group). The price? 1.4bn.
The takeover (see ‘corporate raiders’) of listed companies become very popular. Similarly to the Debenhams case (a UK-based department store), which was bidded by TPG -the same from consortium that now controls Myer and CVC Capital Partners. 1.7 bn pounds was the price. Debenhams had a massive debt which was covered (and renegotiated) by the consortium.
The takeovers applied a lot of short and medium-term strategies (cash maximisation, high leverage in and outs, management ownership, marketing extravaganza etc) which undoubtedly make the revenue progressively increase, but with the shadow of the debt growth.
In 2006, TPG and CVC decided to re-float Debenhams in the London Stock Echange at 195p a share. They reached the market capitalisation of 1.7 bn pounds (price of when it was acquired) but now they had 1.2 bn pounds of debt and little property (total enterprise value was 2.9bn pounds compared to the 1.9bn pounds from earlier).
Due to all the debt with banks/suppliers the price halted for less than 25p a share. Nearly Christmas 2008 the stock hit the bottom. It was a near-death experience. They recovered for 80p a share but the ‘modus operandi’ of the private equity is clear.
In fact, TPG, CVC and Templeman almost tripled their original investment (Templeman made a reported profit of 41m pounds from the float).
If you research in depth about the Debenhams case you will understand that, in the long-term the Myer Holdings shares should be avoided, and if not, analysed carefully.
I was one morning in Melbourne, Australia walking in the ‘financial district’ and I ended up in a small book shop. I found an old book written by an associate of the master Mr. Warren Buffet. This book mentioned about the annual letters that the chairman wrote for the Berkshire Hathaway shareholders.
Since 1977, his letters were published and are a cutting-edge school for those willing to learn more about stocks fundamentals. The real meaning of investors (as of Bejamin Graham’s concept of value investing) is solidly conceived in Warren Buffet words.
When looking into fundamentals, there is a lot to learn from this man:
I will use the WordPress as a tool to express ideas, give opinions, suggestions, and most importantly to SHARE information that I have come across during my endless researches about life and finance.
It is a democratic space so please write your thoughts whenever you feel like it. I will try to update this often times, and will be going through many different topics from business ideas, investments and lifestyle.
I would like to dedicate this to those, who like me, are constantly gathering information from independent sources and aim for an intellectual evolution.
Now it is your move. Enjoy the read!
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