# MQG vs. BNB - which is best?



## JeffB (3 August 2005)

Does anyone have a view on these two stocks. MBL seems to be hitting strong resistance levels at $64, even with a brokers target of $ 70 and brokers are tipping BNB as a long term buy but are there any short term valuations.


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## Yippyio (19 October 2005)

*Re: MBL vs BNB- which is best?*

ABN AMRO Broker Up Grade for both stocks

FYI - Rationale

MBL & BNB – Time to Buy back in …

Our analysis shows that the downside risks to valuations for MBL and BNB are limited. Given strong business models, we believe that in the near term both stocks will continue to be bolstered by upgrades. We move both stocks from Add to Buy.
Sensitivity testing for key risks shows limited downside...

The key risks to our valuations and target prices for Macquarie Bank (MBL) and Babcock & Brown (BNB) are a downturn in equity markets, a rise in interest rates and an increase in competition. Our sensitivity testing of all three events shows a surprising resilience by both banks to negative shocks over the next 12-18 months, with the maximum valuation impact resulting from a rise in interest rates, decreasing valuations for MBL by 12% and for BNB by 22%.

...and both banks now well positioned for the medium term


In our view, there are important counter-arguments to concerns about the risks mentioned above. Firstly, both banks have raised enough equity over the past 12 months to continue with rapid asset growth even in a market downturn. Secondly, international diversification provides the opportunity to search for assets and capital on a global scale. Thirdly, the increasing brand recognition of both firms provides them with a distinct competitive advantage compared with any newcomers.
Biggest issue is keeping the fee pipeline full

Given the level of spare capacity at both MBL and BNB, we believe the main impediment to their growth in the near to medium term will be finding suitable assets in which to invest while maintaining a disciplined approach to acquisitions. Longer term, MBL and BNB will need to raise further capital to support the continued rollout of their specialised funds and, as such, are vulnerable to future market conditions.
Upgrades to earnings forecasts, price targets and recommendations

In the near term, we believe MBL and BNB's share prices will continue to be bolstered by earnings upgrades. Accordingly, we lift our forecasts for the next couple of years by about 5% for both stocks. Further out, reduced visibility leads us to a more cautious approach. Nevertheless, with the rise in our price target for MBL from A$80.85 to A$84.72 and the retention of our A$20.00 price target for BNB, there is now more than 20% upside potential to our targets for both stocks. Hence, we raise our recommendations on both from Add to Buy.


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## RichKid (19 October 2005)

*Re: MBL vs BNB- which is best?*

I've changed the title of this thread as there are existing threads on each stock.

So this'll basically be a thread on which one has better prospects and why- basically a comparison.

If comments are stock specific then they can go in the respective thread for MBL or BNB.


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## kerosam (19 October 2005)

*Re: MBL vs BNB- which is best?*

does anyone remember in a recent AFR article, a broking company believes that MBL has price target of about $142 to $146? didn't say time frame. anyone care to comment on that?

BNB... don't they have a group of rich jews behind them? if these jews are supporting BNB, BNB can't go too wrong.


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## michael_selway (21 October 2005)

*Re: MBL vs BNB- which is best?*



			
				Yippyio said:
			
		

> ABN AMRO Broker Up Grade for both stocks
> 
> FYI - Rationale
> 
> ...




thx are those 84.72 & 20.00 price targets for the next 12 months from the date of article being written? thanks


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## It's Snake Pliskin (21 October 2005)

*Re: MBL vs BNB- which is best?*

They are both stuck in quicksand today!


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## RichKid (21 October 2005)

*Re: MBL vs BNB- which is best?*



			
				Snake Pliskin said:
			
		

> They are both stuck in quicksand today!




Sell vol seems to have reduced a bit for MBL but BNB has had selling pick up a bit in the last few days.


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## waytogo (30 December 2005)

*Re: MBL vs BNB- which is best?*

Which is best - your own answer to this question may come down simply to your risk/reward appetite.  Some thoughts I had follow- bear in mind my comments are speculative in nature, and you must make your own investment choice.  None of us have crystal balls, otherwise I would be in Monte Carlo right now with all the other millionaires...

Both shares are growth shares, with BNB yet to clarify its P/E a bit more (hopefully this December 2005 full year result). Both have had a number of earnings upgrades, with BNB expected to produce a circa $216 million full year profit, following two 20% upgrades.  The prospectus forecasted
$154.7 million.  BNB's P/E appears to be a little more expensive than MBL's following the respective guidances, but both companies have said their guidances would be "at least" the forecasts made.  BNB, with its GPT joint venture or potentially other initiatives, could potentially pull even more income out of the bag, making its P/E look better again.  Both companies have been very busy doing further deals globally this year, which are longer term deals, to snowball in the context of future earnings.

Both have been said to deserve the same P/E valuation on the basis that BNB's better growth prospects offset its higher balance sheet risk.  On the upside, you could argue BNB has a lot more growth potential, by looking at its trading performance thus far, over and above MBL, which trades on a lower P/E.

Bar the shouting, both these growth shares should do well in buoyant market conditions.  Indeed, their very business models are interrelated to the health of the global/Australian economy/markets.  

As MBL does well,  BNB seems to do even better, to show what it can become.  BNB also appears to be even more internationally focussed, which is the next major frontier for MBL's continued growth outside its home market.

In a downturn, the recent October 2005 crunch showed how resilient each share may be in inevitably tougher times.  BNB was hurt more than MBL, but did rebound better from its $15 low (helped by the fact it fell more).  MBL is better diversified in its operations, while BNB is more specialised and following a mini-mac model.

Both have strong and growing long-term cash flows from global, market-leading assets, to buffer bad times.  Such cash flows ensure debt levels are manageable, as do efforts to fix debt interest rates to counter future increases.  

MBL's tilt at the LSE and other growing global moves represent the company's next major growth watershed, and should be expected to underpin the continued march of its share price.  Of course, what is to stop BNB doing this, or should I say, continuing to follow a similar sounding strategy?  BNB may well just be in "catch up", then "pass by" mode.  For the present, BNB requires a greater risk appetite in tougher markets, to go with the benefits of its to-date greater finesse during good markets.

-----------------------------------------------------------------------
These are just my own thoughts, not recommendations to you.  I am not qualified to give investment advice!


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## RichKid (30 December 2005)

*Re: MBL vs BNB- which is best?*



			
				waytogo said:
			
		

> Which is best - your own answer to this question may come down simply to your risk/reward appetite.  Some thoughts I had follow- bear in mind my comments are speculative in nature, and you must make your own investment choice.  None of us have crystal balls, otherwise I would be in Monte Carlo right now with all the other millionaires...




Great summary waytogo, 
I guess BNB is clearly more volatile atm as you say (and as the charts show) and a lot will depend on how the market fares as they are exposed to many listed vehicles. I've heard that increasing interest rates (which I think is a done deal over the coming years) may be a vulnerability for both stocks. Not sure how far that is true as I assume they would have hedged that risk to some degree.


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## brisvegas (30 December 2005)

*Re: MBL vs BNB- which is best?*

*BNB*

FORECAST EARNINGS  Last Analyst Update  
 29 December, 2005 
 EPS(c) PE Growth 
Year Ending 30-12-05 71.1 24.1 235.0% 
Year Ending 30-12-06 86.4 19.8 21.5%  


FORECAST EARNINGS TREND DETAILS  
 Year Ending 30-12-05 --------- Year Ending 30-12-06 
 EPS(c) PE Growth --------- EPS(c) PE Growth 
Median 71.1 24.1 235.0%  86.4 19.8 21.5% 
High 76.3 22.4 259.5%  92.3 18.5 21.0% 
Low 65.9 25.9 210.5%  80.5 21.2 22.2% 
30 Days Ago 71.1    86.4   
60 Days Ago 71.1    86.4   
90 Days Ago 71.0    89.5   

Number of Analyst 
Estimates 2  2 


FORECAST EARNINGS TREND
Have the analysts been upgrading or downgrading their forecasts over the last 3 months?


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## brisvegas (30 December 2005)

*Re: MBL vs BNB- which is best?*

*MBL * 


FORECAST EARNINGS  Last Analyst Update  
 29 December, 2005 
 EPS(c) PE Growth 
Year Ending 30-03-06 401.3 16.9 23.9% 
Year Ending 30-03-07 437.9 15.5 9.1% 





FORECAST EARNINGS TREND DETAILS  
 Year Ending 30-03-06 --------- Year Ending 30-03-07 
 EPS(c) PE Growth --------- EPS(c) PE Growth 
Median 401.3 16.9 23.9%  437.9 15.5 9.1% 
High 410.7 16.6 26.8%  459.4 14.8 11.9% 
Low 379.0 17.9 17.0%  374.1 18.2 -1.3% 
30 Days Ago 394.6    437.9   
60 Days Ago 377.5    414.5   
90 Days Ago 373.0    411.1   

Number of Analyst 
Estimates 6  6 

 FORECAST EARNINGS TREND
Have the analysts been upgrading or downgrading their forecasts over the last 3 months?


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## TheAnalyst (30 December 2005)

*Re: MBL vs BNB- which is best?*

I have my eye on mbl installment warrants, however, i wont be in one bank but most likely the majority of them with different weightings for each one of them.

I like mbl as it is the only growth stock with a near frundamental p/e and there is no economic indication that they will not continue to grow earnings.

I like st george because it has the least market capitalisation and would be one of the most potentail take over targets.

I like NAB because when this baby recovers it most likely will recover with lightening speed, the trouble is about when,  so you got to have your money there as any fundmanager who misses out will get their back side kicked.

ANZ and CBA have given no indication that they are not going to continue growing earnings and any of the two will most likely be involved in a take over offensive of St george and to a lesser extent AMP.

Suncorp metway i like because they are another type of QBE story but a bank as well, so diversity diversity


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## michael_selway (31 December 2005)

*Re: MBL vs BNB- which is best?*



			
				TheAnalyst said:
			
		

> Suncorp metway i like because they are another type of QBE story but a bank as well, so diversity diversity




Hi can u tell me what the "QBE story" is 

thanks!


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## RichKid (31 December 2005)

*Re: MBL vs BNB- which is best?*



			
				michael_selway said:
			
		

> Hi can u tell me what the "QBE story" is
> 
> thanks!




Please keep this on topic folks, by all means start a new thread if need be for Suncorp....


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## brisvegas (31 December 2005)

*Re: MBL vs BNB- which is best?*



			
				RichKid said:
			
		

> Please keep this on topic folks, by all means start a new thread if need be for Suncorp....





please define "on topic"


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## TheAnalyst (31 December 2005)

*Re: MBL vs BNB- which is best?*



			
				michael_selway said:
			
		

> Hi can u tell me what the "QBE story" is
> 
> thanks!




Let me guess! you are related to chicken......lol...


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## RichKid (1 January 2006)

*Re: MBL vs BNB- which is best?*



			
				brisvegas said:
			
		

> please define "on topic"




Thanks for the question. The title of the thread is always a useful guide. This thread is not about all banks, it's about how MBL & BNB compare to each other. 

Waytogo's post is a good example of the comparative analysis which we seek in this thread. Posts on MBL or BNB alone can go in the MBL or BNB threads. Hope that it is clear now, your posts comparing the financials of each bank is great for fleshing out the points raised earlier by Waytogo.


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## waytogo (2 January 2006)

*Re: MBL vs BNB- which is best?*

Reading through newspapers, MBL has featured fairly consistently as a key pick for the new year, with BNB expected to again go over $20 in 2006, after its recent pasting. Based on buoyant markets and continued global growth, MBL's (and BB's) successful business model should reasonably produce such results.

MBL (and BNB) are following a strategic growth theme, which is ramping up
global asset acquisitions into the upward global economic cycle.  Allan Moss’ stategy is to pursue “big opportunities in big markets”. 

Sure interest rates spook the market (and probably BNB more than MBL given its greater volatility), and yes interest rate rises are the biggest threat to both stocks, but rising interest rates are also a very positive sign of healthy economic growth/its accompanying CPI pressure.  The healthy global economic growth will be MBL's/BNB's meal ticket. Central banks around the world need to carefully ensure they don't increase interest rates too far though, and smother the valuable growth.

MBL and BNB's other three major risks to earnings and share price growth are declining equity markets, competition for assets being purchased and sentiment.  MBL has a reasonable exposure to poor sentiment, given fee criticism in the past, and the public nature of several assets like the tollways and airports.  So, sentiment is probably their no. 2 risk.  Various catchphrases that praise the 'Millionaires Factory' just as easily get trotted out in damaging media articles when newspaper sales are needed with the help of emotive articles.  I think most people wuld be surprised if an organisation like MBL wasn't trying to earn fees from its line of business.
I am not qualified to give financial advice - you should seek your own recommendations.


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## bug (27 August 2006)

*Re: MBL vs BNB- which is best?*

Jeff B highlighted the strong resistance keeping MBL below $64 on 3 August 2005.  What's the price today? $63-odd. 

MBL has had quite a lot of trouble staying past $64, not to mention dipping below $60 a few times too, over the last 11 months.

What is it with Macquarie? It's had plenty of deal announcements, and not excessive negative media coverage.

Can it's dismal SP performance just be put down to choppy equity markets and the difficulty moving assets off its balance sheet to recycle profits?  Profit levels have been at a record anyway. The 2007 full year result will include Dyno Nobel and the $90M profit from the sale of its stake in Macquarie Goodman.  It isn't hard to roughly work out their profit this time will exceed $1 Billion.  They are snowballing in size globally, so even this figure should keep rolling.

BNB is doing well, putting out more profit upgrades, around eight in the space of two years' listing.  It's admittedly been a little range bound too, having trouble getting past $20, but managing to quickly recoup its major fall down to $15 during last year's October correction.

Is it MBL's big share price that's holding it back, while the more nimble BNB has a strong growth path?  BNB has achieved the same growth it took MBL the last four years to achieve.  BNB has done it in 2 years of listing.

BNB has gone down the same track of setting up specialist funds and truly is a mini-mac.  But will it be a victim of its own growth and success like MBL later?


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## michael_selway (27 August 2006)

*Re: MBL vs BNB- which is best?*



			
				bug said:
			
		

> Jeff B highlighted the strong resistance keeping MBL below $64 on 3 August 2005.  What's the price today? $63-odd.
> 
> MBL has had quite a lot of trouble staying past $64, not to mention dipping below $60 a few times too, over the last 11 months.
> 
> ...




Basically not much growth for MBL % pa wise, atm, compared with BNB, AFG and MFS.

*MBL - Earnings and Dividends Forecast (cents per share) 
2006 2007 2008 2009 
EPS 382.3 440.2 471.2 478.0 
DPS 215.0 250.0 267.5 292.0 

BNB - Earnings and Dividends Forecast (cents per share) 
2005 2006 2007 2008 
EPS 77.0 106.3 130.5 156.3 
DPS 23.0 33.0 41.0 48.5 

AFG - Earnings and Dividends Forecast (cents per share) 
2005 2006 2007 2008 
EPS 32.0 48.7 62.3 77.4 
DPS 30.6 42.0 43.0 45.6

MFS - Earnings and Dividends Forecast (cents per share) 
2005 2006 2007 2008 
EPS -6.8 24.4 30.0 39.2 
DPS -- 14.0 18.5 23.5 * 

thx

MS


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## Julia (28 August 2006)

*Re: MBL vs BNB- which is best?*

There has been quite a deal of suggestion that MBL will split their business into two separate divisions.  I don't know how much concern this may be causing investors but while there is uncertainty about what will happen there is usually an adverse effect on the SP.

Julia


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## bug (28 August 2006)

*Re: MBL vs BNB- which is best?*

MBL and BNB have taken almost similar approaches to establishing infrastructure funds - what are their respective chances of reaping future benefits?

There has been a lot of bad sentiment about rising interest rates and the sustainability of the specialist funds model.  MBL has persistently revalued the funds to further borrow against their assets, with dividends paid to investors from the refinancing proceeds.  Rising interest rates will make the cost of servicing that debt greater and physical operational revenues that can't sustain dividend payments will struggle to fund the debt.

To its credit, BNB has rejected this unsustainable model and BBI has paid dividends from operational income. MBL's appetite for fees and the above issues with its infrastructure business model are making the chances of new infrastructure funds less likely.  MBL's tilt at the LSX was one of the first signs its infrastructure fund model had run its full course - everything was being called infrastructure even if it wasn't quite.


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## Fab (5 November 2007)

*Re: MBL vs BNB - which is best?*

Just wondering what is happening with MBL today. It looks to me like it did not trade. Can anyone explain ??


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## doctorj (5 November 2007)

*Re: MBL vs BNB - which is best?*

MBL's code has changed to MQB and I believe is now known as Macquarie Group.


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## Fab (5 November 2007)

*Re: MBL vs BNB - which is best?*



doctorj said:


> MBL's code has changed to MQB and I believe is now known as Macquarie Group.




Thanks I just entered the code in Commsec but it was not recognised ? Any idea when this code will be available


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## doctorj (5 November 2007)

*Re: MBL vs BNB - which is best?*

Sorry, that should have read MQ*G*.


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## fenghui (6 November 2007)

*Re: MBL vs BNB - which is best?*



doctorj said:


> Sorry, that should have read MQ*G*.




I have some MBL shares. Can I still use the code "MBL" to sell?


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## doctorj (6 November 2007)

*Re: MQG vs BNB - which is best?*

No idea - probably best to call your broker.


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## Fab (11 February 2008)

*Re: MQG vs BNB - which is best?*

Here is what ABN Amro says about MQG:

MQG’s update last week reaffirmed that the business is on track to deliver, however, Allan Moss's
resignation stole the headlines. This saw the MQG share price sell off quite aggressively, however we
believe Nick Moore is a solid and experienced replacement and the business has been left in good health.
With its strong financial position and global leadership in infrastructure, MQG looks like good value at
these levels, and is currently trading on a discount to international investment banks despite its stronger
growth pipeline and limited sub prime exposure. Strong support at $60, buy 

I am tend to agree with this statement. It looks incredible to me that MQG is @ $60 at the moment.


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## Fab (11 February 2008)

*Re: MQG vs BNB - which is best?*

Here is more from ABNAMRO
Reaffirmation of guidance, resignation of CEO
MQG's reaffirmation of its profit guidance for FY08 was overshadowed by the announcement of Allan Moss's
resignation. As widely anticipated, Nicholas Moore will take over as CEO, although the timing will come as a
surprise and is perhaps unfortunate given the fragile state of equity markets. We do not believe that this handover
will materially impact the growth prospects of MQG.
Guidance
MQG has confirmed that the 2H08 result will be at least in line with the pcp (A$733m), implying a full-year result of
$1.8bn.ABN AMRO believe the risks are now to the upside given the 3Q08 result was up 13% on the pcp. In order
to miss current guidance, either performance would need to deteriorate dramatically or provisions be far higher than
management currently anticipate.
Investment view
While there are obvious concerns around MQG's indirect exposure to further market turmoil, we believe the group
should have a much lower correlation with global investment banks (95%). MQG has a diversified earnings stream,
as demonstrated in the strong 1H08 result. Furthermore, we believe MQG's increasing brand awareness and
leadership position in the infrastructure space will continue to drive growth in overseas earnings. ABN AMRO price
target is $90.


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## hardcoremike (12 February 2008)

*Re: MQG vs BNB - which is best?*

Fab. Just curious as to how u get those reports?
cheers.


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## galey (12 February 2008)

*Re: MQG vs BNB - which is best?*

BNB has far less exposure to the prime debacle then MQG so when things start to recover BNB should be in great position.


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## Fab (13 February 2008)

*Re: MQG vs BNB - which is best?*



hardcoremike said:


> Fab. Just curious as to how u get those reports?
> cheers.




It is an ABN amro newsletter

Here are the headlines for today.

In Today’s Issue:
Global Market Action Scoreboard, Commentary, Resources
Aussie Market Action SPI Comment, Events & Dividends
ASX (ASXWZE) Reporting Preview – Volumes are still strong
MQG (MQGKZI) MINI Trading Buy – Update reaffirms guidance
WBC (WBCJZR) HOTS Investment Buy – Gail Force
Round Up Corner Companies reporting tomorrow – AMP,ASX,LEI

I can't believe that MQG is trading so low.


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## Fab (13 February 2008)

*Re: MQG vs BNB - which is best?*



Fab said:


> It is an ABN amro newsletter
> 
> Here are the headlines for today.
> 
> ...




Here is more info:

Toll free 1800 450 005
www.abnamro.com.au/warrants


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## prana (13 February 2008)

*Re: MQG vs BNB - which is best?*

not suprising. MBL was trading from $40 to $20 during the last NA recession - it happens, it's the market mate.


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## Garpal Gumnut (13 February 2008)

*Re: MQG vs BNB - which is best?*

I would tend to wait until they both bottom, all these broker recommendations seem optimistic in the extreme.

MQG has support at $50, its also a nice round number. If it holds at this level I'd wait a few months for it to trade sideways before entering. It may go further down, next support is $35.

BNB similarly has support at the $10 mark, also a nice round number.

It seems to be a given that these shares, once they stabilise are going to go up again, as they did in the bull market recently finished. This is unlikely.

Brokers make money from buying aand selling shares so it is natural for them to spruik shares. 

Please look back on the MBL, MQG, BNB, AFG and other debt type share threads on ASF and look at the broker recommendations for these stocks over the last few years. Pure bunkum and selling of dreams. 

Wait for the bottom and  sideways trending before re entering these stocks. Charts for MQG and BNB attached.

There is no need to rush in, especially in a bear market with short selling of these products.

gg


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## Garpal Gumnut (15 February 2008)

*Re: MQG vs BNB - which is best?*



Garpal Gumnut said:


> I would tend to wait until they both bottom, all these broker recommendations seem optimistic in the extreme.
> 
> MQG has support at $50, its also a nice round number. If it holds at this level I'd wait a few months for it to trade sideways before entering. It may go further down, next support is $35.
> 
> ...




We do indeed live in interesting times, $50 doesn't seem unrealisable for MQG and $15 for BNB, chartwise. Any funnymentalist views on this, I get lost in p/e s and forward valuations.

gg


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## 3MT (16 February 2008)

*Re: MQG vs BNB - which is best?*

How do you fundamentally analyse bull market darlings like MQG and BNB in a bear situation (where debt is not so cheap, but no-one knows exactly how less so). (ie. you need lots of luck) 

Forecasts are always questionable of course, but even more so in an environment where cost of funding is hard to price (relatively unpredictable) and availability of funds is lower (but once again hard to estimate how much lower because at the moment it seems to be sentimentally drivened) -- despite the money supply still at high levels.

The only consolation i see with MQG is that the company pays good money to employ some of the best minds to work on creating value for their shareholders. But at the same time, they are subjected to macro parameters which even the best may not be able to work around (at least for now).

I might trade both BNB and MQG (BNB being a good trade stock), but would never invest in them. Only because I think there are plenty other opportunities with more solid business models. I may forgo the specular returns, but I guess I am more risk adverse than the BNB/MQG shareholders.  -- risk/reward thing.


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