TRA - Turners Automotive Group [previously TNR - Turners Limited]

[Snoopy]

If someone knocks on your door and offers to buy your house at half of the value that you think it is worth you wouldn’t sell it because you would consider it a low ball offer. With shares you have to decide what is a fair price for the share. You do not have to accept low ball offers.

I am not sure I fully agree with that analogy. Is $2.30 on market for TRA shares a low ball offer? Since there is a free market for Turners shares and that was yesterday's closing price, this would suggest the answer is no. However the market does go up and down both on company news and trends in wider interest rates. Those of us who have been in the market for many years know this. We also know that we don't have to scratch each and every daily itch. So I think it is fair to suggest that you can have a medium term view of where you think the share price should be that is not in accordance with the daily market price. As an investor, it is my job to arbitrage that price difference.

SNOOPY

[Snoopy]

If someone knocks on your door and offers to buy your house at half of the value that you think it is worth you wouldn’t sell it because you would consider it a low ball offer. With shares you have to decide what is a fair price for the share. You do not have to accept low ball offers.....

Unless you knew the tide was rising and devaluing your property every week and after a period of time it was going to be worth nothing.....

....which is not the case with Turners as they have a positive operational cashflow and turn a profit.

SNOOPY

[dodgy]

Unless you knew the tide was rising and devaluing your property every week and after a period of time it was going to be worth nothing.

Dear Minimoke,
The $64000000 question is "how does one actually know the tide" . If it was that easy every 100% informed punter would be rolling in it.
Regards
-dodgy

[Snoopy]

Dear Minimoke,
The $64000000 question is "how does one actually know the tide" . If it was that easy every 100% informed punter would be rolling in it.
Regards
-dodgy

No-one does know the tide, at least not for sure. So you have to work on positive indicators which statistically should see you get ahead over the longer term. However, no matter how careful you are, at some point an investment you are involved with will go wrong. This is why you need diversification in your portfolio. For my NZX investments, I have decided owning twelve shares at any one time (or more exactly six pairs of like shares - the individual members of each pair keeps the other one honest) is the way to go. My 'pair' for Turners Automotive Group is my latest investment - HGH.

SNOOPY

[dodgy]

[QUOTE=Snoopy;748503]No-one does know the tide, at least not for sure. So you have to work on positive indicators which statistically should see you get ahead over the longer term. However, no matter how careful you are, at some point an investment you are involved with will go wrong. This is why you need diversification in your portfolio. For my NZX investments, I have decided owning twelve shares at any one time (or more exactly six pairs of like shares - the individual members of each pair keeps the other one honest) is the way to go. My 'pair' for Turners Automotive Group is my latest investment - HGH.

Dear Snoopy,
I agree with you and having holdings in 3 markets further spreads risk - NZX high trading fees, ASX ($A29.90) very high trading fees, USA (US$0.00) very low trading fees. All this also goes in the mix , and, yes I pay tax so capital gains tax poses no interest in this regard.
Regards,
-dodgy

[RupertBear]

My capital loss on TRA is unrealised.
What has been the goal of my investing.?
My goal was to build my capital to the point where when I retired ,I had the capital to provide me with a good income.
My capital is over twice what i aimed for,[and I have paid off both daughters' mortgages].
My dividends far exeed what my income was before I retired.
Goals achieved.I remain "well positioned"with a large diversified portfolio,which includes income shares,Australian shares,and still has some fun stocks.In fact my largest holding is a fun stock .

If you own a rental property, do you get a valuer in every day to value that property? Do you then get worried because sipping on your Saturday latte, your house price has gone down by 1% over the last week? I would suggest the answer is 'no' to both questions for two reasons:

1/ You don't have to look at your investment every day to know whether that investment is fulfilling your longer term investment goals.
2/ Paying real estate fees every week buying and selling your property would soon destroy any capital profit you made.

However, as a property investor, do you care if your tenant stops paying the rent? I would suggest the answer is 'yes', very much so.

Looking back at Turners, as Sharemarket investors, we are in a privileged position:

1/ We do not have to call in our own valuer each day to tell us what our Turners shares are worth.
2/ Using our ability to buy and sell Turners shares will incur much lower sales commissions that doing the same with a property.

However, these two advantages are not a 'call to action'. We can choose to accept market offers to buy our shares or ignore them. If we choose to focus on the dividend income from our Turners shares, we see that it is continuing to increase. Long term an increasing income stream will lead to an increasing share price. So there is no long term driving force to sell. Indeed, the rational investor would be more inclined to buy more because the lower the share price, the better the investment yield.

If you want to criticise Percy's Turners position, you could say that perhaps he should have staggered his Turners share purchases over a longer time frame. That would have meant that the 'with hindsight view' (which is never apparent at the time a purchase is concluded) that he paid too much for his TRA shares would mean he paid 'slightly less too much' (in effect that is my own position). But as Percy has told you, he bought for the income stream and the ability of that income stream to increase, and so did I. Neither of us are planning to sell over the medium term, and we are satisfied with our own yield return, which does not decrease if the share price falls.

Others have suggested that those of us still with investment capital to buy more ought to wait until share price rises to $2.57 or something to commit more capital to the company. For a yield investor this is BS. The lower the price you can buy your shares, and that could mean buying today, the better the investment yield. No matter what the share price does in the future, there are no exceptions to this rule.

SNOOPY


Thanks Percy and Snoopy, very helpful thoughts, I think I finally get where you are coming from

[Beagle]

Others have suggested that those of us still with investment capital to buy more ought to wait until share price rises to $2.57 or something to commit more capital to the company. For a yield investor this is BS. The lower the price you can buy your shares, and that could mean buying today, the better the investment yield. No matter what the share price does in the future, there are no exceptions to this rule. Snoopy

Snoops me ol mate. That post assumes most people care about capital movements in the share price, (which I think is a very safe assumption). Waiting for a new uptrend to be confirmed through the use of TA such as the 100 day MA line break is a simple risk management tool which would have seen people get out at $3.00 and stay out.
You think most investors would have been happy with that decision with the benefit of hindsight ?

Some people are retired and have a focus mainly on income and have more capital than they need so whatever approach works fine for them is their business, but I would think the vast majority on here care quite a lot about movements in the share price. Worth noting that the shares have been in a pretty steady downtrend from just on $3.90 in May 2017 to the current price and it keeps making new multi year lows. You think there might be reason for this ? Like others I see no point in getting dividends if your capital gets seriously eroded in the process.

At the risk of being dogmatic, this will be a good yield investment for most people when a new uptrend is confirmed. To buy before that is risky and the risk of further capital erosion should be obvious to anyone with even a rudimentary understanding of charts and TA.

If all people care about is the dividend then yes absolutely no argument that you are right that the lower the price the greater the yield, (assuming the business is not going so badly that future dividends may be lower which may be what the share price is suggesting).

Something is not right here and I am a little surprised a dog with your nose can't pick up the scent of trouble ahead.

[BlackPeter]

I guess TA and FA, while both good tools give at this stage different answers. Percy's and Snoopy's views are spot on for anybody who invests with a mid or longterm time horizon ... as long as the fundamentals of the company don't change.

Question is - why does the TA look that terrible? They say the market is always right, but unfortunately that's only in determing the price of a share, not determing the value.

So - what is happening?

It appears there are indications that new car sales are dropping (see CMO) - and the drops are in line with the announcements of TRA - i.e. these years financials probably don't look that flash, but the market should have (and I think has) priced that in months ago. Unless there is a new desaster I would think that the upwards potential after the financials is much higher than further downward potential.

It is fair to say that some of the board members would not win in a popularity contest and particularly Byrnes and Bakers do have a somewhat patchy history related to creating consistent share holder value. On the other hand - they both had as well their successes - and DPC (chaired by Byrnes) while taking a huge drop after the GFC at least survived - this is more than other finance companies can claim ;

The chair is as well sending mixed sigals whether this company has his full attention. Him holidaying (or whatever) during the AGM was unfortunate and showing disrepect to the holders, no matter whether the company (no doubt with his full knowledge and support) shifted the AGM date.

Sharebuybacks are a mixed blessing - while they increase EPS, they increase as well leverage ... and while TRA has (for a mixed trader / finance business) not yet reached a banking liabilities to equity ratio - they are moving into the wrong direction if they want to reduce this finance risk. Interest rates better don't go up ...

On the plus side - as percy does not get tired to repeat - they do have a plan and so far they are doing what they are saying. I do like the idea of a onestop shop for used cars - and being the biggest fish in the NZ second hand car pond must return (if nothing else) huge synergy gains. Even if the market takes a breather - they are well positioned to come out stronger out of any downturn than before (big fish eats small fish).

Consensus earnings for the next 3 years average to 27 cents. Not too bad for a $2.30 share with growth potential (all CAGR's I take are well above 15%).

While I do have mixed feelings related to the board - I do respect management - and at the end it is them determining the results - as long as the board does not get into their way.

Anything significant I missed? I am still holding and think that the share is at current undervalued - i.e. not the best time to sell ;

[winner69]

I no longer hold and pleased I got out without a capital loss.

I must confess I struggle to understand how one can be happy getting a fat divie while your capital is going down. Bears hate loosing capital

See what you have done now Rupert - got many justifying their position

Shot off an email to my mates at the LSE for them to have a look at this good raw material for their studies - quick response was that a few must be going through a regret (at holding) stage and by justifying their position as to why they are seeking some comfort (even if it reassuring each other it’s all fine)

I’ve still got my small holding ...the punt that there would be profit upgrade and the share price would rocket up from 260 odd to 324 (I think it was) didn’t work....still hoping one day soon Baker and his Singapore mate would have found a buyer and give me $2.70 ....aren’t I stupid in hoping for that but at least I have a reason for still holding.

[BlackPeter]

See what you have done now Rupert - got many justifying their position

Shot off an email to my mates at the LSE for them to have a look at this good raw material for their studies - quick response was that a few must be going through a regret (at holding) stage and by justifying their position as to why they are seeking some comfort (even if it reassuring each other it’s all fine)

I’ve still got my small holding ...the punt that there would be profit upgrade and the share price would rocket up from 160 odd to 224 (I think it was) didn’t work....still hoping one day soon Baker and his Singapore mate would have found a buyer and give me $1.70 ....aren’t I stupid in hoping for that but at least I have a reason for still holding.

Hmm - are you implying there might be holders who have no reason for still holding?