Hi Dentie, first and foremost I am also a learner, so maybe I wont be that insightful
I have though been invested in XRO for a while.
My gripe with posts such as the one I referenced is that these tend to be posted without any reasoning what so ever. They come across to me as unnecessary and unhelpful. The post in the NBR article on PEB (maybe you, maybe not) made me laugh in this regard. I am used to seeing these types of comments in the Xero thread, but this one was posted in response to an article on PEB (nothing to do with Xero), it was so out of context it just made me question even more why people would make such comments? Of course everyone has the right to an opinion, I just feel that when people comment on any stock suggesting it is overvalued it is only reasonable to expect some sort rationale to back that up. The thing that I have tried to point out in this thread, to both people posting these types of comments, and additionally to people considering investing in Xero, is that these comments have been made all the way from about $2.5 to $10 and have therefore (to this point) have been way off the money! I happily accept however that an investment in XRO comes at high risk, and long term it may not be succesful. I just hope potential investors in Xero haven’t been deterred by these comments and encourage them to do their own research before making a decision. To this point most people could quite easily have invested in XRO and mitgated their risk by taking their initial investmetn off the table. I have done this as I am sure many others have too.
In terms of my thoughts on Xero, well as a relative newbie, I don't have any fancy formula to determine a fair SP. I was introduced to the company by someone I trust a great deal back when the SP was around $1. I subsequently did some basic qualitative research on the company, looking at the management team, directors, and talking to a some XRO staff members. I also spent a good amount of time talking with accountants and small business owners who use Xero to get their opinions on the product(s) Xero is selling. I have continued to do this as the company has grown and from day one I have been impressed and I still am now. Arguably my rationale for investing may be a little bit weak, but certainly it is great deal more informative than the posts which get up my nose
In terms of addressing some of the concerns you have raised about Xero, there will be many people with far more knowledge than me to do this, but for what it's worth here is my opinion:
I stand to be corrected on this one but given the nature of Xero's business I don't see tangible assets (other than cash in the bank) as particularly relevant. And I reiterate, as at Dec 2012 Xero had $85m NZ cash.
I guess you mean profit, and yes, for me this is the biggest concern and the greatest unknown, but it is prudent to remember XRO is very much still in growth phase and this costs a lot of money. Costs, contrary to what others suggest here, will come down significantly once the heavy investment into entering the US and UK markets subsides (CJ has made this case in mcuh more detail), and I believe XRO will begin to be highly profitable eventually. Using PEB as an analogy, as I know you are invested there, it should not be a surprise when people invest in a fast growing company which is not profitable IF they believe the future is bright. People believe this to be the case in PEB, in XRO, and in many other companies in their relative infancy so I don’t see non-profitability as a big red flag at this very moment.
This needs to be put in context. The sell down from Drury, Morgan et al was off the back of significant US investment, most notably a second round of investment by Peter Thiel. While I agree it is never good news when directors and senior management sell down, in my opinion and in this case it was far far outweighed by the additional investment from the US.
Look, at the end of the day an investment in XRO is not for everyone, I just hope people who are considering it do their own research and are not put off by some of the flippant comments which pop up every time XRO’s SP climbs.
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