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Decision Journal
galumay:
I ended up increasing my position in DDR, I had a lengthy internal battle with myself about the debt levels, everything else about the company is compelling but I wish they would do more to reduce the debt level. Dicker Data have fallen in recent weeks to what appears to be a cheap price on any metric. I played devils advocate at length in a thread on HotCopper, http://hotcopper.com.au/threads/ann-fy2015-results-presentation.2725548/
I got in at $1.53 which has averaged down my holdings to $1.66
Ultimately I dont like adding new holdings to the portfolio unless the case is compelling - and it wasnt in SMX's case. So looking at existing holdings to build into, UOS is already a pretty big part of the portfolio, CCP is also built to about as much as I am comfortable with and the others are either in out of favour sectors or fully priced. So DDR it was, the binary option was SMX so my prediction is that DDR will likely perform better in the long term than SMX, with lower risk. Its possible SMX will outperform DDR if they can turn the business around, but there is a fair amount of risk that it wont turn around and it would have meant a new company in the portfolio - so lets see where these two head in the mid term.
Now a week later DDR are up to $1.70 - right for the wrong reasons, as soon as i bought DDR issued an announcement that 1st Q results were ahead of forecast by $1m - but SMX were up about 15% in the same week!!
galumay:
TGA reported profit impairment and downgrades this week, they appear to impact NPAT by about -30% and therefore EPS will reduce from around 21c to 14c.
Underlying NPAT would appear to basically be flat, which means EPS should return to around 20c and NPAT circa $30m next year, the current price of $1.40 seems very cheap on those metrics and the fall of 20% in the SP seems disproportionate to the long term impact of the downgrade.
To average down and take advantage of this potential mispricing I would need to sell another holding, considered options are selling SGN for a small profit and reinvesting in TGA or selling CAB at a larger loss and reinvesting in TGA.
Revisiting my analysis of CAB its worth so much more than its share price, cheap on every possible metric. The disruptive impact of UBER has smashed the price as has the regulatory changes, yet the company has not suffered anywhere near the impact the share price would suggest. I think it would be madness to sell at a loss.
SGN have recovered and with a review of operations and a merger with WPP they now look a lot more solid than when i took a punt on them originally, they pay a good dividend and are up to $1.07 from the $0.91 i paid. I am very reluctant to sell these to take the punt on averaging down into TGA.
I also have the UOS i bought to trade the +/- 5% in SP, if these can make it back to 50c while TGA are 'cheap' I may choose to swap over for a trade on TGA rather than averaging down.
galumay:
Well still waiting for UOS to recover to a sell, on market at my buy price of 48c - I picked up the divvy of $520 anyway so would be happy with that exit and then buy TGA. Will see if Mr Market meets my price!
17/7/16 - managed to get back out of UOS for 48c. banked the profit of $520 and retored capital to bank.
galumay:
ICS This is a little company that has been on my watch list for quite a while, I am thinking about taking a position. Its currently trading at about $1.65 and I have a note on my scratch sheet to look at them again at anything below $1.70.
I suspect the price has suffered a bit from the fact that nearly all their revenue comes from the UK, and there will obviously be some short term currency impacts, but the business itself should be uneffected by whatever Brexit ends up looking like.
I like the fact that they have no debt, some cash and the core business is simple to understand and seems resilient.
Thinking about the risks, I guess someone else could develop better software and market share might shrink. The other risk is probably management doing something stupid - they have a bit of form! The most recent ones being the seemingly unecessary consolidation - about which KTP on the other forum, made the pithy observation, "211 million shares on issue was considered too large".
Too large for what? Are they counting them by hand?" Also the rather bemusing move into the edu sector - with a tiny investment of $250k. Didnt really make a lot of sense to me.
galumay:
Also decided to sell the last of my corporate bonds, discovered the bastards at FIIG are charging me a $30 per month fee - which have no memory of! Will add it to the cash postion in UBank.
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