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  1. #41
    Legend shasta's Avatar
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    Quote Originally Posted by winner69 View Post
    Surprised with you of all people Shasta coming out with such a genaralised statement .... as you know 10% ROE isn't always a good result and doess't always lead to shareholder value

    Isn't the real sign of having 'very competent management on board' is whether they have create real economic value when taking into debt levels .... ie a return on invested capital in excess of the company cost of capital .... not just the shareholder part

    And i would hate to think that wbosher takes your advice and backs one of the highest ROE companies on the NZX10 because that consistently high ROE means they have 'very competent management on board' .... wbosher might be disappointed with his investment in TEL eh
    I possibly should have added that is a small part of my criteria among a host of other important things i look for.

    Anyone buying TEL without looking at the chart would have to be a devout contrarian!

  2. #42
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    Quote Originally Posted by wbosher View Post
    Thanks Shasta, I'll take a look. Do you think it might be a good idea to start with NZ companies, or doesn't it really matter? I only ask this because it may be easier to keep up to date with local business news, and there are a smaller amount of companies to trawl through.
    I started off on the NZX, but little liquidity saw me move to the ASX in 2007 (the NZD/AUD was 90-92c back then), mainly as i branched out into O&G companies & miners

  3. #43
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    I used to trade the ASX exclusively, for the reasons you've pointed out, but also becase using TA it was easy to use a scanner to cut down the choice from thousands down to maybe 20 or so in a few minutes.

    As I'm not yet familiar with FA, I thought that having less to choose from like on the NZX, might make life a little easier for a newbie (to FA) like myself.

  4. #44
    Speedy Az winner69's Avatar
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    wbosher .... soemtimes all the theory and all that can really confuse the issue about whether any company is a good investment from a FA point of view

    Why don't you imagine that you have enough dosh to buy the whole company .... FA is then looking at what you would get out of that company over time (cash and added capital value) .... look at from an owners perspective ... and if you come up with a number that you reckon is a fair retuen for the risk you would have taken then (fundamentally) buying a few shares in it is probably a good idea. If you wouldn't buy the whole company then why buy a few shares in it

    If all this is too hard then go back to trading prices that the market thinks any company is worth at any particular point in time. Buying a few shares in a company isn't investing in that company (they don't get your cash) .... you are only buying something that has some value attributed to it.

  5. #45
    Speedy Az winner69's Avatar
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    wb ... sort of what i was raving on about is covered in my easons below why i wouldn't buy WHS at the moment .... even though fundamnetally it is a great company, strategically well placed, essentailly well mnanaged, has a good business model etc and will remain part of NZ landscape for some time. So on fundamentals no reason not to buy .... but at the mo on a fundamental valuation basis overpriced .... I couldn't justify paying the market price for it today if I could afford to buy the whole company

    From my psot on the WHS thread -

    Currently WHS EBIT about $128M (assuming this year to be about the same as last year) which after tax gives Operating Earnings of about $90M .... driven from shareholder equity of $$320m and debt of $100m .... so a 20% return on capital .... fantastic performance

    At current shareprice market cap is $1.1 billion. So if you managed to buy the company it would cost you this $1.1 billion and you pick up the $100m debt so total cost (capital required) is $1.2 billion. All of sudden that $90m operating earnings is not that attractive .... it only gives you a 8% return on the capital invested (6% if you had to pay a 20% premium)

    So honestly .... would any of you if you had $1,4 billion buy something for a 6% after tax return .... esp when they have essentially saturated the market and future growth potential is rather limited without further capital.

    I doubt it ... therefore isn't WHS overvalued at the moment? .... and that there is some strategic value of the sites / footprint for a potential buyer included in the price.

    Same sort of thinking Buffet applies ... as Snoopy would probably say Warren wouldn't be buying WHS at these prices .... but at what price? .... at least a 12% return i would say to cover cost of capital ... ie about $2.10 a share.

    Is that what Warren pay Snoopy ... haven't checked your latest workings on sharechat



    This is not saying that buying WHS shares is stupid or anything .... it is saying that a purchaser would not get much of a return from buying the company at the current price ..... but the WHS shareprice will probably go up and down over the next few years even thought the underlying 'fundamnetals' wont change .... thats what i mean about trading the price of WHS shares .... nothing more and nothing less

  6. #46
    Legend shasta's Avatar
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    Quote Originally Posted by winner69 View Post
    wb ... sort of what i was raving on about is covered in my easons below why i wouldn't buy WHS at the moment .... even though fundamnetally it is a great company, strategically well placed, essentailly well mnanaged, has a good business model etc and will remain part of NZ landscape for some time. So on fundamentals no reason not to buy .... but at the mo on a fundamental valuation basis overpriced .... I couldn't justify paying the market price for it today if I could afford to buy the whole company

    From my psot on the WHS thread -

    Currently WHS EBIT about $128M (assuming this year to be about the same as last year) which after tax gives Operating Earnings of about $90M .... driven from shareholder equity of $$320m and debt of $100m .... so a 20% return on capital .... fantastic performance

    At current shareprice market cap is $1.1 billion. So if you managed to buy the company it would cost you this $1.1 billion and you pick up the $100m debt so total cost (capital required) is $1.2 billion. All of sudden that $90m operating earnings is not that attractive .... it only gives you a 8% return on the capital invested (6% if you had to pay a 20% premium)

    So honestly .... would any of you if you had $1,4 billion buy something for a 6% after tax return .... esp when they have essentially saturated the market and future growth potential is rather limited without further capital.

    I doubt it ... therefore isn't WHS overvalued at the moment? .... and that there is some strategic value of the sites / footprint for a potential buyer included in the price.

    Same sort of thinking Buffet applies ... as Snoopy would probably say Warren wouldn't be buying WHS at these prices .... but at what price? .... at least a 12% return i would say to cover cost of capital ... ie about $2.10 a share.

    Is that what Warren pay Snoopy ... haven't checked your latest workings on sharechat



    This is not saying that buying WHS shares is stupid or anything .... it is saying that a purchaser would not get much of a return from buying the company at the current price ..... but the WHS shareprice will probably go up and down over the next few years even thought the underlying 'fundamnetals' wont change .... thats what i mean about trading the price of WHS shares .... nothing more and nothing less
    Trying to remember the saying, "better to pay a good price for a great company, than a great price for a good company" (something like that)

  7. #47
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    Quote Originally Posted by winner69 View Post
    wb ... sort of what i was raving on about is covered in my easons below why i wouldn't buy WHS at the moment .... even though fundamnetally it is a great company, strategically well placed, essentailly well mnanaged, has a good business model etc and will remain part of NZ landscape for some time. So on fundamentals no reason not to buy .... but at the mo on a fundamental valuation basis overpriced .... I couldn't justify paying the market price for it today if I could afford to buy the whole company

    From my psot on the WHS thread -

    Currently WHS EBIT about $128M (assuming this year to be about the same as last year) which after tax gives Operating Earnings of about $90M .... driven from shareholder equity of $$320m and debt of $100m .... so a 20% return on capital .... fantastic performance

    At current shareprice market cap is $1.1 billion. So if you managed to buy the company it would cost you this $1.1 billion and you pick up the $100m debt so total cost (capital required) is $1.2 billion. All of sudden that $90m operating earnings is not that attractive .... it only gives you a 8% return on the capital invested (6% if you had to pay a 20% premium)

    So honestly .... would any of you if you had $1,4 billion buy something for a 6% after tax return .... esp when they have essentially saturated the market and future growth potential is rather limited without further capital.

    I doubt it ... therefore isn't WHS overvalued at the moment? .... and that there is some strategic value of the sites / footprint for a potential buyer included in the price.

    Same sort of thinking Buffet applies ... as Snoopy would probably say Warren wouldn't be buying WHS at these prices .... but at what price? .... at least a 12% return i would say to cover cost of capital ... ie about $2.10 a share.

    Is that what Warren pay Snoopy ... haven't checked your latest workings on sharechat



    This is not saying that buying WHS shares is stupid or anything .... it is saying that a purchaser would not get much of a return from buying the company at the current price ..... but the WHS shareprice will probably go up and down over the next few years even thought the underlying 'fundamnetals' wont change .... thats what i mean about trading the price of WHS shares .... nothing more and nothing less
    Thanks for that winner69, that sounds a lot easier than trying to figure out sh!tload of ratios!! So correct me if I'm wrong, I could basically used the PE ratio of several stocks to narrow down the search, and dig a little bit deeper with what's left over to work out if it is under/overvalued from there, and then pick the best one of the bunch?

    All sounds too simple.

  8. #48
    Speedy Az winner69's Avatar
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    Quote Originally Posted by wbosher View Post
    Thanks for that winner69, that sounds a lot easier than trying to figure out sh!tload of ratios!! So correct me if I'm wrong, I could basically used the PE ratio of several stocks to narrow down the search, and dig a little bit deeper with what's left over to work out if it is under/overvalued from there, and then pick the best one of the bunch?

    All sounds too simple.
    In theory yes mate but life isn't always that simple is it .... irrespective of what ratios say remember that shareprices invariably reflect the prevailing sentiment of investors at any point in time.

    One thing I am not clear about is what type of investor you want to be and what are your long term objectives. You seem to have moved away from being a trader which seems to suggest you want to be reasonably active with your investing to trying to invest on fundamentals which suggests you are happy with consistent gains over time with the odd windfall along the way .... or are just exploring what is best for you?

    Looking at fundamentals is more than just ratios (they are jsut valuation tools). It is more important to understand how a company makes money and what the key drivers are that lead to sustainable earnings growth .... and then you work out what you might want to pay for it ,,, as shasta said try to find a great company at a good price

  9. #49
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    Quote Originally Posted by winner69 View Post
    In theory yes mate but life isn't always that simple is it .... irrespective of what ratios say remember that shareprices invariably reflect the prevailing sentiment of investors at any point in time.

    One thing I am not clear about is what type of investor you want to be and what are your long term objectives. You seem to have moved away from being a trader which seems to suggest you want to be reasonably active with your investing to trying to invest on fundamentals which suggests you are happy with consistent gains over time with the odd windfall along the way .... or are just exploring what is best for you?

    Looking at fundamentals is more than just ratios (they are jsut valuation tools). It is more important to understand how a company makes money and what the key drivers are that lead to sustainable earnings growth .... and then you work out what you might want to pay for it ,,, as shasta said try to find a great company at a good price
    I'm taking a break from trading due to my wife having a baby in about 4 weeks, and I'll need all the money I can muster while she's off work. I'm thinking about doing both short/medium term trading as well as some long term investing, once we're back on our feet financially. This why I thought I'd use this time to learn something about FA so that I'll be prepared when the time comes to get back into it. It'll probably be close to a year before I can afford to do anything though.

    I was using trading for quick gains, which for the most part I acheived. The sharp rise in the market over the last year (with the exception of the last couple of months) certainly helped.

    My reason for the long term investments will be to hopefully have enough money in about 15 years to put my kids through university, if they choose to do that, or help them get into their first home. I think getting into a home in 20 years time will be almost impossible with out parental assistance. That's what we're here for after all.

  10. #50

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