Diligent Boardbooks IPO

[chad321]

Does anybody have any rough but slightly educated guesses into how long it should or could take for the new accounting firm to review and correct all of the financials in question (given the size and business structure of DIL). Also, will DIL submit the corrected financials one at a time to the market as they are ready, or will they do all the old ones at once, and then the latest overdue quarter?

[CJ]

Also, will DIL submit the corrected financials one at a time to the market as they are ready, or will they do all the old ones at once, and then the latest overdue quarter?I would expect them to release them all at once.

They will be release when ready. They will have Board meeting booked so these things cant be rushed.

[chad321]

Anyone remember Advantage Group?

This thread and the ADV thread when compared together would probably read about the same ... Wonder if the share price graphs look similar too?

I hope it doesn't end the same way ... :(

When I was 12, I worked for my Dad and earned $350. My Dad invested it for me in Advantage when they were about $3.60. It didn't take long for that $350 to be worth $0. I shall never forget :|

[Mista_Trix]

Around six weeks' time. This type of process cannot be rushed.

I really hope the market holds.

[chad321]

Around six weeks' time. This type of process cannot be rushed.

Plenty of time for market hesitation. But if they get it all right (which of course they will), the overall picture ongoing will be solid.

[QOH]

When I was 12, I worked for my Dad and earned $350. My Dad invested it for me in Advantage when they were about $3.60. It didn't take long for that $350 to be worth $0. I shall never forget :|
That was a valuable lesson to learn early in life. better to lose all your capital aged 12 when you have many years to recoup it.
The older I get the more cautious I become.

[winner69]

Anyone remember Advantage Group?

This thread and the ADV thread when compared together would probably read about the same ... Wonder if the share price graphs look similar too?

I hope it doesn't end the same way ... :(

Belg ..can't find an ADV chart of old

Will need to make do with comparing DIL with RAK

Seem to be going the same way

[TimmyTP]

Belg ..can't find an ADV chart of old

Will need to make do with comparing DIL with RAK

Seem to be going the same way
I think these comments are a wind-up (in which case "ho ho"). In case they are not, please be reassured from someone with first hand experience of their operation (didn't work for them, but worked with them over a long period and saw from the inside) that Advantage Group was poorly organised, lacked vision, was slow to innovate and was selling to a market with shrinking margins.

Whilst I have never visited DIL's offices, I struggle to believe from the googgling I've done, that it is rational to compare DIL with ADV over any useful time period.

As for your lesson chad, I hope the you learnt to take care over the risks you take, rather than to avoid risk at all; otherwise you risk being bored and/or average.

DISC: holding a small percentage, marginally above $6, with a key eye out for some good lessons for the future.

[winner69]

I think these comments are a wind-up (in which case "ho ho"). In case they are not, please be reassured from someone with first hand experience of their operation (didn't work for them, but worked with them over a long period and saw from the inside) that Advantage Group was poorly organised, lacked vision, was slow to innovate and was selling to a market with shrinking margins.

Whilst I have never visited DIL's offices, I struggle to believe from the googgling I've done, that it is rational to compare DIL with ADV over any useful time period.

As for your lesson chad, I hope the you learnt to take care over the risks you take, rather than to avoid risk at all; otherwise you risk being bored and/or average.

DISC: holding a small percentage, marginally above $6, with a key eye out for some good lessons for the future.

No doubt you are right in all you say

What belg was getting at is the shareprice action ...how punters perceive the company in other words ...and this quite often indicates where a company is going

It is the balance between perception (the story being told) and reality......and belg saw this with Advantage and I see the same sort of share market action with RAK

No worries cause this time is different

[winner69]

We seem to have given up on our regular updates on support at that and support at that etc

Methinks moosie et all are keeping silent today as they unwind their positions.

Maybe they have seen the light of day ......shareprices don't fall 40% in a few months unless something is really wrong ....wonder what is wrong?

Sorry not quite 40% yet ....that's just over 5 bucks

[PlatnuM195]

With all this talk of a plummeting share price, does any of this actually affect what the company is doing on a day-to-day basis?

I feel like there was a similar negative sentiment towards Apple recently. Speculators would drive down the share price, but did it change anything to do with their products? Nope.

What's the difference between DIL at $5 and at $8? Is there suddenly a lower expectation of growth compared to a few months ago now?

[winner69]

With all this talk of a plummeting share price, does any of this actually affect what the company is doing on a day-to-day basis?

I feel like there was a similar negative sentiment towards Apple recently. Speculators would drive down the share price, but did it change anything to do with their products? Nope.

What's the difference between DIL at $5 and at $8? Is there suddenly a lower expectation of growth compared to a few months ago now?

$8 to $5 is the difference punters WANT or are PREPARED to pay for DIL

Yes, nothing has changed at what DIL do (probably) ....but maybe punters now think that perceived growth was a little stretched and have adjusted their thinking otherwise.

And of course other things that have made punters think differently

[luigi]

4713 ProvencoCadmus (Advantage Group) next to DIL.

[CJ]

Would you buy tax advice from a company whose management just got indicted for tax fraud? Would you buy accounting services from an accounting firm that just got charged with accounting fraud? every big 4 accounting firm has been sued for irregularities.

Everyone still looks at S&P ratings despite their complete failure during the GFC - how much are they being sued for?

[Huskeez]

Im totally in agreement with you,if your your fundamentals tell you your "stock" is going to go up massively in the future.... but the charts tell you the stock is going nowhere for the next 1-3 months... then you should really hold back on pulling the trigger... Looking at the DIL chart , i cant see how any investor at this point would look at it and say wow what an oppurtunity.... these are probably the same traders/investors who were saying .. "Wow what a great buying oppurtunity @ $7.50 .... $7.00"Paul Tudor Jones quote "Losers Average Losers" comes to mind. Why catch a falling knife by taking a low probability position? Not my cup of tea anyway.I Always thought of trading/investing as strategic. DISC : Not Holding
Unfortunately, the motto "buy the rumour, sell the fact" also applies in reverse. I am more than happy to accumulate at these oversold prices. I am more than confident DIL will sort this, just like any other issue, and continue on from strength to strength. As with others, I'm not selling until the story changes. I hope those on the sidelines have their money ready, as any move upwards will likely occur in a fast and furious pace at oversold levels. Buyers came in thick and fast to prop up $6.30 support today, so if you can buy near that you are onto a winner, as it will not break unless there is some seriously bad news.Remember when everyone was screaming doom and bear markets only a few weeks ago, then it rebounded and some were left high and dry? The story HADN'T changed, people just THOUGHT it was going to! DIL is going to do the same, just give it a month, you can mark my words on that!DISC - Happy DIL holder.Its been a month moosie... :) This is why i love TA , 2 people see the same chart , and both interpret them differently.. Still im a short term trader... and havent had a sell signal from FPH yet... DIL is still well off the radar with my system

[see weed]

Belg ..can't find an ADV chart of old

Will need to make do with comparing DIL with RAK

Seem to be going the same way

i have my old chart here.......july 22nd=$2.65, sept=2.50, nov18th=2.30, dec17th=4.15 , jan7th=3.55, feb2nd=3.37, feb22=$4, feb28th=$4.40, march 6th=4.90, march17th=4.50, april 3rd=$5.62, april17th=$3.20, may30th=2.67, july28th=2.50, aug 9th=3.10, sept26th=1.95, oct 13th=1.70, nov 29th=1.22, jan 18th=1.08, march 30th=.85c That is in the right order over 2 years, but not sure what years, might be 1998 ..1999 not .

[Huskeez]

lol, my timing may be out, but the story still hasnt changed! I am not unwinding my position, nor am I thinking of doing so. I'm silent because I have plenty of work to do while the market plays silly games with the sp! hope everyone is having fun, looks like another capitulation Friday ;)Haha just having you on, your a good sport mate... hard to find someone in my age bracket who is interested in the markets and not Xbox and getting loans to do up **** cars :)

[ddrone]

Is it just me or is there a trading halt right now?

[Mista_Trix]

earthquake

Bigger than the last in wellies. Been a bit crap to be honest, everyones gone white.

[Dej]

earthquake

Only in New Zealand aye..

Just btw Huskeez, pretty sure im in the same (if not younger) age bracket as moosie and you, all my friends are doing exactly what you say. Spend money on cars and claim it makes them money...

But im here instead also :t_up:

[Wolf]

I think I'm younger than all of you, haha :) I'm 16.

[Snoopy]

If this is the case, past growth rates should not be projected forward, as this may become a business in decline. I would wait not just for the financial restatements, but also for some indication that the company is achieving strong rates of growth again. Otherwise the share price is going much lower as the P/E re-rates based on a lower growth outlook.


This decoupling of the "DIL business model for customers" and the "DIL investment model for shareholders" is something that doesn't get discussed enough. The analogy goes something like this.

Suppose you are a hotshot computer graduate, degree under your belt at just 20, deciding where is the best place to use your talents. Someone from Diligent approaches you.

-----

"I know you are a bright spark, and you could well go into the workforce in any number of software companies", they say.
"But at Diligent we have a proven product." "And we need smart people like you to keep that product ahead of the game."
"So I am going to offer you a deal." "If you take out a loan of $250,000, and pay that money to us, then in 45 years we will give you that money back." "We won't pay you a salary, but in the meantime you get to keep any incremental profits you make for us in proportion to the capital you have contributed to our business." "What do you say?"

-----

Now I am guessing that many of you shareholders reading this, would not sign up to such a deal. For a start the $250k that is promised to you 45 years hence is simply the money you lent to the business being given back to you. The net return you get on this money is nil, plus you have to wear the 45 years of inflation that will deflate the purchasing power of your 250k. However the deal does have some positive elements. 45 years of compounding earnings from DIL and all their collective corporate wisdom before and after you join might end up being quite a lot of money. I think what is clear though is that such a deal has risks and should not be entered into lightly.

Contrast this who are keen to buy into DIL at a price in the mid $5 range, on a PE of around 45. There seems to be some willing to bet all of their net wealth on buying in at that price. However, I would put it to such people that buying into DIL at say $5.50 is equivalent to our our mythical whiz kid graduate signing on the bottom line to the 'graduate deal' that I outlined above. You see PE is just another way of saying in years how long it will take for any company to give your capital back. Perhaps by putting it this way, potential investors can see that DIL is far from a bargain where the price is now. Yes you may end up getting a great return, but only in exchange for taking an extreme risk.

In my book the "DIL business model for customers" stacks up. But at $5.50, "DIL investment model for shareholders" does not.

SNOOPY

[Dej]

I think I'm younger than all of you, haha :) I'm 16.

Yep you win :t_up:

[Balance]

Snoopy has written!

And as per usual with his unique logic which defies explanation!

Time to buy!

Based upon his logic, no one will ever invest in any growth stock!

Snoopy would have been saying 3 years ago (when DIL was trading at 50 cents) that it is equivalent to lending DIL $250,000 forever to get $250,000 in ten million years etc etc etc.

Unadulterated rubbish which insults a 6 year old!

[robbo24]

In my book the "DIL business model for customers" stacks up. But at $5.50, "DIL investment model for shareholders" does not.

Damn! You should have told ACC, who just bought 285,000 shares for $5.62 each! You could have saved them a lot of money if you had told them this earlier! DAMNIT!!!

[Balance]

To be honest, I read Snoopy's comments and thought - "Where do I start?"

You've summed up more succinctly than I could have.

Reflects very badly on him unfortunately.

Have up to now always thought Snoopy writes some good thought provoking and challenging stuff (eg. Heartland) but this is unbelievable!

:( :( :(

[goldfish]

Wow 2159923 shares just passed through followed by 100000 more...any ideas who?

[Balance]

Wow 2159923 shares just passed through followed by 100000 more...any ideas who?

Stock has been hammered down to $5.10 level to get the crossing done.

Worryingly, it looks close to Sodi's shareholding level?

[goldfish]

someones grandmother ;)

Wish it was mine.

[Corporate]

This is a becoming a great case study into why you should never fight the market. I wish Phaedrus was around to put together one of his charts inclusive of a number of the comments in this thread.

Some people are in complete denial.

[Joshuatree]

I find it invaluable, contrarian posts esp when you have exuberance on a stock, right or wrong good to have some balance lol Snoopy and debate thanks KW. As for "Time to buy!" Yeah,right. :p
Snoopy has written!

And as per usual with his unique logic which defies explanation!

Time to buy!

Based upon his logic, no one will ever invest in any growth stock!

Snoopy would have been saying 3 years ago (when DIL was trading at 50 cents) that it is equivalent to lending DIL $250,000 forever to get $250,000 in ten million years etc etc etc.

Unadulterated rubbish which insults a 6 year old!

[winner69]

Stock has been hammered down to $5.10 level to get the crossing done.

Worryingly, it looks close to Sodi's shareholding level?

Be a bugger if it was Sodi

Even it was Sodi we must remember at people sell for many reasons ...like divorce settlements, buying new mansion or whatever. Prob nothing sinister

Only smallish volumes today besides that big sale so no need to panic.

[blakecb]

Be a bugger if it was Sodi

Even it was Sodi we must remember at people sell for many reasons ...like divorce settlements, buying new mansion or whatever. Prob nothing sinister

Only smallish volumes today besides that big sale so no need to panic.

If it was Sodi it would look pretty sinister...selling down after 40% has been wiped off the company's value and before any clarity on the 'issues' has been offered. And certainly the market wouldn't like it one bit. There is no better definition of 'smart money' than that.

I hope people have finally been convinced not to buy until the issues have been cleared up and confidence in the company is restored. You may miss bottom but it's a much safer investment strategy.

I found a couple of Phaedrus' old charts:
http://i602.photobucket.com/albums/tt102/PhaedrusPB/TUA22907fa.gif

http://i602.photobucket.com/albums/tt102/PhaedrusPB/SCT15.gif

[Theracay]

Be a bugger if it was Sodi

Even it was Sodi we must remember at people sell for many reasons ...like divorce settlements, buying new mansion or whatever. Prob nothing sinister

Only smallish volumes today besides that big sale so no need to panic.

True. It was probably someone freeing up capital to buy a house and porsche from Palmerston North.

[MAC]

Wouldn’t it be fascinating to sit in DIL’s boardroom listening to DIL management explaining concisely to Deloitte management that every additional day they take shed’s another 3% in share price and knocks another $13M of capital off the company’s value.

Hope they have Deloitte suitably motivated to work right through the weekend.

There must be some undisclosed reason why Deloitte are not capable of estimating a completion date so as to allow DIL to at least, if nothing else, advise their shareholders as to when we should expect a restatement announcement.

It would seem to me that even the provision of a completion target alone would probably calm the market, possibly even bottom the SP.

[winner69]

the question is, who is doing the selling? long term holders exiting for profits? short sellers who bought early on and are now making more on the way down? the volume was quite low until 5pm as well.

at this level the stock is hitting negative territory for the year now. so, is the stock worth less now than it was in january? I think we all now the answer to that...

With the market up 10% plus DIL not the best stock on the market this year is it?

Your last point - yes the stock is worth less than it was in Jan .....maybe in Jan it was a realistic price ...in between times just hype and excitement and exuberance which DIL not delivered on ...evidenced by cash flows declining over march and June quarters

[Balance]

I find it invaluable, contrarian posts esp when you have exuberance on a stock, right or wrong good to have some balance lol Snoopy and debate thanks KW. As for "Time to buy!" Yeah,right. :p

If you follow Snoopy on Heartland as some of us do, it has been fantastic buying whenever Snoopy goes all negative.

Bought today.

:D :D :D

[Corporate]

Wouldn’t it be fascinating to sit in DIL’s boardroom listening to DIL management explaining concisely to Deloitte management that every additional day they take shed’s another 3% in share price and knocks another $13M of capital off the company’s value.

Hope they have Deloitte suitably motivated to work right through the weekend.

There must be some undisclosed reason why Deloitte are not capable of estimating a completion date so as to allow DIL to at least, if nothing else, advise their shareholders as to when we should expect a restatement announcement.

It would seem to me that even the provision of a completion target alone would probably calm the market, possibly even bottom the SP.

You know they have to re-audit (after management have prepared) 3 years of financial statements right? That doesn't happen over night especially when Deloitte were not the original auditors. Then once management has prepared, the audit has been completed, the board and audit committee would review and approve the restated financial statements. I don't think they will be rushing this - imagine if they stuffed it up again!!

[Sideshow Bob]

i think the stock was worth much less on an FA basis in january and that price was "realistic" because of hype and excitement too. so why should it be worth the same now when we have much more cash and revenue with a bit slower growth? there are still new products in the offing as well. is it just the fundamentals catching up with the stock price? apparently, as deutsche bank and craigs are calling fair value around $5.50, but that doesn't include potential products. as the market should aways be forward looking, why is it the stock is being hammered by historical issues that have no bearing on the final balance sheet? good questions to ask ones self at this point in time.

Craigs '12 month target' is $7.20

[CJ]

Be a bugger if it was Sodi.it won't be Sodi as it will be a lock up period. He knows info that hasn't been disclosed to the market.

He would only be able to sell during set windows after financial results are announced.

[well it they had any corporate governance, this old be true]

[MAC]

Please don't misunderstand, no one is suggesting Deloitte rush their work, we all agree that would not be desirable. A company like Delloite, when suitably motivated, are fully capable of professionally scoping their work, resourcing appropriately and providing an expected estimate of completion with adequate contingency. One would like to imagine they presently have multiple teams efficiently working within some sort of roster.

Deloitte may well have provided a schedule to DIL, the fact that DIL have not provided a schedule expectation to the market does seem quite peculiar given the circumstance.

DIL management must surely be aware that not providing a completion expectation contributes to the present volatility.

[Roadrunner]

True. It was probably someone freeing up capital to buy a house and porsche from Palmerston North.

Haha!Fantastic news!I will take down my FOR SALE sign and cancel Sunday's open home ;)

[psychic]

Hello all. Long term lurker, first time poster and first time trader today. (oops - yesterday its 1am already?))
A very unsatisfactory experience obviously and possibly great entertainment for the more experienced here.
Having cunningly picked the bottom of the market, ordered 9000 DIL@ $5.34 max this morning pre-open, Sp then tanks and by mid afternoon $5.10 odd and my loss about $2k so far. Not quite as psychic had foreseen. Didn't anticipate the earthquake either and panicked decision to get the hell off this ride and leave investing in shares to you guys thwarted by the temp closure of NZX. Am over the shock and distress for now, have admitted possible error to the wife (Dear Lord, at what cost?) reviewed reasons for buying, and am now positively excited and upbeat about reversal of fortunes come Monday morning.... Go DIL. please.

But aside from this, I am a bit puzzled about how the buy thing works. I thought my order would be at best price. It was confirmed at $5.34 10:16 yet the NZX timeline shows 9000 going through at $5.28 at 10:55. Sod all difference when compared to fall in sp today,but do the brokers take a punt as well on trades? Also, you seem to have info on what parcels are for sale and at what price etc - where do I access this live data please. Don't see it on NZX. Apologies for ignorance.
Enjoy the thread, some characters here. Cheers

[modandm]

Hello all. Long term lurker, first time poster and first time trader today. (oops - yesterday its 1am already?))
A very unsatisfactory experience obviously and possibly great entertainment for the more experienced here.
Having cunningly picked the bottom of the market, ordered 9000 DIL@ $5.34 max this morning pre-open, Sp then tanks and by mid afternoon $5.10 odd and my loss about $2k so far. Not quite as psychic had foreseen. Didn't anticipate the earthquake either and panicked decision to get the hell off this ride and leave investing in shares to you guys thwarted by the temp closure of NZX. Am over the shock and distress for now, have admitted possible error to the wife (Dear Lord, at what cost?) reviewed reasons for buying, and am now positively excited and upbeat about reversal of fortunes come Monday morning.... Go DIL. please.

But aside from this, I am a bit puzzled about how the buy thing works. I thought my order would be at best price. It was confirmed at $5.34 10:16 yet the NZX timeline shows 9000 going through at $5.28 at 10:55. Sod all difference when compared to fall in sp today,but do the brokers take a punt as well on trades? Also, you seem to have info on what parcels are for sale and at what price etc - where do I access this live data please. Don't see it on NZX. Apologies for ignorance.
Enjoy the thread, some characters here. Cheers

You need an online trading account to see market depth (buy and sell orders).

With the clear lack of knowledge/experience you demonstrate I'm not sure direct investing on your part is a good idea... good luck to you anyway

[noodles]

Hello all. Long term lurker, first time poster and first time trader today. (oops - yesterday its 1am already?))
A very unsatisfactory experience obviously and possibly great entertainment for the more experienced here.
Having cunningly picked the bottom of the market, ordered 9000 DIL@ $5.34 max this morning pre-open, Sp then tanks and by mid afternoon $5.10 odd and my loss about $2k so far. Not quite as psychic had foreseen. Didn't anticipate the earthquake either and panicked decision to get the hell off this ride and leave investing in shares to you guys thwarted by the temp closure of NZX. Am over the shock and distress for now, have admitted possible error to the wife (Dear Lord, at what cost?) reviewed reasons for buying, and am now positively excited and upbeat about reversal of fortunes come Monday morning.... Go DIL. please.

But aside from this, I am a bit puzzled about how the buy thing works. I thought my order would be at best price. It was confirmed at $5.34 10:16 yet the NZX timeline shows 9000 going through at $5.28 at 10:55. Sod all difference when compared to fall in sp today,but do the brokers take a punt as well on trades? Also, you seem to have info on what parcels are for sale and at what price etc - where do I access this live data please. Don't see it on NZX. Apologies for ignorance.
Enjoy the thread, some characters here. Cheers

Over $45000 for your first trade!!! I would dial that back so you don't have to explain to your wife.

There are generally 2 types of individuals that play the sharemarket.

1. Investors who look at fundamentals of the company
2. Traders who look at price action. Given you entry was based on price action, you appear to fall into this category.

Traders would not touch this stock ATM. It is a falling knife and you just caught it. I would read some books to discover terms like "support" and "resistence". DIL just broke through support. This is considered very bearish.

Good Luck

[kizame]

Hi Psychic, long time lurker; so that would indicate that you have done your research and thought it was a good time to buy. It was most probably an uncomfortable experience because how often do you spend $45,000 and not drive away in something :D there is more discomfort to come as nothing is a certainty (volatile period in DIL).

I post mainly on PEB forum and keep saying do your research, ignore the chartists, know why you bought, keep up the research and react to your decisions not the markets. The share market transfers wealth from the impatient to the patient. But do be prepared to react when necessary and on real news not forum posts. And did I say do your research? Get to know the company, that is where you will get confidence in your investment and won’t end up following the chicken littles or nay sayers. Keep your wife involved and discuss and show her your discoveries, but remember women are more conservative investors than men usually. Have fun and good luck.

Oh by the way, sorry but it may not be Monday morning for any reversal of fortunes, but I hope it is for your sake.

Disc do not hold DIL

All good advice Except the bit about ignore the chartist.

I think investing or trading,the first place to go would be to look at a chart of the stock to see where the stock is heading,i.e up down or sideways, Then your analysis based on the fundermentals,and future prospects,then your decision based on all these aspects.
But of course this is not a debate about the virtues of fundys or techys,it is about a healthy balance.

[kizame]

And... Looking at the chart action of DIL, would you go there right now?

[winner69]

Been a tough last 10 weeks for DIL with almost 40% wiped off the value of the company. I suffered as well by not being disciplined enough to sell when the ATR said so and then waiting a bit more. Did eventually sell and locked in multi year profits but should have been heaps more.

so 10 weeks of the shareprice falling .... only 2 weeks have been positive and that was only a few cents to get excited about. Been a couple of lowish volumes weeks but overall volume has been pretty average.

Does 10 weeks of downtrend represent panic .... wouldn't think so. Panic only lasts a short time.

Obviously in the eyes of the market DIL is not seen in the same light as it was. Is the market stupid ... generally not but who knows.

A guy called Templeton who supposedly was a guru said "To buy when others are despondently selling and sell when others are greedily buying requires the greatest fortitude and pays the greatest reward.". Some have shown both despondency but most on this thread have shown the greatest fortitude. Good on them because according to Templeton they should get the greatest reward. But Keynes said "The market can stay irrational longer than you can stay solvent." - remember this

Templeton also said "Bull markets are born in pessimism, grow on skepticism, mature on optimism, and die of euphoria.". Maybe DIL has had its bull run. I didn't mention the word euphoria on this thread the other day, somebody else did.

Will things get better next week. Who knows but one would have to say that momentum is with the sellers at the moment .... maybe like me the profit takes who have held for a long time and cash up and move on to something more exciting

Maybe Hoop can do one of his famous OBV charts and tell us what it is saying ... please Hoop
Chart is weekly changes in share price since peaking

[Whipmoney]

Secondly, the SSH notice clearly states that there are two stakes - one is the broking house, so JP Morgan doesnt own the shares, it holds them on behalf of its clients who placed the orders. So again, nothing to do with JPM making any decision as to the worthiness of DIL as an investment, they are merely acting on orders.

Lastly, the second JPM stake is JPM trading in a proprietary capacity. However, you have no idea what type of holding that is. They may have bought long or they may have borrowed shares to cover short sales they have placed. All types of interests in shares, including shorts, must be disclosed. In other words, what you are thinking is a good indicator could be the opposite - JPM clients are short selling DIL, and JPM is covering those trades (as they legally have to do since naked short sales are illegal)

That by its very definition means that JPM is long..

[winner69]

Hoop - when bollies start to widen is that good or bad?

[Balance]

Hello all. Long term lurker, first time poster and first time trader today. (oops - yesterday its 1am already?))
A very unsatisfactory experience obviously and possibly great entertainment for the more experienced here.
Having cunningly picked the bottom of the market, ordered 9000 DIL@ $5.34 max this morning pre-open, Sp then tanks and by mid afternoon $5.10 odd and my loss about $2k so far. Not quite as psychic had foreseen. Didn't anticipate the earthquake either and panicked decision to get the hell off this ride and leave investing in shares to you guys thwarted by the temp closure of NZX. Am over the shock and distress for now, have admitted possible error to the wife (Dear Lord, at what cost?) reviewed reasons for buying, and am now positively excited and upbeat about reversal of fortunes come Monday morning.... Go DIL. please.

But aside from this, I am a bit puzzled about how the buy thing works. I thought my order would be at best price. It was confirmed at $5.34 10:16 yet the NZX timeline shows 9000 going through at $5.28 at 10:55. Sod all difference when compared to fall in sp today,but do the brokers take a punt as well on trades? Also, you seem to have info on what parcels are for sale and at what price etc - where do I access this live data please. Don't see it on NZX. Apologies for ignorance.
Enjoy the thread, some characters here. Cheers

You have got in at a good price, Psychic.

That was a big selldown on Friday - $11.6m of stock, akin to any big selldown where it has to be done at a discount.

[Xerof]

It just means higher volatility W69

bollies are basically 2 SD of recent price action, in simple terms

they also 'rewrite' themselves as each new day is added to data, so are a guide at best

a good trade is to buy (or sell) when price is well outside the BB's, then close out at midpoint. (Reversion to mean)

[AndyLP]

All good advice Except the bit about ignore the chartist.

I think investing or trading,the first place to go would be to look at a chart of the stock to see where the stock is heading,i.e up down or sideways, Then your analysis based on the fundermentals,and future prospects,then your decision based on all these aspects.
But of course this is not a debate about the virtues of fundys or techys,it is about a healthy balance.

I see a lot of people here mention this strategy.
If it was that successful though, why haven't I read about it in the classic works of investment. Graham, Buffett and Lynch all seem to preach the exact opposite. Don't try to time the market. Graham makes the observation that the more complex the systems used to predict the market, the less likely they are to be accurate. The closest we should get to timing the market is buying on weakness.

I think a lot of people are lured into trading, especially young men with new careers and disposable income, because of its seductive image thanks to films such as Wall Street. Being in this bracket myself, I found reading about the relatively unexciting world of long term investment quite sobering. For me, and this might be a bit unpopular, but trading stocks on a daily basis is no better than spending your cash making alterations on an imported Japanese car. (Mentioned earlier) They're both probably based on image.

After browsing this forum a year or so it seems quite evident that those here who purely buy to hold for say 5 years or more - and would be presumably happy if the stock market shut down for this time - seem to be far more self assured than those who use chart indicators to buy and sell.

My advice (though I'm no guru, I think 3k posts qualifies you?) to new investors is to read the classic investment books first, and then decide if you want to involve charts at any level in your investment philosophy.

Disc. Hold RYM and PEB, looking hard at DIL

[stoploss]

Hello all. Long term lurker, first time poster and first time trader today. (oops - yesterday its 1am already?))
A very unsatisfactory experience obviously and possibly great entertainment for the more experienced here.
Having cunningly picked the bottom of the market, ordered 9000 DIL@ $5.34 max this morning pre-open, Sp then tanks and by mid afternoon $5.10 odd and my loss about $2k so far. Not quite as psychic had foreseen. Didn't anticipate the earthquake either and panicked decision to get the hell off this ride and leave investing in shares to you guys thwarted by the temp closure of NZX. Am over the shock and distress for now, have admitted possible error to the wife (Dear Lord, at what cost?) reviewed reasons for buying, and am now positively excited and upbeat about reversal of fortunes come Monday morning.... Go DIL. please.


But aside from this, I am a bit puzzled about how the buy thing works. I thought my order would be at best price. It was confirmed at $5.34 10:16 yet the NZX timeline shows 9000 going through at $5.28 at 10:55. Sod all difference when compared to fall in sp today,but do the brokers take a punt as well on trades? Also, you seem to have info on what parcels are for sale and at what price etc - where do I access this live data please. Don't see it on NZX. Apologies for ignorance.
Enjoy the thread, some characters here. Cheers

Hi, welcome psychic.To answer a couple of your questions.Most people with an active interest watch the share price movement, trades , volumes etc on a trading platform. -ANZ have one, ASB as well, Direct broking ( owned by ANZ ) .The matching price was 5.34 so your order would have been in the market and dealt at the open.It would just be a coincidence 9000 going through later at a higher price.
Another thing you must consider when investing are your loss parameters etc, it is slightly alarming that this investment could be causing distress to your wife. ( most would say only invest what you are prepared to lose.) Another strategy could be if you had 50 K to invest and you like something maybe invest 20 or 30 % at the current price. If it confirms your view by rising in price start buying more. On the other side if it goes down (either stop out)or if you are still really keen you can average in ( catch a falling knife ) Buffet says if it gets cheaper I like it more....( you need big nuts and pockets for this style ) The other side to this would be someone like Soros, if it went down he would think he got it wrong and cut the position immediately... So many different strategies out there, best to get as many books as you can on investing.Different things work for different people and personalities.Just some very general advice here- Good luck out there.
S/L

[Vaygor1]

ACC increases their stake ... probably a good sign ... but they get it wrong on occasions too.

Boy do they what..... look at their buy/sell of ALF.

[Balance]

ACC increases their stake ... probably a good sign ... but they get it wrong on occasions too.

You mean for the 2m shares done of Friday?

[Snoopy]

Damn! You should have told ACC, who just bought 285,000 shares for $5.62 each! You could have saved them a lot of money if you had told them this earlier! DAMNIT!!!


ACC do not have 90% of their net wealth invested in Diligent as some here are advocating. Because Diligent are a top 50 company, I would guess that ACC are almost obliged to have some of their money in there, lest they get 'left behind' by the market, something that would reflect poorly on the portfolio manager.

SNOOPY

[winner69]

It just means higher volatility W69

bollies are basically 2 SD of recent price action, in simple terms

they also 'rewrite' themselves as each new day is added to data, so are a guide at best

a good trade is to buy (or sell) when price is well outside the BB's, then close out at midpoint. (Reversion to mean)

So if the close on friday of 512 (or was it 515) is below the bottom bollinger band of 523 then a good trade beckons?

And then close out at the midpoint whatever that maybe in the future ...about current 200ma of 297

This strategy worked last 2 times price went below bollies .....in a few days as well ......even whil DIL remained in a down trend

Methinks the price could will be 6 bucks next weeks

[winner69]

ACC do not have 90% of their net wealth invested in Diligent as some here are advocating. Because Diligent are a top 50 company, I would guess that ACC are almost obliged to have some of their money in there, lest they get 'left behind' by the market, something that would reflect poorly on the portfolio manager.

SNOOPY

Last sept ACC report said they has 2.1 billion invested in nz equities so now probably a bit more

Market cap of nzx is 75 billion .... ACC have nearly 3% of the nz market

Bet you they have something in every share, or almost everything.

And not particularly overweight in many. Returns not much more than their index

http://www.acc.co.nz/PRD_EXT_CSMP/groups/external_communications/documents/reference_tools/prd_ctrb110931.pdf


Always couldn't understand why punters thinking ACC buying is a good sign ..just moving money around and punting with the hoards of ash they have ...keeping themselves busy and the broking community rich

[Snoopy]

Based upon his logic, no one will ever invest in any growth stock!

Snoopy would have been saying 3 years ago (when DIL was trading at 50 cents) that it is equivalent to lending DIL $250,000 forever to get $250,000 in ten million years etc etc etc.


Based on your comment Balance, you could say that it doesn't matter what price you pay for a growth stock as long as it is growing. My comment was based on the growth at a reasonable price philosophy. What I am saying is that once the PE goes over 40, and share starts to look expensive.

High PE ratios can be justified while a company is in its start up phase. But if you take this quote from the April 13th press release.

"Diligent now services 276 Fortune 1000 companies and 15.2% of NYSE listed companies, of which 47 were added in the first quarter 2013. In addition, we serve 34% of the FTSE 100 Index (UK) and 35% of the ASX 20 Index (Australia)"

Now lets look at Fortune 500 companies as an example. Grow at 50% and 414 Fortune 500 companies will be on the customer list in FY2014. Grow at 50% again then 621 companies are on the Diligent list in FY2015. I am not saying this won't happen. I am saying that this is already priced into the Diligent share price as a fait accompli. So to justify a DIL share price higher than today's price, you are asking for that 50% growth rate to be extended again. Up to 931 in FY2016, which is pretty close to market saturation. At this point the PE ratio will have come back to earth to maybe between 15 and 20.

So in round figures factor in three years of 50% growth and divide the current PE ratio by 3, and you get an estimate of where the share price is likely to stick:

(1.5x1.5x1.5)/3= 1.125.

So based on a share price of $5.50, you will end up at about $6.20. And that is assuming everything in the business plan goes to perfection. Personally I can get a return like that for much less risk, so I wouldn't be interested in investing in DIL at current market prices.

Of course this doesn't factor in new product releases, which some here assume will be marketed to the existing customer base (denied in a 15th March press release), or an adaptation of their existing product to other users. That sounds more likely although it is unlikely that margins will be retained by going down that path. Generally new products are a cash drain to start with, which is quite contrary to the consensus here that any new product is an instant home run.

DIL is a great company. But it is likely to be a very mediocre investment at current market prices. That is why I am waiting for the share price to start with a 2 before I dive in.

SNOOPY

[winner69]

Snoopy quoted DIL as saying they service "35% of the ASX 20 Index (Australia)"

That's 7 companies ...good solid share


I wonder what their share of the asx200 is? Obviously less than that oerwise would have used itthat as a reference eh.

But then I don't get i ....they only want the boys using it.

And over 900 of the fortune 1000 companies seems a bit outrageous.

Wonder if growth proponents really understand the maths of compounding numbers.

Al I know is that free cash flow has shown NO griwth over the last year .....isn't cash what counts

[winner69]

DIL's share price start with a 2? what exactly are you smoking snoopy? I know there are different investing techniques and all, but sometimes it requires a bit of tweaking in dealing with other kinds companies (eg PGW is no DIL!) although I hate most brokers/instos, I think their $6.60 and $7.20 calls are much closer to the mark than your $2.

or, did you mean you will invest when the sp hits $20 and all this is much behind us all, and the company is even more rock solid than it already is? (and its all probably waaaay too late!)

I think I hear HNZ calling your name again, it says you can still invest with her and that all is forgiven, just give her your money ;)

Moosie ....not everybody thinks like you.

Percy wasn't saying DIL was ove priced or anything ....all he was saying that if he wanted to make a decent return that he expects ....into the future .....he could only pay 2 something to achieve that aim. Anything higher wouldn't achieve that ....go looking for something else he will.

[iceman]

Moosie ....not everybody thinks like you.

Percy wasn't saying DIL was ove priced or anything ....all he was saying that if he wanted to make a decent return that he expects ....into the future .....he could only pay 2 something to achieve that aim. Anything higher wouldn't achieve that ....go looking for something else he will.

W69, not sure what punishment you will or should receive, but confusing Percy for Snoopy would have seen you severely reprimanded on the HNZ thread. Due to the large volume of posts on this thread, hopefully Percy will miss your serious and defamatory mistake :t_up:

[percy]

W69, not sure what punishment you will or should receive, but confusing Percy for Snoopy would have seen you severely reprimanded on the HNZ thread. Due to the large volume of posts on this thread, hopefully Percy will miss your serious and defamatory mistake :t_up:

Looks as though Winner69 has another 200 native trees to plant.!! lol.
ps.I do not usually follow this thread.However I always try to read Iceman's posts,so picked the defamatory mistake.I would have easily forgiven Winner69 and blamed it on the cider he has been drinking to get over the earthquakes.But mistaking me for Snoopy !!!!!!

[Balance]

Diligent at $2 something? Maybe if their banking license doesn't come through.

Low blow, STC.

But I like it!

:D

[winner69]

Bugger .....so Percy isn't Snoopy's alter ego as I always thought

Suppose it was too much one person to be a homeworkist as well as a balancesheetists

So if Snoopy and Percy are actually two different persona my sincere apologies to both

[percy]

Bugger .....so Percy isn't Snoopy's alter ego as I always thought

Suppose it was too much one person to be a homeworkist as well as a balancesheetists

So if Snoopy and Percy are actually two different persona my sincere apologies to both

With a reply like that how can I not forgive you??!! lol.

[winner69]

Mate told me MOA got a bit more to fall yet .... just to catch up to the decline in DIL

[psychic]

Just a note to thank you guys for your response and comments to my earlier post. Appreciate you taking the time to write and for all the good advice. Sorry if I came across all "woe is me". I was really just having a dig at my poor timing. Happy to have a piece of DIL, know there is likely more volatility ahead. Cheers

[Balance]

Just a note to thank you guys for your response and comments to my earlier post. Appreciate you taking the time to write and for all the good advice. Sorry if I came across all "woe is me". I was really just having a dig at my poor timing. Happy to have a piece of DIL, know there is likely more volatility ahead. Cheers

You will go far, Psychic - stay hungry, stay curious and keep learning.

As i wrote, I think you got in at a good price.

[PlatnuM195]

So that means the change in perception in DIL's growth story is even worse than the MOA story?

[Lorne Ranger]

I think there will be a lot of people who have bought DIL over the last three years who will be thinking " I really have no idea what is going to happen with this stock anymore, I might as well get out now, realise the profits on offer, and start again". I am honestly surprised so many are getting out given the pending reports and (I believe) reassurances, but I can understand it too; DIL has been a great stock for many people in recent years, and still is for them. But at these prices I also believe it will be good again to a new group of investors. I think the huge gains we saw in a couple of hours of early trading the other week, (later lost in subsequent days), demonstrates that many people do perceive this stock as dramatically undervalued, and I think we will see a similar reaction once the reports come out and, assuming things are back on track, a more stable behaviour. But no doubt the last month, warranted or not, would have hurt perceptions of the stock and to many it will appear too unstable even when everything on paper says its a good company. It will need a solid period of nothing but positive news to regain some of that trust, which after all is so much more important in a Tech based growth stock than any other. Those are the risks as I see them, so while I'm holding, I am not oblivious to the potential for more volatility. We may not have seen the last of this behaviour, but once the historical profit takers are shaken out and replaced with investors with a longer view, and reassurances are given by way of reporting as expected, I think it will start again to solidify and show more returns.

In the meantime, like many others, I'm sitting back, waiting to see how low it goes before opting to top up. It has shown the elastic band can fling it 12% in 2 hours so I might miss out, but I shouldn't worry, what I have now should be enough, and there's always PEB that could do with a top-up.

An exercise in patience and not panic indeed.

[zigzag]

In Australia shorting does seem to be quite a common practice, not so much in NZ. I am not really up to speed on this. I do believe JPMorgan were short selling Bathhurst, and we can all se what happened there. Dil could also be a candidate for short selling. I am sure that across the ditch, there is a lot more disclosure around this practice. A bit more clarity around this practice is needed. Does anybody know what sort of regulations and disclosure requirements NZX has concerning this activity?

[psychic]

Thanks for the further encouragement Balance. :) appreciated.
Hey, this is probably not of interest to you guys, in fact I hear the sniggering now.. But i see two reuters analysts have upgraded from hold a month ago to outperform and buy... Growth 39 percent 2014 if i recall correctly.... Cheers

[Vaygor1]

In Australia shorting does seem to be quite a common practice, not so much in NZ. I am not really up to speed on this. I do believe JPMorgan were short selling Bathhurst, and we can all se what happened there. Dil could also be a candidate for short selling. I am sure that across the ditch, there is a lot more disclosure around this practice. A bit more clarity around this practice is needed. Does anybody know what sort of regulations and disclosure requirements NZX has concerning this activity?

I am not a customer of Forsyth Barr nor am I into shorting, however the following link is the one I have found in NZ that is the most informative regarding this type of trading. https://www.forsythbarr.co.nz/investing-with-us/le-short-selling/

There are hyperlinks within this page and a pdf you can download.

[JohnnyTheHorse]

Interesting thoughts being thrown around. I did find it very strange that Milford sold all in what seemed like a panic, maybe they were aware of this possible shorting? Maybe someone's pushing it down to launch a takeover at a cheap price?

Ah, so much speculation. Good thing none of this effects the company and its stellar growth eh?

[zigzag]

Shouldn't retail investors be more in the loop if this practice is occurring. Both sides of a trade need to be playing on a level field - i.e. - if one side knows they are deliberately short selling, then they are in possession of information that gives them an unfair advantage. I'm confused. Are you?

[blackcap]

Shouldn't retail investors be more in the loop if this practice is occurring. Both sides of a trade need to be playing on a level field - i.e. - if one side knows they are deliberately short selling, then they are in possession of information that gives them an unfair advantage. I'm confused. Are you?

Im confused as to what you mean with your post. Are you saying that if you are buying shares and there is a short seller selling to you that you want the market to have to inform you of this? That would be nigh on impossible unless a broker had to mark a parcel of shares as "a short sale parcel".

Add to that I think this would be a ridiculous requirement. I cannot see why this would be required at all. Short selling adds to liquidity and efficiencies of markets. Also if a stock is sold short but fundamentally it should not have, this generally provides a rocket under the share price when they have to cover their shorts. That said I may have misread your post.

[blakecb]

I definitely think major fund managers manipulate the stock market. It is possible a big player has pushed the stock all the way down and then purchased low with the intention of pushing it back up to a point where they then sell it and take their profits. That is the way the American players work - I've read a book on the share market in which the basic premise assumes such behaviour is the norm. We are just not as used to it as they are in America - but American firms bring American problems. Sell like anything if JP gets out though, fundamentals or not! Those companies only sell for one reason.

Anyone who has played around with forex (as I have been recently) will tell you how easy it is to short a stock. On the forex you just press 'sell' (obviously regardless of whether or not you own the stock) and there you go - you've sold a currency/commodity/index that you don't own. When you close out your position it buys the stock at the price at which your position is closed and you gain or lose the difference between the two. So could the SSH relate to a purchase of securities that JP has already sold short? I don't know much about how it works in NZ so I'm sorry if that is a stupid question.

I will be watching the stock very closely this week.

[zigzag]

I am not a customer of Forsyth Barr nor am I into shorting, however the following link is the one I have found in NZ that is the most informative regarding this type of trading. https://www.forsythbarr.co.nz/investing-with-us/le-short-selling/

There are hyperlinks within this page and a pdf you can download.

Thanks for the link Vaygor1. That does help to explain the process. But am still worried about the level of disclosure. Reading the SSH notice to the NZX from JPMorgan doesn't add to my understanding, just adds to my confusion.

[zigzag]

Im confused as to what you mean with your post. Are you saying that if you are buying shares and there is a short seller selling to you that you want the market to have to inform you of this? That would be nigh on impossible unless a broker had to mark a parcel of shares as "a short sale parcel".

I have noticed that in Australia this information does get published. If you read the H/C site, then posters know which stocks are being shorted, and how many shares are being held specifically for shorting.

[winner69]

The nzx used to have a short selling report .....but I think you need to be one of the special few to get it

[zigzag]

The nzx used to have a short selling report .....but I think you need to be one of the special few to get it

That's exactly what I am starting to think. NZX policy "requires that all orders or trades that are short sales or trades be flagged as such" So where are the flags, or are they only available to the chosen ones.

[blakecb]

This shows how easy it is to short and how little money you actually need to do it due to leveraging. I know this is currency, but you can do it for the AUS & US share market along with indexes and commodities. I could execute this sale even though I haven't actually purchased the currency in the first place. I can't find anyone that let's you do this with NZ stock in the same way; Forsyth Barr's version is a bit different in type (ie not a contract for difference but rather you 'borrow' already owned stock from it). I'm sure JP Morgan would have their own version of this. But it makes you realise why the world gets itself into a jam:
4727

[zigzag]

I guess that JPMorgan kind of borrow the shares, and use them to manipulate the market to their advantage, then eventually close out their position, return the shares and pocket their booty. I am still feeling like there is a big gap in my knowledge, and feel uneasy about it. I do like to understand what is happening.

[blakecb]

I guess that JPMorgan kind of borrow the shares, and use them to manipulate the market to their advantage, then eventually close out their position, return the shares and pocket their booty.

EDIT:
I don't think JP Morgan would necessarily have to do it like that - couldn't they simply use the 'naked short selling' approach?

Removed CFD info.

[percy]

I guess that JPMorgan kind of borrow the shares, and use them to manipulate the market to their advantage, then eventually close out their position, return the shares and pocket their booty.

Or conversely close out their position,return the shares, and take their loss should the shareprice have gone up.!!

[zigzag]

Im confused as to what you mean with your post. Are you saying that if you are buying shares and there is a short seller selling to you that you want the market to have to inform you of this? That would be nigh on impossible unless a broker had to mark a parcel of shares as "a short sale parcel".

Add to that I think this would be a ridiculous requirement. I cannot see why this would be required at all. Short selling adds to liquidity and efficiencies of markets. Also if a stock is sold short but fundamentally it should not have, this generally provides a rocket under the share price when they have to cover their shorts. That said I may have misread your post.

Blackcap. I am not against shorting. It does add to liquidity and true price discovery. I would just like a bit more clarity around it.

[CJ]

Not completely following this. jPMorgan has a long position of over 5% per the SSH notice.

Are they covering clients short positions? This shouldn't effect the market as JPMORGAN long position would offset their clients short positions.

Or are you saying they have sold more than their 5% to be in a net short position.

[blackcap]

I guess that JPMorgan kind of borrow the shares, and use them to manipulate the market to their advantage, then eventually close out their position, return the shares and pocket their booty. I am still feeling like there is a big gap in my knowledge, and feel uneasy about it. I do like to understand what is happening.

Also if you borrow shares off someone and sell them the question is "are you short selling? A case could be argued for both sides. Its not a naked short and you have delivered scrip so it is not a short. However on the other side you have sold something that is not yours. Many ways to view it. But really does it matter if investors are selling short or not. Its a market with buyers and sellers, demand and supply. If instos are trying to manipulate the market and you know better... take advantage of it and play their manipulations off against them. If someone is short selling and beating a price down... be happy about it that you can pick up some stock cheaper.

[blakecb]

Not completely following this. jPMorgan has a long position of over 5% per the SSH notice.

Are they covering clients short positions? This shouldn't effect the market as JPMORGAN long position would offset their clients short positions.

Or are you saying they have sold more than their 5% to be in a net short position.

The way shorts seem to work is you sell first and buy later to cover the sell, so could the SSH notice relate to the 'buy later' aspect of a stock they have already sold? In other words, it would mean they now don't own any stock because the buy was covering their short....?

I really don't know how all this works on the NZX, so just asking questions... my apologies if they are foolish questions.

[winner69]

I don't think JP Morgan would do it like that - they would do the "contract for difference" type approach I imagine.

CMC Markets did originally let you do this on the NZ share market as well, but have since stopped.

Description from a CFD broker:
Trading CFDs gives you the freedom to trade companies, indices, currencies and commodities across Australian and international markets using a single trading account. They let you exchange the difference in the price of an underlying instrument (such as a share, index or commodity) between the time a trade is opened and the time it is closed.



CFDs - CMC is only a betting shop - the betfair of the stock markets.

With CMC you actually never buy/sell/own shares .... just gambling on prices

[zigzag]

Not completely following this. jPMorgan has a long position of over 5% per the SSH notice.

Are they covering clients short positions? This shouldn't effect the market as JPMORGAN long position would offset their clients short positions.

Or are you saying they have sold more than their 5% to be in a net short position.

Don't follow me. I'm lost. I thought JPM had borrowed the shares off their clients and they were using them to play the market. Your saying that it's the other way around. JPM are just facilitating the process and clipping the ticket, while their clients are the ones doing the trading.

[Whipmoney]

Think you need to do some research on what "covered short selling" is. "Covering" is not buying shares, its borrowing them. JPM is taking the shares that its clients have bought, and then using them to short sell the company in their own capacity or on behalf of other clients.

http://www.investopedia.com/ask/answers/05/lendersellshare.asp

Oh really... I think you need to read the content of your own link:

"In a short sale (http://www.investopedia.com/terms/s/shortsale.asp) transaction, shares are borrowed from the lender (JPM) by the short seller (JPM's client) and sold in the market. The lender (JPM) of these shares continues to maintain a long position (http://www.investopedia.com/terms/l/long.asp), hoping the shares will go up in value.

If the lender wants to sell the stock, the implications for the short seller will depend on where the shares were borrowed from - generally either from the brokerage firm's inventory or from the margin account (http://www.investopedia.com/terms/m/marginaccount.asp) of one of the firm's clients."

[blakecb]

From NBR 2008:
Short selling is when investors sell shares they don't own. In covered short selling, investors sell shares but have a contract with someone to borrow shares to cover the position.
In naked short selling, investors sell shares and have to buy them back within a settlement period of three days. Some shares have encountered waves of selling as investors try to push share prices down to get out of their short positions. This increases volatility in share prices.

[winner69]

Somebody explained the JPM notice the other day. Something like JPM declaring an interest in some shares and didn't say they bought any Have a look back or whoever it was might want to explain again

[Dej]

CFDs - CMC is only a betting shop - the betfair of the stock markets.

With CMC you actually never buy/sell/own shares .... just gambling on prices

Agreed, bet me to it.

[blakecb]

Agreed, bet me to it.

Yeah correct, apologies for using them as an example!! The forex broker I am using is in fact not a CFD but does allow naked short selling at leverage.

[Xerof]

Jesus, Moosie, you have made two 'safe assumptions' tonight, and got the folks awfully confused

perhaps you could provide facts to back up your assumptions?

I see it closed at or near its low for the day, week, and multi-month, so looks like its still in that downtrend

Milfords clients will be feeling very pleased with themselves

[Theracay]

How many people here have participated in short selling before?

[stoploss]

Before you consider short selling as an option , or lending your stock there were some valuable lessons learned here.

http://www.businessspectator.com.au/article/2013/2/22/financial-services/opes-prime-collapse-billion-dollar-bust

[zigzag]

Thanks KW. You've explained things really well. I would like the NZX to publish this information as you say they do in Australia. If we knew a stock was being shorted, then we could make more informed decisions. When the shorters know what is going on, and smaller investors don't, I think there is an unfair advantage. But we have to live in the world as it is, so I will bear all this in mind in the future, and exercise a lot more caution. Once again, thanks for taking the time to explain this.

[Dej]

99% of retail investors dont short sell. Probably because most of the retail brokerages dont offer it. However, if you have a sophisticated broking platform like Interactive Brokers, you can put your own shares up for loan, be paid interest on them if they are borrowed, and so earn a cash return while you hold your long position. Very common in the US as most companies dont pay dividends. Its also the reason why the super funds in Aus loan out their shares - easy return on assets. And with IB you can short sell anything with the click of a mouse so long as IB knows they have enough loaner shares to cover it (all automated, so not difficult).

Big trading banks know that retail investors are long only. So they exploit it. They see the mug punters buying (because they are the ones placing the orders for them) when the share price falls, because its "really cheap!" so they take those mug punters shares and short sell them, making the share price go down further, whereupon more mug punters buy in because now its "really really cheap!!!. The big traders continue selling the mug punters shares back to them all the while the price is falling falling falling, until the mug punters finally give up in despair and stop buying - at which point the traders step back in to buy back their short sold positions. This then pushes the price up, the mug punters quickly get excited again, and start buying all over again, which causes the big traders to resume their short selling and the whole cycle starts over.

This is WHY its not recommended that you buy into a confirmed downtrend. Dead cat bounces are usually just pauses as short sellers close out old positions. The down trend resumes until there is little room for the stock to fall further - this is usually when the stock will be considered truly cheap based on fundamentals (as determined by the experienced traders not the mug punters), and the traders will then switch from short selling to going long. Its this trend break that you want to ride - not the earlier ones.

When you understand HOW the game is played, you learn to follow the SMART MONEY and not get sucked into being the cattle fodder for it. Therein lies the value of TA - monitoring volume, momentum, and trends - so you can see what is a fake out and what is a break out.

The best investment advice I ever got (sorry, cant remember the name of the book that explained all of this) was "if you can't play the game, don't play". This means that unless you can join the short sellers and play with them, its better to not be involved with that share at all. So now I get out whenever a downtrend takes hold, and I stay out until its clear the short sellers have moved on.

Very very informative post for those who dont know what goes on with Shorting. *round of applause*

[Theracay]

Thanks KW.
And I suppose in the case of shares bought on margin, the share price would be further devastated as firms start issuing margin calls? :)

[percy]

KW,
Thank you for fully explaining short selling.Your posts have been clear and simple to understand.

[blackcap]

What I find interesting is that there are people "trading" in shares without knowing the rules of the market in which they are trading! Astonishing really.

For fundamental long term share investors these day to day price gyrations are un-important (in fact they can use them as a cheaper entry point) but I thought traders would know a little bit about the markets they are "playing" in.

KW does summarise short selling well although the practice is not very prevalent in NZ and I think (could be wrong) does not impact the market here as much as ppl may like to think.

[baller18]

Some keen interest today up to and including support at $5.20. Looks like we have our bounce today. Act accordingly!
Yup, I could have sold at $6.70, 6.50, 6, and accumulated more shares at 5.50, sold again at 5.50 and accumulated more and 5.30 and so on....
I am seriously contemplating this game with Dil atm... Just for the time being...

[JMKC]

Some keen interest today up to and including support at $5.20. Looks like we have our bounce today. Act accordingly!

Didn't you say last week that support was at $5.30?

[baller18]

Didn't you say last week that support was at $5.30?
Whatever moosie says, we are doing the opposite... lol..

[Balance]

You will go far, Psychic - stay hungry, stay curious and keep learning.

As i wrote, I think you got in at a good price.

Price should retrace higher now that big seller has been taken out.

Keep an eye on Snoopy's postings - they are the best contrarian postings you are ever going to get.

When he gets 'slit your wrist' negative, based upon some unfathomable logic, you take out your cheque book and buy.

[baller18]

Price should retrace higher now that big seller has been taken out.

Keep an eye on Snoopy's postings - they are the best contrarian postings you are ever going to get.

When he gets 'slit your wrist' negative, based upon some unfathomable logic, you take out your cheque book and buy.
How do you know or make out that the big seller has now left?

Cheers

[Balance]

How do you know or make out that the big seller has now left?

Cheers

The way the sp fell, and the big crossing that was done on Friday.

Think of it as like a placement - always has to be done at a discount but if locked away properly, sp will retrace back higher.

[Lorne Ranger]

Fake or Break? I'm close to giving up guessing.... Any TA readers out there with a view?

[Halebop]

I use both TA and FA. FA says it's reasonable value. Notwithstanding the rise this morning, TA says it's still making lower highs and lower lows. My instinct says the $5.25-$5.35 range is an important support/resistence point and I'd rather wait for confirmation than leap in at this price.

[chad321]

I'm sure many of you have seen these videos but thought I would post for those who have not and are interested.

http://www.youtube.com/watch?v=8MvA-gGev3g

Q & A session with Charlie Horrell about what board portals is. Looks to be 4 parts. Have just finished finished the 2nd part on security and found it interesting.

[blackcap]

As I stated yesterday with BRL, JP Morgan had BIG shorts on them:

However, one stock is clearly being picked on - coal miner Bathurst Resources.

Asic data shows a significant short position of 6.4 per cent on Bathurst and the number has been gaining steadily all month.
Bathurst optimistically raised about $75m in May last year as it pursued plans to develop coking coal resources near Greymouth, but its stock has been pummelled in recent months.
From $1.10 in March this year its shares are down to about 50 cents and could go lower.

IF that is true Moosie, then BRL are about to get a big rocket up their share price on any good news. THese short positions have to be purchased back at one stage or another. The danger with shorting a stock is that your potential liabillity is infinite whilst your potential gain is finite.

[Theracay]

IF that is true Moosie, then BRL are about to get a big rocket up their share price on any good news. THese short positions have to be purchased back at one stage or another. The danger with shorting a stock is that your potential liabillity is infinite whilst your potential gain is finite.

Unfortunately it remains at a dreadful price and fluctuates downwards on good news.
Lost hopes for any positive reaction from any news until they can finally throw out these f&b cases for good. *yawn*

[Xerof]

There has been a lot written, assumed, read as factual and misunderstood about short selling, who does it, can it be done, is it legal ad nauseum, on this thread.

I have posted an illustrative booklet put out by Leveraged Equities, part of Forbars, on a new thread under Investment Strategies, for anybody to have a read of and hopefully gain a better understanding of it

thanks to KW for his efforts on the topic as well.

disc: no,I don't work for or use them myself, and do not get a trailling commission for introducing anyone to it

[Xerof]

Indeed. I think most of the shorting has been done already though, and BRL will be a long way away from making huge SP gains as they are still a long way away from mining. On the other hand, if DIL is being shorted, they better do it all quick before the re-audit comes out and those forecasts are used as short-term sp posts!

I reckon its finished and squared up moosie. Balance alluded to it on Friday as well. Could be wrong on both counts.....

[chad321]

SSH - JPMorgan Chase & Co and its affiliates4:10pm, 19 Aug 2013 | SSHDisclosure of ceasing to have substantial holding
Section 25, Securities Markets Act 1988
To: New Zealand Stock Exchange
And: Diligent Board Member Services, Inc
Date this disclosure made: 19th Aug 2013
Date last disclosure made: 30th July 2013
Substantial security holder(s) giving disclosure
Name(s): JPMorgan Chase & Co. and its affiliates
Contact details: Lynette Swee, Telephone : 65 68821109, Email : asia.doi.team@jpmorgan.com
Date on which substantial security holder(s) ceased to have substantial holding: 16th Aug 2013
Summary for: : J.P. Morgan Clearing Corp;
For this disclosure,—
(a) total number held in class: 2,532,728
(b) total in class: 83,776,155
(c) total percentage held in class: 3.02%
For last disclosure,—
(a) total number held in class: : 4,235,861
(b) total in class: 83,776,155
(c) total percentage held in class: 5.06%
Details of transactions and events giving rise to relevant event
Details of the transactions or other events requiring disclosure under the instructions to this form: [See Appendix A].
Additional information
Nature of connection between substantial security holders: NA
Address(es) of substantial security holder(s): NA
Name of any other person believed to have given, or believed to be required to give, a disclosure under the Act in relation to the securities to which this disclosure relates: NA
Declaration
I, Kezia Wong, declare that, to the best of my knowledge and belief, the information contained in this disclosure is correct and that I am duly authorised to make this disclosure by all persons for whom it is made.

[winner69]

What's all mean chad...have you read the whole 21 pages

[chad321]

*Trying to learn*

Thought I would post it here since I had seen it so quick after it being released. I don't know what it means. I have a guess but am most likely wrong.

[Xerof]

At first glance, all seems straightforward, JPM Whitefriars, as Principal/proprietary owner, bought a parcel at ave $7.35, (declared in July ann), have now sold out at $5.10

[Xerof]

Lol, I didn't want to be the one to spell it out KW.

see my earlier post

[CJ]

OR they borrowed a parcel of shares sometime before 30 July (the SSH doesnt specify when they were purchased, it only stated a 4 month period), short sold them
Still confused. If they short sold them, why does the SSH say they were Long 5%. Wouldn't the short sale be a disposal?

[blackcap]

Leaving traders and speculators aside, could anyone please advise me how short sellers destroy wealth? They do not affect the underlying EPS of a business, the cash flows thereof and so I cannot see any rationale for this. If anything they temporarily depress the price of a share giving me the investor a cheaper entry point than I otherwise could have obtained.

[Xerof]

Yep, retail investors buying DIL must have been the laughing stock of the broker fraternity, who knew two funds were selling at the same time, according to a post on this thread a while ago. (Brokers really need to keep client activity confidential, don't you think?)

Perhaps Milfords' public comments on their sale was to upset the second sellers planned churn? I recall one contributor being very angry about it at the time, but I don't think it was taken to the FMA.....

btw, nice buying on Friday for anyone who declared a purchase....timed to the minute, well done

[blackcap]

I won't disagree its not a sensitive issue; the postings on this thread alone give testimony to that. But ethical? I'm still not convinced short selling is an evil. If people want to play that game caveat emptor. No one forces people to be in the market in the first place and when you buy a stock you (long term value investor) are buying a future series of cashflows of a share of a business. The price (capital) of that share is immaterial in the greater scheme of things.

[winner69]

Leaving traders and speculators aside, could anyone please advise me how short sellers destroy wealth? They do not affect the underlying EPS of a business, the cash flows thereof and so I cannot see any rationale for this. If anything they temporarily depress the price of a share giving me the investor a cheaper entry point than I otherwise could have obtained.

Good question

Just highlights why the world is in the state it is in today.

Question could easily have been what real economic benefit has all this carry on created .... NONE

Plenty of profit for some and making some wealthy but at the end of the day nothing physical has been made or real service provided.

Profits on the S&P500 might be showing healthy increases but strip out the financials and the real companies that actually make things or sell things it is not so bright

The longer the world carries on making money on 'paper transactions' and clipping the ticket on the way through the bigger the pain when the system collapses.

Whatever fun while it carries on but that does not make it right

[blackcap]

Good question

Just highlights why the world is in the state it is in today.

Question could easily have been what real economic benefit has all this carry on created .... NONE

Plenty of profit for some and making some wealthy but at the end of the day nothing physical has been made or real service provided.

Profits on the S&P500 might be showing healthy increases but strip out the financials and the real companies that actually make things or sell things it is not so bright

The longer the world carries on making money on 'paper transactions' and clipping the ticket on the way through the bigger the pain when the system collapses.

Whatever fun while it carries on but that does not make it right

I am not a trader (don't use short selling myself) but what you advocate would also apply to those buying long and selling at a profit for a paper transaction as you put it. But herein lies the value of the trader: They provide the liquidity required so that someone is comfortable making an investment in a stock in the first place. I would be loath to invest in a firm if there was no possible exit stratey. Love or loath them.. that is what traders do provide and as such the risk premium on your stock decreases and as such the value on your investment increases. Some illiquid good shares trade on PE's of 5-7. If there was more liquidity these same stocks may trade on much higher PE's.. just an anecdotal example.

[baller18]

Not too sure if I am correct, will need more knowledge from TA members.
Seems like a healthy uptrend could be on its way? Suggested by the possible volume...

[blackcap]

Not quite. Loan covenants are often tied to market cap and hence share price. So if a short seller forces a company to breach its loan covenants by driving its price down, which then causes the bank to call in the loans, and the company then goes bust because it cant get refinancing or is forced to raise equity massively diluting existing shareholders, then exactly how have long term value investors been served well by short sellers?

At what about takeovers? No fun being compulsory acquired out of your long term holding at a loss because someone took advantage of a temporarily low share price to make a takeover offer.

Indices are also market cap based - drops in share prices sees companies forced to exit an index, and then face even more selling as index funds liquidate holdings.


You forgot Warren Buffets two rules (1) Don't lose money (2) Dont forget Rule #1

I can see where you are coming from with the loan covenants example but I cannot for the life of me think where this has been the case in NZ because of short selling. It wouldnt happen to a strong well capitalised company.

With takeovers.. that just depends in which jurisdiction you are investing in. Each will be different.

Didn't realise Warren had these rules. But am about to purchase the Intelligent Investor as I have heard from a lot of circles it is "the book" to read on investing.

p.s as an aside it would be really interesting to see if short sellers actually make money and if there are any stats on this. The market as a rule goes up (the trend is up) so short selling is ultimately a negative sum game. You would have to be really good at timing the market to make any money off it.

[baller18]

you need to see rises in the RSI, stochaistic and a huge rise in the MACD for an uptrend to start. as of right now, she's still well and truly in the downtrend. remember what KW said about the short term jumps. the only way I can see the uptrend being confirmed is the re audit results and quartetly/half year released to put the matters to bed for good. it does help jp halving their stock, but remember that they are still in there. a few more weeks before it starts again, be patient baller ;)
Thanks heaps! Back to studying stocks! lol!

[Theracay]

Leaving traders and speculators aside, could anyone please advise me how short sellers destroy wealth? They do not affect the underlying EPS of a business, the cash flows thereof and so I cannot see any rationale for this. If anything they temporarily depress the price of a share giving me the investor a cheaper entry point than I otherwise could have obtained.

If a company needs to raise more capital, the depressed price could hurt the company(?) :)

[Stranger_Danger]

I thought this share was struggling due to a perception of crappy governance, rather than short selling?

If someone is selling it short, they're probably attracted to...crappy governance.

If shorts do anything, it is to shine a light and be a contrarian view. I can't see much harm in that.

Hypothetically, if someone manages to pump a share to massive heights and distribute it to small holders, then someone bets against it, then it falls, who has really destroyed shareholder wealth?

To put it another way, if a group of people create crappy poisoned food to sell at inflated prices at the town fair, and another group make money by warning people about it, and then lots of people get sick, who is really the bad guy?

[Balance]

This ain't no short selling.

[blackcap]

It seems to me that some people are trying to blame short selling etc for a fall in the price of their stock. If it is a good stock with good fundamentals there is nothing to worry about. Take advantage of the depressed price (due to shorts) and buy some more :)
Stranger danger has some good points.

[Whipmoney]

Not quite. Loan covenants are often tied to market cap and hence share price. So if a short seller forces a company to breach its loan covenants by driving its price down, which then causes the bank to call in the loans, and the company then goes bust because it cant get refinancing or is forced to raise equity massively diluting existing shareholders, then exactly how have long term value investors been served well by short sellers?

Loan covenants are rarely ever tied to market cap/SP except where a lender is providing credit and using the shares as security in which case the covenant is on the share-holder (borrower) as opposed to the company itself.

[Balance]

so you're suggesting jp morgan bought a massive lot in DIL then sold out for a huge loss a few weeks later? pull the other one!

If J P Morgan is shorting, it does not make sense that it can cover its short position by selling the stock down until some mug sells to them at the rock bottom recent price of $5.12.

The way the share price has been moved down, there is definitely grounds for a market manipulation inquiry.

Just IHO.

[Hoop]

This is a more complex chart designed to show trend strength and trend changes and trading behaviour ....No real signs of abnormal trader behaviour, just a downtrending stock with lots of loyal shareholders and main shareholders holding firm (except one...eh?).

Not medium or long term buy signals yet......

Buyers sensing the $5.10 - $5.20 was a good place to get in (bottom of the channel) created a relief rally of very short term buy signals (which are weaker today) this very fortunate buying stopped a threatening warning of a bottom side breakout of the downward channel..If that breakout downwards had happened TA would've told us that something within DIL was seriously wrong....It hasn't happened so its just a normal down trending stock looking for a bottoming out point.

Disc: DIL has graduated up onto my watch list

http://i458.photobucket.com/albums/qq306/Hoop_1/DIL19082013.png (http://s458.photobucket.com/user/Hoop_1/media/DIL19082013.png.html)

[Lorne Ranger]

Thanks Hoop, I can actually understand that chart! Appreciate your work to keep us informed and forewarned.

[robbo24]

This is a more complex chart designed to show trend strength and trend changes and trading behaviour

Hoop, with your chart skills and knowledge can you shed any light on the perceived correlation between DIL and XRO?

Do their charts show any similarities?

[Xerof]

Robbo,

Hoop will no doubt respond himself to your question, but here's an observation of trading behaviour for you, which might be of value.....

If you scan both threads on Sharetrader over the past months, contributors on DIL have repeatedly beseeched DIL to be "unbelievably cheap", and "it can't go any lower", "it's heading for $10" "it definitely won't go lower than xx, then xx-$1" etc etc.

On the other hand, contributors on XRO (often the very same commentators as those on DIL) have repeatedly warned folks that XRO is "grossly overpriced" and "beware of a dramatic fall", "don't buy, its too dangerous"


Well......here's the comparative chart

4733

DIL down 30%, XRO up 12%

I rest my case M'Lord :p:p

[robbo24]

4684

I'm not really a chart kind of person - but it looks kind of like that old comparison between XRO and DIL plays out here too.

Since the revenue issues came to the forefront there was a transposition to a step down from XRO but in fact the daily trends follow that of XRO quite closely.

But hey - call my bluff, I don't know hardly any of the terminology or theory behind this kind of thing.

I refer you to my post #2409 on 07-08-2013 at 02:45 PM.

It looks, from this chart, that the accounting problems led to a sudden drop but the remaining behaviour looks vaguely similar to that of XRO... You may rest your case but I don't think it's that simple, or is it?

[TimmyTP]

DIL is most definitely overpriced, buy tons of XRO instead :p
http://coolrisk.com/files/coolrisk/cartoons/reverse_psychology.jpg

[baller18]

Hey guys,

By hoops chart, does it mean when ever the SP drops below the primary trend line and hits the bottom bollinger band, its signalling a downtrend and sell signal?
Is it vice versa for the opposite scenario?

Thanks heaps!

[baller18]

Just been looking at the charts, not just DIL, but other stocks as well which all fit into how Hoop determines what direction the market is moving.
Have just gone through checking other stocks, and all present the same uptrend or downtrend by looking at the MA200, bollinger bands and etc.
TA + FA skills for the win win situation.
More study and more study to do!!!

[baller18]

lol, buy high and sell low then baller???
Please answer my first question lol

[Hoop]

Hey guys,

By hoops chart, does it mean when ever the SP drops below the primary trend line and hits the bottom bollinger band, its signalling a downtrend and sell signal?
Is it vice versa for the opposite scenario?

Thanks heaps!
Maybe maybe not..
I'm not a great fan of trend lines on their own...They do break often, such as deceleration of an rapid up trend and replaced with an alternative slightly flatter up trend line...
Together, Trendlines and Bollinger Bands both portray trend direction and so working together would obviously produce a much more reliable result than if they worked alone in isolation.
The Bollinger Bands are variables...they changes direction when data from each of its determined period becomes available...The bands are deemed a support or resistance area for that moment in time so during a rapid market corrections it's common to see it hugging to one of the bands while the bands broaden out again..however very wide bands suggests volitatity and as such in theory the share price has little resistance**** inside the band area and can freely move around and possibly create shorter term countertrends, especially inside very wide bollinger bands.

------------------------------------------------------------------------------------------------------------------------------------------------------
**** EDIT After reading Moosie post ...when using Bollinger Band indicator it comes with a MA20 [period] default ..yes MA lines act as S&R lines.... the shorter the [period] the shorter the term analysis..when using longer term analysis MA10 and MA20 are usually too sensitive to be reliable....I often leave the MA20day fault out of my Bollinger bands on a year or longer charts
Most people on ST are longer term investors so would use longer time [periods] such as MA50days as the minimum and more likely to use MA100days or MA200days. These larger MA [periods]lines will obvious wander around inside and outside the default set Bollinger bands.
-----------------------------------------------------------------------------------------------------------------------------------------------------


Just been looking at the charts, not just DIL, but other stocks as well which all fit into how Hoop determines what direction the market is moving.
Have just gone through checking other stocks, and all present the same uptrend or downtrend by looking at the MA200, bollinger bands and etc.
TA + FA skills for the win win situation.
More study and more study to do!!!

You're on to it Baller18......but it will take a long time as there is a lot to learn...

As with any discipline in life you have extremes..A small number of TAers invest in stocks knowing nothing about the company they invest in....There are far larger numbers that use FA only.....

I use both FA and TA ..I believe that if the tools for investment are freely available to help you make a better decision then why not use them.

Sometimes FA and TA are in conflict but if one has studied both disciplines and understand their concepts then that knowledge gained is very valuable, as often the reasoning why the conflict is happening becomes a lot clearer. The DIL conflict has been reasoned out in depth on this thread...I think we all know by now why the DIL shareprice has slipped and identified the causes.

Its a well documented fact that many FAer's use simple TA to better time their buys and sells..

[baller18]

Everyday we could short sell Dil, and have more shares...

[Whipmoney]

Please, I dont mean to be rude but a little basic research before commenting is often a good idea. Loan covenants ARE often tied to market cap.
http://www.afr.com/p/markets/market_wrap/keeping_debt_dirty_secret_from_investors_Xx6iA6Y74 5fl8LJUDyCHSK

"While many of these events are boiler-plate (eg, fraud), it is also common for lenders to insert not-so-standard “covenants”. These include requiring the company to keep its ratios of “debt to equity”, “earnings to interest repayments”, and “cash to total repayments” below certain thresholds. Other covenants include change of control events and market capitalisation thresholds. If the company breaches any of these terms, it may be compelled to repay quickly all the debt it has outstanding."

Have short sellers pushed a company to the brink - YES. Remember these guys?

"Between January 8 and 9, 2008, Allco Finance Group’s share price fell from $5.61 to $5.18. This pushed the company’s market value below a critical $2 billion milestone, about which shareholders knew nothing. Allco’s directors had agreed to loan facilities that included covenant which allowed lenders to demand repayment of their debts if Allco’s value fell below the $2 billion mark. Allco did not reveal the covenant’s existence until February 25. By that stage the game was all but over. While Allco’s assets were worth more than its liabilities, its share price tumbled to below $1 because investors knew that it would not be able to meet its debts when they fell due.


A month later, on March 27, Babcock & Brown disclosed to shareholders for the first time it too had agreed to a $2.5 billion market value clause as part of billions worth of debt facilities. Once triggered, two-thirds of all lenders could demand their money back in 90 days after a four-month review. Babcock’s share price had already slumped from more than $25 to $15. Between June 11 and 12, it went into free-fall from $9.52 to $6.90 as Babcock breached the newly-revealed covenant. It was not long before Babcock was placed in administration."

1. When I stated that loan covenants are rarely ever tied to SP/Market Cap I mean't so in the context of DIL and the NZ Market (as per the thread) and whilst I congratulate you for finding the two very interesting examples above (both from Australia) such covenants are likely to be few and far between, even in the Australian market.

2. In your Allco Finance Group example above I note that some "basic research" reveals that the lender in question had actually advanced funds to a seperately controlled group subsidiary called Allco Principals Trust (APT) that had geared itself up with bank borrowings to acquire shares for Allco employees/management (roughly 13% of the company's equity base) and these shares were pledged as collateral for the loan. This is exactly along the lines of what I had stated above, i.e. SP/Market Cap covenants are generally applied when funds are being advanced against lists shares (margin lending). Furthermore, I would speculate from this financing structure that the covenant is applicable to the subsidiary only and not the parent itself (there may have been a cross-default clause however) and furthermore whilst the covenant was triggered from a falling share-price the subsidiary didn't default on the loan rather "management" was essentially bailed out by a $48m loan from Allco Finance Group to APT (the subsidiary).

3. I haven't looked much into the history of Babcock & Brown (to be honest I can't be bothered) but it would appear that given their nature as an Investment Bank a Market Cap covenant would make sense as the Market Cap provides a quick and dirty mark to market test of the company's net tangible assets. I should have also pointed out that NTA covenants are reasonably commonplace in NZ with respect to property stocks.

I rest my case.

[Lorne Ranger]

Grrr Frustrating to see so much red on my daily portfolio update on such a green day for the NZX.

Lonely times being a DIL/XRO supporter. Thank goodness for this forum, even if it is mostly populated with people with the same frustrations! Well, one more day along the path...

[iceman]

Grrr Frustrating to see so much red on my daily portfolio update on such a green day for the NZX.

Lonely times being a DIL/XRO supporter. Thank goodness for this forum, even if it is mostly populated with people with the same frustrations! Well, one more day along the path...

LorneRanger I had no internet from 13 August til 17 August so couldn't keep up with the "frustrated posters" during that time. When I got back to "civilisation" I had something like 23 pages to catch up on on this thread alone, so yes there are obviously some frustrated shareholders !! At least us DIL shareholders don't get bored while we are waiting for the reversal, at least not those that read all the comments on here ;)

[blackcap]

Grrr Frustrating to see so much red on my daily portfolio update on such a green day for the NZX.

.

That may imply that you are not diversified enough. If you only hold DIL and XRO, I would be challenging you on who is giving you financial advice ;)

[kizame]

looks like were shifting into a low volume consolidation phase. the support levels have held above $5.00 so I'm confident this is our price for the next few weeks before re-audit is announced. expect it on a Tuesday as is usual with DIL.

can you confirm hoop?

Moosie you have been confident of the share price all the way down to here,maybe you should have sold around $8 and bought in around here, instead of taking the slide to the pool.

[Lorne Ranger]

Yay. Great to see so much green on my daily portfolio update on such a red day for the NZX.

Good times being a DIL/XRO supporter. Thank goodness for this forum, populated with people with the same elations!

One more day along the path...

[Xerof]

So what is buzz-o-bumble, the BOT doing on DIL? Call the FMA, the police, but not David Shearer any longer.....

[baller18]

For anyone wanting to know what the magical word "Nasdaq" does to a stocks share price, look up MKB.ASX.

Just a friday-filler to keep the long-suffering shareholders happy on little trading :)
What are the chances of dil listing on Nasdaq?

[JohnnyTheHorse]

What are the chances of dil listing on Nasdaq?

Pretty much a certain thing. They will be asking shareholders what they want regarding a US listing in the near future (I would suspect once the accounting issues have been 100% sorted, they will begin to look at it more seriously).

[Xerof]

What are the 'mechanics' of delisting NZX/relisting Nasdaq for NZ based shareholders?

Aside from taking on currency risk, possible FIF disclosures and associated dividend/imputation complications, what is the process? Do we have any precedents?

Moosie, what makes you think the BOT was selling? It 'looked' like accumulation to me, lol.

[zigzag]

What are the 'mechanics' of delisting NZX/relisting Nasdaq for NZ based shareholders?

Aside from taking on currency risk, possible FIF disclosures and associated dividend/imputation complications, what is the process? Do we have any precedents?

Moosie, what makes you think the BOT was selling? It 'looked' like accumulation to me, lol.
They're already an American company, so nothing really changes, except they would be listed in USA. i.e. they are already subject to FIF disclosure, and imputation credits don't apply as Americans don't have them. They also already trade and report in US dollars.

[CJ]

Forex is built into the NZD price. If it lists in the US in USD, there will be no forex risk n the share price; you will need to calculate that separately.

Remember there will be no fundamental change to the business, customers, etc, just the exchange Ian's currency it's listed on/in.

[nextbigthing]

What are the 'mechanics' of delisting NZX/relisting Nasdaq for NZ based shareholders?


Would you simply get one US based share for each NZ share you currently own?

Does this become complicated for tax purposes?

[zigzag]

Would you simply get one US based share for each NZ share you currently own?

Does this become complicated for tax purposes?

My understanding is that if you have invested less than $50,000 offshore you don't have any problems. However, if you go over $50,000, that's when things start to get complicated. $50,000 refers to your original amount invested, not the current value. If the amount is over $50,000 then you become liable for the dumb-ass Michael Cullen Tax, which is basically a sneaky capital gains tax. NB. ZZ is not an accountant!

[nextbigthing]

My understanding is that if you have invested less than $50,000 offshore you don't have any problems. However, if you go over $50,000, that's when things start to get complicated.

Ah I see. This must be what happened with David Shearer..... ;)

[zigzag]

Ah I see. This must be what happened with David Shearer..... ;)

You've got it. Good one!

[nextbigthing]

Hi All,

Many people believe DIL is a great company and have factored good sales growth into the current shareprice. I often read on this forum 'my model suggests xxx price' etc.

For the benefit of both learners and current/potential DIL investors, is anybody brave enough to share quite specifically how they have come up with the price they think. Especially, where exactly they will achieve the growth and how much and exactly what that is based upon. Ie share their model.

I don't just mean generics like 'they have a new product coming out and I feel that will add $20 mil' etc. That's just a subjective statement. I'm meaning a good detailed analysis more like, they are launching in country Y next year. Country Y has 1000 prospective clients and with an uptake rate of 5% which is modest given the usual uptake rate of 10% and country Y's desire to move with technology like this as proven by the uptake of this similar product....this will add $100 mil of annual revenue at the standard price etc...... Or whatever your model involves!

The point is not to provide analysis on DIL for someone who's too lazy or stupid to do their own, it's intended to be educational for newer investors on both DIL and model building and a comparison for current investors and to provide specific factual based information about this stock to debate.

I'd imagine there would be some very different models and ways of coming up with the shareprice out there. Be brave and put yours out there, someone may offer you advice that tweaks it and makes it perfect. Or at least you get a chance to ramp DIL :)

Happy investing,

Nextbigthing




Disc; don't own DIL yet, maybe one day, maybe not. But it's an interesting thread!

[winner69]

Maybe DIL using all this revenue counting issues as a ploy to delay as long as possible a shocker of a quarterly result, if not the June quarter than the September one .... Surely they can't stretch this out to October

Just a thought

[MAC]

Yawn, ….. I slept well, imagine the small army of accountants on the Deloitte night shift are just heading off to bed about now. +21 days, 11% drop in SP and $54M off market cap and counting, …… ho hum.

Haven’t they got accounting software or something, can’t possibly be too much longer now?

[Toasty]

Sometimes its hard to get the excel spreadsheet to print legibly on A4. Its probably just some minor issue with working out how to print the whole sheet on A3 or maybe a couple and then trying to work out where you sellotape them together?

[CJ]

Sometimes its hard to get the excel spreadsheet to print legibly on A4. Its probably just some minor issue with working out how to print the whole sheet on A3 or maybe a couple and then trying to work out where you sellotape them together?Disagree. The problem with Auditors is they do all their work on laptops, and with the trend towards 13 inch screens for easier portibility, that isn't ideal for big spreadsheets. Therefore it is likely to take a bit more time. Alternatively, they could have splashed out for some 23 inch screens but they are hard to transport between the client and the office.

[andysh]

As an auditor (not Deloitte), yes we have laptops but I have a 15". When big spreadsheets come out, I have duel 23" at work, so that works well. Also hope they get it done soon.

[Toasty]

Is there any reason that Diligent would rush to provide reconstituted numbers for the benefit of shareholders? If they are confident that the underlying numbers will look ok then would it follow that they are not concerned about the short term fluctuations that we find so annoying?

This could constitute a fundamental misunderstanding on my part but unless they are looking to raise money in the short term do they really care what the share price looks like now? Perhaps they are just dragging the chain because this is merely an annoyance against the larger plan being executed under business as usual.

[winner69]

As an auditor (not Deloitte), yes we have laptops but I have a 15". When big spreadsheets come out, I have duel 23" at work, so that works well. Also hope they get it done soon.

Hope you have checked the formula in cell BY655 lately ...might have corrupted all the other numbers

[Lorne Ranger]

I agree, I'm sure priority for Dil and their auditors is to get it right, not panic at the sight of the SP, unfortunately!

There must be some other hold-up. I doubt it's Diligent's fault it's taking so long, but given my understanding of the issue concerned, I would have thought if it was just up to the auditors they would have applied their new rule to all subscriptions, and something called a computer programme would do the rest. Bam. They must be waiting for some external advice, from the FCC or the like, so the timing could be out of their hands.

In the meantime its like waiting for a bus without a timetable. On a public holiday. :mellow:

[CJ]

Hope you have checked the formula in cell BY655 lately ...might have corrupted all the other numbersMaybe they need to upgrade excel as they are on an old version which only has ~64k lines, not 1m

[Mista_Trix]

I get the feeling they're probably doing it right so that the process of listing offshore has no holdups, which if the shareprice is likely going to jump back up after this is all sorted, will be of little worry. The greater issue for them is going into that next step knowing all is sorted. Surely this would involve taking longer to double check everything.

[JohnnyTheHorse]

Well they have not yet filed for an extension on their interim report, so I would expect the resolution, quarterly and interim report all to be released before the end of the week. This is required under NZX rules, unless they seek an extension. Correct me if I'm wrong.

[JohnnyTheHorse]

That is for the US, the quarterly is not required under NZX regulations. Diligent must release their half year report within 60 days of the ending period (30th June). They are yet to ask for an extension, so I assume they will be releasing it this week. That is how I understand it anyway, please correct me if I'm wrong.

[Mista_Trix]

Getting close to that $5.00 mark.

[robbo24]

Getting close to that $5.00 mark.

Break the seal!! Let's go sellers, get scared and sell up!! Please!!

[robbo24]

holding as hard as I can!

Come on Moosie (and others).

I know you can see that big red or orange arrow pointing downwards.

I know you hate that arrow.

Go on, just sell a few... See if you can make it back on another stock.

[robbo24]

How about I wait a few more weeks then sell it to you at a 40% premium to todays price? ;)

I don't know about a few weeks because I'm realistic that there will be profit taking all the way up. After all, this price hasn't been on offer for nearly a year or so right?

I'd like to see it go below $5 as it may present an opportunity to top up some more.

I wonder if that guy who sold his house and porche has bought in yet? He could've waited...

[Xerof]

Where's Mobius when you need him.....sold out?

[malc.s]

Many people believe DIL is a great company and have factored good sales growth into the current shareprice. I often read on this forum 'my model suggests xxx price' etc.

For the benefit of both learners and current/potential DIL investors, is anybody brave enough to share quite specifically how they have come up with the price they think. Especially, where exactly they will achieve the growth and how much and exactly what that is based upon. Ie share their model.


I am a learner and this is my first post. I made a spreadsheet which took into account the Net Income, EPS, Share Price, $US exchange rate, P:E of DIL and calculated a PEG. My estimation of Net Income (in the future) was based on DIL's earnings growth over the last 3 years (not on any new product or new market). My spreadsheet says that DIL is worth more than their current share price. But guess what? DIL is going to re-state their accounts for the last 3 years! So the numbers in my spreadsheet are potentially wrong! by how much? who knows!?

Being on the 6 o'clock news pushed DIL up to $8. Having to re-state their accounts has pushed them back down. Sentiment is now against them. They have more potential than this, depending on JP Morgan sabotage!

Disc: Love DIL. bought DIL, sold DIL... maybe again one day

[malc.s]

Hi nextbigthing

I didn't answer your question at all did I? The potential market for Diligent Boardbooks for iPad is huge: Asia, Europe... but if they can't get their own governance sorted then they're screwed! How can you make a share model of that sort of uncertainty?

[Wolf]

Is there a formula applicable to diligent to work out its intrinsic value?
I tried using Warren Buffets intrinsic value calculator and used the 10 year federal note in the discount rate (2.77%) (by the way what rate should i use instead) and got $6.07 ($7.79 NZ) in 10 years based on no dividend. If a dividend is brang out i suspect it would be higher.

I'm new to analysing etc but decided to give it a shot anyway to try and get an idea of the company i own.

[Amor Fati]

Bit of bedtime reading?
http://www.boardbooks.com/corporate-governance/
See New Committee Charters as of the 10 June 2013.
Pg, 2,9,12,15,16, all in capital letters just for you Moosie!
What could this mean I wonder..... thought provoking capital letters at least.

Xerof, don't you worry Möbius will be holding tight.

[winner69]

The Buffett formula is more simple than that - simple enough that Buffett can assess most companies on a formula he can do in his head.

He has never officially revealed what his formula is, but based on hints, many have guessed that it is free cash flow divided by a risk free rate. In Buffett's case, that would be a 20 year AAA rate like the municipal rates found here.

http://finance.yahoo.com/bonds/composite_bond_rates

In other words, free cash flow divided by 4.6.

Now, remember that Buffett has many other tests, like quality of management, moat, and businesses he can innately understand (not tech stocks!). Hence I personally would not use it for a tech company like DIL.

That formula essentially a busy persons DCF model ...using whatever cost of capital figure is appropriate

Works for 'stable' companies ....whatever 'stable' means these days. But in most analyst models things are always 'stable' as generally they estimate earnings/cash flows growing at constant rates anyway (cheats).

As DIL cash flows have stopped growing at exponential rates maybe this formula is appropriate.

FCF about 20 cents divided by sparks 6% gives a value of 333. Most would use a higher rate than 6% to allow for risk ...like 10% to give a value of 200

What a load of rubbish these valuation techniques are ....can't even give a decent number for DIL

[Xerof]

Bit of bedtime reading?
http://www.boardbooks.com/corporate-governance/
See New Committee Charters as of the 10 June 2013.
Pg, 2,9,12,15,16, all in capital letters just for you Moosie!
What could this mean I wonder..... thought provoking capital letters at least.

Xerof, don't you worry Möbius will be holding tight.

lol, yes I was attempting to elicit a response on the timing of any announcement, which was yesterdays discussion point.

Thanks for pointing out the new charters.......

[Mobius]

Here I am. And holding... of course. This is a $10+ share, remember?

As to Roadrunner, his Carrera is still for sale, and is highly unlikely to sell at $45K. That is beyond the market for a 3.4 litre car, even dressed in a sparkly GT3 outfit. Sorry Roadrunner, you are a little ahead of the market on your pricing, as low k examples of the superior 3.6 litre 996 facelift are available at lower prices. Isn't it funny how people put different values on the same items? I guess that's why we are all here... :P

For the record, I have ADDED 3 Porsches and an Audi to my collection using DIL profits. Funnily enough, I was once promised by Alex Sodi that my shares would one day buy an entire Porsche Dealership, when I complained to him the share price was so low, and had remained there for so long. That was in 2009 IIRC. Although an entire dealership is still out of reach, I have made a decent start on it. I took profits at $6.21 and at just over $8, and now am waiting again for the next run - which can't be too far away now.

Someone tried to make it look like DIL is running out of potential clients quickly, but that is rubbish. To date, DIL has been harvesting the low hanging fruit, and has concentrated on gaining landmark clients on the major exchanges, and they have been extremely successful at it, one has to admit. They will also be similarly successful when they turn their attentions to government agencies, local councils and NGOs. DIL already have significant footholds in these markets, and even if you completely ignored any other sectors, these three provide tens of thousands of potential clients, and hundreds of thousands of users worldwide.

It's my personal belief - based on nothing except my time at DIL - that there is a VERY large opportunity to develop "Boardbooks Lite", such that the implementation is much quicker, and the amount of training provided drops substantially, or is removed entirely. Ultimately, Boardbooks Lite could be a product you could purchase online, install at your convenience, roll out to users and begin using it, without any contact at all with the company. Reducing the cost of sales (already low), and the cost of deployment (quite high) must surely be at the front of the minds of the board members, as such a sales model would be completely automated, and would lead to upgrades to "Boardbooks Heavy", for a significant portion of new clients.

Brian Henry was entirely correct in his assertion DIL would grow exponentially (geometric progression) - but with a caveat: exponential growth can only occur for a short time, before the curve goes arithmetic in shape. This has already happened, with quarterly sales figures quite steady now for many quarters. I explained why that is in a previous post. Boardbooks Lite could make the figures take a turn towards the exponential shape for a good long period, before it drops back to the shape of an arithmetic progression. And let's remind ourselves; an arithmetic curve still looks pretty good. How will DIL be priced when it is taking on 20M of new business per quarter?

----------------
How many escape pods are there? "NONE, SIR!" You counted them? "TWICE, SIR!"

[Balance]

broke $5 and very little buy depth


Looks like confidence is gone?

Accounting issues are taking too long to sort out and the longer, the greater the likelihood for nasty surprises.

[TimmyTP]

Looks like confidence is gone?

Accounting issues are taking too long to sort out and the longer, the greater the likelihood for nasty surprises.
Would it be more accurate to say that the longer they take to sort out, the more nervous people become?
Or do you have some reason or experience to suggest that longer delays imply more fundamental and serious issues, Balance?

[MAC]

I'm not sure we should assume that too much balance, they are just accountants doing what accountants do, working methodically and professionally, but slowly.

As much as I would like to think DIL have Deloitte working 24/7, I doubt that DIL management are all that interested in what the shareprice SP does in the interim, they have no need to raise capital now or in the near future.

[bonne vie]

This little story will horrify the FA and TAs out there as I have broken several basic rules - if you believe in a company don't worry about fluctuations and don't try to catch the falling sword. I guess I am sharing it so some can laugh, while others will know they are not the only ones dithering about what to do with this stock.. Like many I do not have other people interested to discuss shares etc, so this forum is interesting/education and at times a great comedy.

While I know DYOR - Thanks Mobius for your encouraging post. I have really dithered with this share, having made nice profits (paper) and deciding I was overweight so put a sell order in for 1/3rd @ $8.00 - then cancelled it. Decided I would not make the mistake I had on two other shares (Rym (ouch just a great stock) and Xero) which continued to rise substantially. Well then to make it worse - yes I ended up a sheep with cold feet and sold half at $5.89 for small profit. Pity I broke my own written rule " If you still believe in the company, don't make a paper loss into a real loss". Now I have bought back in, hold more than I had initially and trying to keep faith in the future. Fortunately, while Diligent is still approx 15% of my portfolio - it is only one of 12 or so I hold of which the majority have nice little green arrows.

[Balance]

Would it be more accurate to say that the longer they take to sort out, the more nervous people become?
Or do you have some reason or experience to suggest that longer delays imply more fundamental and serious issues, Balance?

Just my experience over the years dealing with accounting issues, and that's the general view of institutional investors.

If in doubt, stay out.

[baller18]

Time to accumulate more? At the crossroads right now..

[Xerof]

I'm not sure we should assume that too much balance, they are just accountants doing what accountants do, working methodically and professionally, but slowly.

As much as I would like to think DIL have Deloitte working 24/7, I doubt that DIL management are all that interested in what the shareprice SP does in the interim, they have no need to raise capital now or in the near future.

well, I see fear today, so have reentered in a very small way this morning. Management will be loving this if they want to start a share buyback.

[nextbigthing]

Hi nextbigthing

I didn't answer your question at all did I?

How can you make a share model of that sort of uncertainty?

Hey malc.s

Thanks for your posts. They've stimulated some great discussion.

I guess you're right, it's very hard to make an accurate model given the uncertainty and hence the wild change of shareprice for tech stocks, DIL included.

[Xerof]

Don't agree with any of that. Sellers still there, almost no buyers, and the chart looks terrible

get a grip of yourself Moosie! (Says he who just reentered)

[CJ]

Management will be loving this if they want to start a share buyback.Its a shame they dont have this approved.

[winner69]

Looks like we're going to breach $5.00 today. Absolutely amazed at how much of a discount some holders are willing to give up to others!

The other side of that argument is that clever people cashed in on the (unwarranted) premium there was in June

[TimmyTP]

Just my experience over the years dealing with accounting issues, and that's the general view of institutional investors.

If in doubt, stay out.
Understood, thanks Balance. I think this is a great learning exercise in the perils of bottom picking. I am keeping my finger clean on this one until I feel confident the pants are pulled up.

[winner69]

Looks like confidence is gone?

Accounting issues are taking too long to sort out and the longer, the greater the likelihood for nasty surprises.

I said that the other day mate .....your turn to get admonished

[baller18]

Sooooooooo deep in red... lol...

[Hoop]

http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=NZ%3adil&uf=0&type=4&size=3&sid=2970890&style=320&freq=1&entitlementtoken=0c33378313484ba9b46b8e24ded87dd6&time=8&rand=279663141&compidx=aaaaa%3a0&ma=0&maval=9&lf=1&lf2=0&lf3=8&height=665&width=720&mocktick=1

[Balance]

I said that the other day mate .....your turn to get admonished

It's cool, W69 matey.

In the end, the truth will out.

Meanwhile, the market will get driven by the usual fear, hope, greed and in DIL's case, sheer terror? :D

[blakecb]

Sooooooooo deep in red... lol...

For every stock I write down a 'stoploss' when I buy it. It is the price at which I will sell, no matter what. If I'm wrong about a stock I'm buying, then I have protection. Entering a trade without a stoploss is a very undisciplined way to trade in my opinion.

So if you were buying the 'cheap shares' that moosie and sparky were promoting in the hope you were picking the bottom (based on what I'm not sure, but anyway...), you would want to say, well if I'm wrong and this is not the bottom, I will sell out at 'x' as it is an acceptable loss (if there is ever such a thing).

It has been said that selling for a loss feels 2.5 times worse than making a gain, so that is why discipline is so important in trading - people don't sell for that 2% loss because it's feels too painful, and then the 2% loss becomes a 20% loss.

We are now seeing all the rhetoric of DIL (cheap shares, american company buy-out, etc.) moving onto PEB even though everything on the charts said and says 'sell'. Make the trend your friend - trade with the trend not against it. And always, always set your stoploss.

[iceman]

It's cool, W69 matey.

In the end, the truth will out.

Meanwhile, the market will get driven by the usual fear, hope, greed and in DIL's case, sheer terror? :D

You're not wrong there Balance (and w69), holders are in panic and not only those that have been selling. I think the rest of us holders are also quite worried about what is happening. Having said that, I am not considering selling in the absence of some major negative news that will change my view of the potential for this company. But man it sure is testing the patience ! A positive announcement/report can not come fast enough !!
Agree with CJ that it is a shame they don't have an approval for a buyback.

[MAC]

For every stock I write down a 'stoploss' when I buy it. It is the price at which I will sell, no matter what. If I'm wrong about a stock I'm buying, then I have protection. Entering a trade without a stoploss is a very undisciplined way to trade in my opinion.

So if you were buying the 'cheap shares' that moosie and sparky were promoting in the hope you were picking the bottom (based on what I'm not sure, but anyway...), you would want to say, well if I'm wrong and this is not the bottom, I will sell out at 'x' as it is an acceptable loss (if there is ever such a thing).

It has been said that selling for a loss feels 2.5 times worse than making a gain, so that is why discipline is so important in trading - people don't sell for that 2% loss because it's feels too painful, and then the 2% loss becomes a 20% loss.

We are now seeing all the rhetoric of DIL (cheap shares, american company buy-out, etc.) moving onto PEB even though everything on the charts said and says 'sell'. Make the trend your friend - trade with the trend not against it. And always, always set your stoploss.

Dear Blakecb,

If a very short term trader like yourself were to hold DIL for a reasonable period of time you may actually do very well indeed.

At $4.80 you may wish to note that DIL is up 320% in the last three years and the fundamentals indicate that there is further significant growth ahead and that this stock is ridiculously oversold.

For the interest of the forum,

How much did you make last year as a tax paying, broker financing trader, please do share ?

[CJ]

For every stock I write down a 'stoploss' when I buy it. It is the price at which I will sell, no matter what.How often do you reset your stop loss. Do you do a trailing stop loss or just reset from time to time.

Do you use a set percentage?

[winner69]

This is how ridiculously oversold DIL is right now:

http://nz.finance.yahoo.com/q/ao?s=DIL.NZ

http://nz.finance.yahoo.com/q/ks?s=DIL.NZ

The old take comfort in analysts workings eh ......... the ultimate optimistics who often overstate things by 20%

So 574 less 20% is 460 .... more downside?

[blakecb]

How often do you reset your stop loss. Do you do a trailing stop loss or just reset from time to time.

Do you use a set percentage?

I've heard many of the more famous investors set their stop loss at between 10-20% of the current value of the share price - so a trailing stop loss. The idea is to have a protection plan to stick to, rather than just hope it will turn around.

In terms of what I personally do, because I do a lot of TA on the stocks I buy, I base my stoploss on movement outside of what I think should happen for the chart (for example a major trend-line break, or major sell signals from the indicators, negative volume, etc). For example, with PEB, which I shouldn't have been in in the first place after the negative divergence on RSI and trendline break, my stoploss was only a few cents worth of margin because the SP was bouncing around in a symmetrical triangle and once it broke out of that, I considered that to be a movement to the down side and not good news.

Many people seem to think that using TA means you are a short-term trader, and that is not true - TA is about risk management. It can keep you in a stock for a very long time, and TA on DIL would have kept you in until the day before the gap down.

I only started posting on this thread because I could clearly see new traders buying into all the talk about 'cheap shares' when the SP was about $7.20! I just asked for caution and all the way along was criticised for that as being a short-term trader. People buying cheap shares at that point would now have lost at least 30% of the value of their holding. Yes it will probably turn around and long term the pain may be mitigated, but they could have purchased the shares for 30% less, and who wouldn't want to do that? Brokerage fees are not that expensive if you use ASB, ANZ or Direct Brokers, so it is a misnomer to pretend you're giving away profits to brokers. I may pay 0.3% to my broker, but I haven't given 30% to the market.

I may yet hold DIL 'long term' when I see that the market sentiment has changed and confidence has come back in to the SP. I will miss the bottom because I will wait for the turnaround. That is not trading, that is disciplined investing.

[winner69]

I note your 21,000 parcel bid at $4.50 then winner ;)

Not mine moosie .... I wouldn't signal intentions that far out. Wait until the time before putting an order in.

Anyway if it gets to 450 it likely to go lower ....much lower if bad news eventuates

[nextbigthing]

Excellent posts blakecb.

Great to have someone balancing out the hype, esp for the newbies.

[Hoop]

I've heard many of the more famous investors set their stop loss at between 10-20% of the current value of the share price - so a trailing stop loss. The idea is to have a protection plan to stick to, rather than just hope it will turn around.

In terms of what I personally do, because I do a lot of TA on the stocks I buy, I base my stoploss on movement outside of what I think should happen for the chart (for example a major trend-line break, or major sell signals from the indicators, negative volume, etc). For example, with PEB, which I shouldn't have been in in the first place after the negative divergence on RSI and trendline break, my stoploss was only a few cents worth of margin because the SP was bouncing around in a symmetrical triangle and once it broke out of that, I considered that to be a movement to the down side and not good news.

Many people seem to think that using TA means you are a short-term trader, and that is not true - TA is about risk management. It can keep you in a stock for a very long time, and TA on DIL would have kept you in until the day before the gap down.

I only started posting on this thread because I could clearly see new traders buying into all the talk about 'cheap shares' when the SP was about $7.20! I just asked for caution and all the way along was criticised for that as being a short-term trader. People buying cheap shares at that point would now have lost at least 30% of the value of their holding. Yes it will probably turn around and long term the pain may be mitigated, but they could have purchased the shares for 30% less, and who wouldn't want to do that? Brokerage fees are not that expensive if you use ASB, ANZ or Direct Brokers, so it is a misnomer to pretend you're giving away profits to brokers. I may pay 0.3% to my broker, but I haven't given 30% to the market.

I may yet hold DIL 'long term' when I see that the market sentiment has changed and confidence has come back in to the SP. I will miss the bottom because I will wait for the turnaround. That is not trading, that is disciplined investing.


Excellent posts blakecb.

Great to have someone balancing out the hype, esp for the newbies.
I totally agree too

[robbo24]

Ah the good old days... 19-11-2012, 12:40 PM


On 800 shares?

Someone is pushing this stock along.

Fine with me but hi, whoever it is - make it more convincing! Just like the buyer who took out all the stock at $4.40!

Fact is - XRO can go to $6.00 with a cash burn profile (i.e.. buying market share), DIL should at least be $7.00.

[baller18]

Yes, rational analysis from hoop and Blake, thanks heaps!

[winner69]

Yes, rational analysis from hoop and Blake, thanks heaps!

Hope you not implying everyone else is irrational

By the way ...you must have bought in by now baller

[baller18]

Hope you not implying everyone else is irrational

By the way ...you must have bought in by now baller
Of course not winner! Everyone is more rational than me, just implying hoop and blake combined TA + FA which = RA
I bought in long time ago... deep in red... average buy $6.60

[tosspot]

I just dont understand some people. everyone knows the restatement is coming very soon or at least an update by friday so why such a big sell off

[Mista_Trix]

I just dont understand some people. everyone knows the restatement is coming very soon or at least an update by friday so why such a big sell off

... people in the know ... ??

[tosspot]

The psychologists in me sees herd mentality, fear of the unknown and intolerable losses mounting on small investors minds. JP did the damage shorting the stock, now the small investors are compounding it.

Don't join them! :eek2:
oh I wont and cant afford to unfortunately bought in at 6.10

[Xerof]

Milford also sold out for sure. There are no facts surrounding exactly what JPM did, it was either an unfortunately timed purchase, then sale on stop loss basis, or as SUGGESTED on here, a well planned shorting exercise, which by all accounts was finished a couple of Fridays ago on production of a SSH notice. Beyond that, who knows, but technically it looks like sh1t

on that basis, I am nibbling (nom nom as Sparky would say) on the day today in small. I will be mightily pissed off if what Management have stated in writing proves not to be the case (immaterial impact on results) but they daren't get that wrong......

out at mid $7's, backing in at high $4's doesn't seem too bad a deal to me

[MAC]

Very low volumes for a big move Tosspot, it's unlikely to be institutional selling just the traders playing. Can't blame them for that, there're just earning an honest living.

Hang in there, all the reasons why DIL was a great company in January will still be there in December, and over time the market always reflects and gravitates back to fundamental valuations.

[winner69]

Very low volumes for a big move Tosspot, it's unlikely to be institutional selling just the traders playing. Can't blame them for that, there're just earning an honest living.

Hang in there, all the reasons why DIL was a great company in January will still be there in December, and over time the market always reflects and gravitates back to fundamental valuations.

Fundamentals -real numbers and no emotion

DIL a great company in January - yes. It had just come off a quarterly FCF of $6.6m / rolling 4 quarter FCF $20.6m

DIL still a great company - not as great and maybe, just maybe, showing signs of peaking. Quarterly FCF is $2.5m (50% less than year prior) and rolling 4 quarter FCF of $17.4m (15% lower than December)

So 2 quarters of cash flow being less than prior year - growth?

Market cap as of now $400m - heck that's 23 times FCF ....before the inevitable dilution.

That's my two pennies worth ....maybe buffet valuation of 333 is what it should be

[winner69]

I don think it traders playing around ...not enough volume being traded

Probably investors selling out thinking something drastically wrong ...maybe they know something or just scared

[baller18]

I was just thinking about what hoop had said a few weeks ago, "if the announcements is nothing spectacular, don't expect the market to be bullish or to even push the SP back up"

Hmmm....

[winner69]

I was just thinking about what hoop had said a few weeks ago, "if the announcements is nothing spectacular, don't expect the market to be bullish or to even push the SP back up"

Hmmm....

Thinking ...hmmm

Did you come to conclusion .....could hoop be right?

[MAC]

Fundamentals -real numbers and no emotion

DIL a great company in January - yes. It had just come off a quarterly FCF of $6.6m / rolling 4 quarter FCF $20.6m

DIL still a great company - not as great and maybe, just maybe, showing signs of peaking. Quarterly FCF is $2.5m (50% less than year prior) and rolling 4 quarter FCF of $17.4m (15% lower than December)

So 2 quarters of cash flow being less than prior year - growth?

Market cap as of now $400m - heck that's 23 times FCF ....before the inevitable dilution.

That's my two pennies worth ....maybe buffet valuation of 333 is what it should be

We all need to do our own analysis and run our own models, can't post em like a chart winner.

Valuations are based on forward earnings, yes the rate of revenue growth is stabilising as DIL's first product approaches maturity in the market, retains its market leader status, achieves increasing margins and keeps good customer retention.

I haven’t yet added a second revenue stream for their next product(s) as we've yet to receive enough info IMO to value them accurately.

Analyst consensus for FY13 is for 41% revenue growth and FY14 is for 42% revenue growth. My analysis is similar and I take some confidence from some level of concurrence with the market.

I run three different fundamental models based on forward earnings from which I assess a valuation well above present SP.

I would encourage all new investors to do the same, don't rely on broker valuations unless you believe they are not sentiment driven and are not prepared in their own interests.

[Mista_Trix]

Hoop could be very wrong: 50/50 chance, take your side!

After the swing I wonder what level he'd be interested in buying in at... He could be righter than us all :-S

[JohnnyTheHorse]

The market will be updated on the situation around the restatements tomorrow. Whether they have sorted it all out yet or not I am not sure.

[iceman]

The market will be updated on the situation around the restatements tomorrow. Whether they have sorted it all out yet or not I am not sure.

Where did you hear that JohnnyTheHorse ?

[winner69]

Hoop could be very wrong: 50/50 chance, take your side!

We could take this further and look at some expected returns eh

50/50 - ok if news is bad price will go down more .....say 400 with 50% chance.

The other 50 split 50/50 as well - one lot price stays about the same as hoop theory, the other price will take off to say 600

Add it all up and presto 470 after the announcement (this week)

Ouch ......what a stupid methodology

[baller18]

We could take this further and look at some expected returns eh

50/50 - ok if news is bad price will go down more .....say 400 with 50% chance.

The other 50 split 50/50 as well - one lot price stays about the same as hoop theory, the other price will take off to say 600

Add it all up and presto 470 after the announcement (this week)

Ouch ......what a stupid methodology
Risk vs reward here does not seem so bright... lol!

Disc : Happily holding till who knows when...

[robbo24]

The sky has fallen and the SP will never go back up.

Sell up now and try to make back your losses somewhere else.

Tomorrow will be even worse, and the day after that, and so on.

[Lorne Ranger]

The thing I learned over the last 12 years of investing is that buying is piss easy, but selling is hard. When you can conduct disciplined, unemotional sells your portfolio return is supercharged. There is a reason why Buffets two rules is "don't lose money".

Buffet also said he buys shares in the basis that you could close the stock exchange for 5 years and he would still make a profit on them. Doesn't seem like someone who advocates for getting the willies during a downtrend; rather to buy more when people are nervous. But whatever works for you is great for you, so thanks for the comments.

[Lorne Ranger]

The sky has fallen and the SP will never go back up.

Sell up now and try to make back your losses somewhere else.

Tomorrow will be even worse, and the day after that, and so on.

Given that EUPHORIA signals the end of a bull cycle, doesn't this just mean the opposite?

[Lorne Ranger]

I am a believer in this stock, like Mr 900, and am holding, with an average buy in the mid 6's, (though that is slowly coming down!). To think that management have mislead in their initial announcement over the restatement delays seems very unlikely, I don't believe that they have shown a tendency for this. So I'm holding with that judgement.

So while I do believe the restatement will be as expected, I am a little nervous that the market will miss it, as I think the next few weeks will be negative for the markets in general given the movement with US and Syria. Any uncertainty about anything at the moment seems to cause ripples, and at best I wonder if the restatement will get lost in the commotion about other news? Am I taking too wide a view of this risk?

[Xerof]

Where did you hear that JohnnyTheHorse ?

I heard it from the Horses mouth............

[iceman]

I heard it from the Horses mouth............

LOL ! But have I missed something. Is there a confirmation that announcement is due tomorrow ?

[iceman]

Johnny took the wise step of asking the company itself what the hell is going on!

Thanks moosie. Great to hear.

[Wolf]

so is the announcement tomorrow?

[Xerof]

Take your pick I guess, given something HAD to be done this week

an extension of time to report, or

the restatements

I see two WA trades after market for 275k......

[Wolf]

I reckon even if the announcement comes out tomorrow and all is well the price wont start back up straight away because of the Syria issue. I jumped in at $5.30 and may buy in again after the announcment

[bonne vie]

[QUOTE=Xerof;424467]Take your pick I guess, given something HAD to be done this week

an extension of time to report, or

the restatements

I see two WA trades after market for 275k......[/QUOTE

Curious
I placed an order at 4.57pm at which stage there was approx 8000 matched at WA $4.80, then amended my order at 5pm at which time I am positive that there was still the same approx 8000 matched at WA $4.80. How was it then possible for the 275000 WA to be processed at 5.17pm?

[bonne vie]

Off market, after hours trade with a weighted average price. 5:17 trades happen all the time.

Yes I realise that there are after hour trades most days especially Off market, but in this case I was surprised that the 275000 did never appeared to show up on the depth chart. Is that normal - or possible bid/sell were load at the same time?

[Dej]

Yes I realise that there are after hour trades most days especially Off market, but in this case I was surprised that the 275000 did never appeared to show up on the depth chart. Is that normal - or possible bid/sell were load at the same time?

Will have been organised off-market too and will have just been an exchange of shares between two parties, but shown the shares traded hands on the NZX.

[bonne vie]

I won't diverse from the main theme of this thread of where is the SP going. Thanks Moosie and Dej for your responses - still a little confused as to why they were not conditioned as "SP" instead of "WA". If they are not part of the depth size how can they be within the weighted average? No need to answer as it does not affect the SP.

Going back to where to now with the SP - IMHO- based on my comment #2630 12/8/13 copied below. The only reason based on the financials (not emotional reasons) that the sp will not reverse upwards is if the actual revenue/expenses figures have been recorded incorrectly in the past financials, by that I mean not mis - allocated and/or timing of the income/expense was incorrect but the actual numbers have been wrong.

If the numbers have been collated correctly then in the long term the affect should be relatively neutral.

# 2630 "There is a lot of speculation as to how the revenue recognition adjustments will affect the profit/tax etc but appears little discussion of affect on Deferred Revenue balance sheet item. This maybe way too simplistic but wouldn't the main effect be that the Deferred Revenue liability is going to increase and retained earnings for past periods decrease (will be accounted for in future R/E). The net affect less "free cash" and tax payable spread over a longer term e.g. aligning with when the income is recognised particularly the spreading of the installation fees over the period of the contract rather than the 12 months previously used. IMHO As long as the company is a going concern until all current agreements income is recognised then over time little impact other than making it clearer to shareholders the true deferred revenue position which needs to be offset against the "cash pile" held.

[robbo24]

Look at all the professional older ladies who back Diligent as a good product: http://www.linkedin.com/groups/Hi-there-Im-looking-new-153542.S.113830305

If that won't raise the SP, I don't know what is. The customer base are top notch females so that puts a big tick in favour of the product for me.

Operationally speaking, is anyone else concerned about the only comment on the iTunes store (byQeertyyiophffhhhb)?: https://itunes.apple.com/nz/app/diligent-boardbooks/id412771395?mt=8
Customer Reviews




Good idea, buggy execution

by Qeertyyiophffhhhb
A good product overall but consistently freezes during use & the navigation can be very buggy at times, jumping multiple pages etc, which makes it hard to use in a board meeting