CAM - Clime Capital

[Pager]

Any opinion?

Ticking along nicely until the credit corp. **** up, down about 50% from its highs last year.

Worth buying at these levels? (86 cents today with a yield of over 6% FF) have they learnt a lesson after CCP that will make them a better manager ?

 

[dhukka]

I have no view on the value of this company except to say that it is trading below NTA.

As stated on another thread, I think CAM's much touted valuation methodology is sound, it is their application of that methodology in the case of CCP that was flawed. It wouldn't be such a big deal, every fund manager makes some bad picks. However, CCP was CAM's biggest investment and for that to implode is a major blow to their credibility as stock pickers IMO.

Yesterday they took another blow to their credibility when they announced that they may not be able to pay the quarterly dividend to their preference share holders.

However, CCP aside they do have a decent track record of picking good stocks such as TRS. It's going to take a while to repair their reputation and the negative sentiment may give you the opportunity to pick up CAM stock at a reasonable price.

 

[josjes]

Any opinion?

Ticking along nicely until the credit corp. **** up, down about 50% from its highs last year.

Worth buying at these levels? (86 cents today with a yield of over 6% FF) have they learnt a lesson after CCP that will make them a better manager ?

If you are in for long term investment, you are better off buy proven well established older LIC, eg. ARG, AFI which has been investing in AUstralian market for more than half century or even ETF that mimick ASX performance like STW, SFY. You know their track record. CAM and the like of many newly listed companies (during the bull market run from 2003-2007) are stock picker, it is very hard if not impossible to beat market year in year out. They might outperform in one year but go bust the next year. In short, unless the manager has proven him/herself over longer term (at least 10 years) that they can beat the market, then give your money to Index manager.
I have learned this the hard way. I have invested in the past on WIL, PMC, TGG but very disappointed. Just my humble view and past experience.

 

[TheRage]

I think both Dhukka and josjef make good points.
The thing that annoyed me about the CCP debarcle is that the valuaiton tool that they use (StockVal) had CCP listed as level 3 risk. They use a scale of 1-4 with 1 reflecting companies that are as solid as wood, while 4 being compaines which are more speculative in nature. While the risk is supposedly adjusted by the potential for return or % discount to market price this to me pointed out an inherrent flaw in the design of stock val. That is no matter how good the return might be for the risk if the assumptions used are based on financials which are wrong then the investment opportunity may never be as good as it appears. For this reason putting large positions into riskier companies at a supposed large discount is flawed. I think I would rather a 12% return with very little risk than a 20% return with heaps of risk. I think Cam has learn't that diworsification can be a good thing in a falling market but I do beleive that their approach is sound but maybe their position sizing needs to be looked at.

 

[dhukka]

I think both Dhukka and josjef make good points.
The thing that annoyed me about the CCP debarcle is that the valuaiton tool that they use (StockVal) had CCP listed as level 3 risk. They use a scale of 1-4 with 1 reflecting companies that are as solid as wood, while 4 being compaines which are more speculative in nature. While the risk is supposedly adjusted by the potential for return or % discount to market price this to me pointed out an inherrent flaw in the design of stock val. That is no matter how good the return might be for the risk if the assumptions used are based on financials which are wrong then the investment opportunity may never be as good as it appears. For this reason putting large positions into riskier companies at a supposed large discount is flawed. I think I would rather a 12% return with very little risk than a 20% return with heaps of risk. I think Cam has learn't that diworsification can be a good thing in a falling market but I do beleive that their approach is sound but maybe their position sizing needs to be looked at.

I think you're exactly right but have drawn the wrong conclusion. I don't think it is the valuation tool that is the problem. As you said yourself, it's the assumptions that go into it. The old garbage in, garbage out problem. This is the limitation of any valuation tool.

Notice how all the banks according to stockval looked like good value until they came out a couple of weeks ago and adjusted the discount rates to reflect the higher risk of bad loans etc. CAM was late to the party on this. Anyone paying attention to what was happening to credit markets worldwide could have seen it coming months ago. If you had taken CAM's assumptions as gospel and bought bank stocks based on those assumptions you would proabably be pretty pissed off.

The good part about stockval is that you can adjust the parameters, you don't have to use what the CAM analysts input. In addition, I would never buy a stock on the basis that stockval says it is undervalued. As far as I'm concerned it is just a screening tool, a jumping off point to do more research on selected companies.

 

[ROE]

I think both Dhukka and josjef make good points.
The thing that annoyed me about the CCP debarcle is that the valuaiton tool that they use (StockVal) had CCP listed as level 3 risk. They use a scale of 1-4 with 1 reflecting companies that are as solid as wood, while 4 being compaines which are more speculative in nature. While the risk is supposedly adjusted by the potential for return or % discount to market price this to me pointed out an inherrent flaw in the design of stock val. That is no matter how good the return might be for the risk if the assumptions used are based on financials which are wrong then the investment opportunity may never be as good as it appears. For this reason putting large positions into riskier companies at a supposed large discount is flawed. I think I would rather a 12% return with very little risk than a 20% return with heaps of risk. I think Cam has learn't that diworsification can be a good thing in a falling market but I do beleive that their approach is sound but maybe their position sizing needs to be looked at.

It's a piece of software it will always be flaw.. and what even more flaw is someone pay thousand of bucks for it and now that is scary.
Why it is flaw because it cant factor in human Irrational exuberance and down right greed and fear and it's that factors that drive stock to new high and historic low

There are no systems or software that can make you money, there is no quick way to riches .. Get back to fundamentals and invest in something you know and understand.
What the software can do I can do in 10 minutes and have just as much effectiveness as that piece of software.

 

[TheRage]

I think you're exactly right but have drawn the wrong conclusion. I don't think it is the valuation tool that is the problem. As you said yourself, it's the assumptions that go into it. The old garbage in, garbage out problem. This is the limitation of any valuation tool.

Notice how all the banks according to stockval looked like good value until they came out a couple of weeks ago and adjusted the discount rates to reflect the higher risk of bad loans etc. CAM was late to the party on this. Anyone paying attention to what was happening to credit markets worldwide could have seen it coming months ago. If you had taken CAM's assumptions as gospel and bought bank stocks based on those assumptions you would proabably be pretty pissed off.

The good part about stockval is that you can adjust the parameters, you don't have to use what the CAM analysts input. In addition, I would never buy a stock on the basis that stockval says it is undervalued. As far as I'm concerned it is just a screening tool, a jumping off point to do more research on selected companies.

Yes you are right. It is the interpretation and influence of CAM's analysis which led me into CCP to start with not the tool. I should not be blaming the tool I should be blaming my self for not having developed my own criteria using the tool. A lesson learned and wont be repeated.

 

[ghotib]

In response to the original question, I think Clime is worth buying at these prices if only because they're so far below NTA, but that doesn't mean it's my, let alone your, best buy.

My take on the CCP pain is a bit different, and it'll be interesting to see what lesson Montgomery & co. draw from it as time goes on. Dhukka has said that he thinks they didn't really understand the business and that they didn't value the ledgers properly. He may well be right about that, but the bright red flag for me was CCP management's explanation of the first downgrade. Remember they said that they were putting on masses of new staff and they'd underestimated the time to train them. That seemed to me like a very serious mistake to me, at least as serious as a financial stuff-up. If senior management was that wrong about how long their people needed to learn how to generate projected income, then senior management didn't understand what their people really do and how many ways there might be to do it. For a business that relies wholly on its staff, that's a huge problem. The Clime guys did talk about the staff in some of their commentary: I remember a remark that CCP was the company of choice to work in. I hope they'll be a bit more skeptical about management's views in the future.

On StockVal and CCP, I could have incorporated that sort of soft data into StockVal by lifting the required return to take account of the risk that I perceived (I didn't, but I was never looking at buying it myself). I think that risk as shown in StockVal is a very loose guide, incorporating anything from stock liquidity to debt level to the perceived quality of the board to whatever. I guess it's more an indication of the amount of digging you should do before buying than anything else.

The CCP thing has shaken my confidence in Clime, but I'm encouraged that they seem to be continuing to follow the strategy they always said they would. As a shareholder, I want them to pick up the dropped stitches and keep knitting, not start doing crochet instead. That means I don't want them to diversify and I don't want them to start chasing price action. I want them to keep looking for good companies that will increase in value over time.

Hopefully without too many more mistakes.

Cheers

Ghoti

 

[dhukka]

In response to the original question, I think Clime is worth buying at these prices if only because they're so far below NTA, but that doesn't mean it's my, let alone your, best buy.

My take on the CCP pain is a bit different, and it'll be interesting to see what lesson Montgomery & co. draw from it as time goes on. Dhukka has said that he thinks they didn't really understand the business and that they didn't value the ledgers properly. He may well be right about that, but the bright red flag for me was CCP management's explanation of the first downgrade. Remember they said that they were putting on masses of new staff and they'd underestimated the time to train them. That seemed to me like a very serious mistake to me, at least as serious as a financial stuff-up. If senior management was that wrong about how long their people needed to learn how to generate projected income, then senior management didn't understand what their people really do and how many ways there might be to do it. For a business that relies wholly on its staff, that's a huge problem. The Clime guys did talk about the staff in some of their commentary: I remember a remark that CCP was the company of choice to work in. I hope they'll be a bit more skeptical about management's views in the future.

On StockVal and CCP, I could have incorporated that sort of soft data into StockVal by lifting the required return to take account of the risk that I perceived (I didn't, but I was never looking at buying it myself). I think that risk as shown in StockVal is a very loose guide, incorporating anything from stock liquidity to debt level to the perceived quality of the board to whatever. I guess it's more an indication of the amount of digging you should do before buying than anything else.

The CCP thing has shaken my confidence in Clime, but I'm encouraged that they seem to be continuing to follow the strategy they always said they would. As a shareholder, I want them to pick up the dropped stitches and keep knitting, not start doing crochet instead. That means I don't want them to diversify and I don't want them to start chasing price action. I want them to keep looking for good companies that will increase in value over time.

Hopefully without too many more mistakes.

Cheers

Ghoti

I think you touch on an important point here. Roger Montgomery has had extensive contact with CCP management, much more so than the average investor could ever hope to have. That increased contact has not benefited CAM one bit and may actually have worked against them.

What I am getting at is that Roger Montgomery's powers of intuition have not served him very well. I have no idea what kind of character Geoff Lucas is, maybe he's a sociopath that can lie through his teeth whilst remaining completely composed. However I find it difficult to believe that through several face to face meetings that Montgomery has been unable to pick up the slightest hint that maybe things were worse than projected by management.

I don't think he needs to be a mind reader but he is either, not a very good judge of character, or his objectivity went completely out the window. The latter could well be the case given that CCP was CAM's single biggest investment and Montgomery has been running around the country giving presentations on how smart is for investing in this business. Actually I think the answer is not either or but probably a combination of both.

For the record, I don't, nor have I ever, owned either CAM or CCP, however I am a stockval subscriber.

 

[Judd]

Apologies for asking this but from what I have read of these posts, CAM uses Stockval, a software package, attempting to undertake an analysis of a particular company's financial situation at a given moment. But, I assume, it cannot factor in poor management, ie a decision to buy and manage debt books for more than are worth.

So, if that is the situation, and please correct me if I am wrong, why would you pay $$$ (have no idea of the actual cost of the product) for a piece of software when it's underlying algorithm cannot necessarily accommodate these 'outliers' and, if so, why would a company rely upon that software to determine its buy or sells?

Sorry but I am a bit thick on these matters.

 

[TheRage]

Apologies for asking this but from what I have read of these posts, CAM uses Stockval, a software package, attempting to undertake an analysis of a particular company's financial situation at a given moment. But, I assume, it cannot factor in poor management, ie a decision to buy and manage debt books for more than are worth.

So, if that is the situation, and please correct me if I am wrong, why would you pay $$$ (have no idea of the actual cost of the product) for a piece of software when it's underlying algorithm cannot necessarily accommodate these 'outliers' and, if so, why would a company rely upon that software to determine its buy or sells?

Sorry but I am a bit thick on these matters.

It calculates it based on past retained earnings and return on equity and makes assumptions which are risk adjusted by the required return. Essentially you get to put in the required rate of return (which is mean't to be your risk filter) For instance if I know a company is risky my required rate of return might be 20% where as something with less risk might be 10%. Once you put in this parameter the tool will tell you whether the current market price is at a discount to the market based on your input or is expensive. The larger the discount the cheaper the stock is and the better the buy. The problem as you have pointed out is that their is a lag on data of 6months due to financial reporting peroids. However in saying that usually a company which has a track record of 7-1o years solid data should be able to project forward if no funny stuff is going on like with ccp.

Perhaps Dhukka could explain it better.

 

[dhukka]

Apologies for asking this but from what I have read of these posts, CAM uses Stockval, a software package, attempting to undertake an analysis of a particular company's financial situation at a given moment. But, I assume, it cannot factor in poor management, ie a decision to buy and manage debt books for more than are worth.

So, if that is the situation, and please correct me if I am wrong, why would you pay $$$ (have no idea of the actual cost of the product) for a piece of software when it's underlying algorithm cannot necessarily accommodate these 'outliers' and, if so, why would a company rely upon that software to determine its buy or sells?

Sorry but I am a bit thick on these matters.

THeRage is essentially right, the only way you can allow for poor management using the stockval tool would be to increase your required rate of return, a very subjective and bound to be inaccurate way to do it. As you say, there is no way to accurate include such outliers. My suggestion is, and I think Roger Montgomery would be in agreement, is that you just wouldn't buy a company with poor management. But of course that assumes you know a particular company has bad management, something CAM failed to pick up on with respect to CCP.

However your questions can be cleared up by removing a false assumption. The company does not rely solely on the software to determine it's buys and sells. In fact, CAM cautions people not to buy a company just because it shows up as undervalued using the software. That doesn't mean some people aren't using it that way, they could be for all I know.

I use stockval as a screening tool, to find companies with good business fundamentals to do further research on. I would never buy a company just because a piece of software spat out a favorable valuation.

 

[Judd]

Thanks folks. Still a little bit unsure since CAM has the added advantage over this punter, and many like me, of being able to meet and discuss issues with management and yet it's investment still went down the toilet: Stockval or no Stockval - assuming CAM does use that product.

No matter. Probably could not afford it anyway.

 

[battiwallah]

Dhukka is right in using Stockval only as a screening tool. "Stockval" is an equation that calculates a number purporting to be the "intrinsic value" of the stock. The variables one must input are: APC (the adopted performance criterion, or return on equity), RR (the required rate of return, or discount rate), RI (earnings reinvested by the company, thus increasing its equity), D (dividends paid out) and EQ (shareholders equity).

It should be realised that ALL these inputs are guesses. No matter that some of them are written in black and white in the company reports, they are still neverthess the result of estimates by accountants subject to error, interpretation and manipulation. Therefore the result has to be taken with a relatively large pinch of salt. Garbage in - garbage out as noted by Dhukka. Therefore, don't place too much faith in Stockval, except (to repeat) as a first pass screening tool. If you could rely on the reliablility of the input numbers it would be fantastic, but you just can't. To state that you will buy a stock when its valuation falls below a particular threshold is nonsense.

Having said that, I still have a high regard for Roger Montgomery, despite the CCP debacle.

Disclosure: I have holdings in CCP and CAM, but do not subscribe to Stockval. I am seriously thinking of increasing my stake in CAM, it's attractive at its current price.

 

[Pager]

Roger Montgomary has been involved in all sorts over the years and many things have come onto the scene with a bang only to disappear after a year or so, not going to bag him but basically hes a very good salesman, anyone remember the Sherpa software ?, or the AGI futures trading system he sold under the banner investors advantage.

Clime has been going for a while know and is in a different league to anything else hes been involved in plus all the regulatory stuff associated with being a listed company but to be honest I'm wary especially after the CCP **** up.

RM is very good at talking the talk but im not sold he/Clime can do the walking bit over time !

 

[ghotib]

Roger Montgomary has been involved in all sorts over the years and many things have come onto the scene with a bang only to disappear after a year or so, not going to bag him but basically hes a very good salesman, anyone remember the Sherpa software ?, or the AGI futures trading system he sold under the banner investors advantage.

Judging by the online documentation that was around when StockVal was first released, Sherpa was an ancestor of StockVal, so it hasn't really disappeared.

Clime has been going for a while know and is in a different league to anything else hes been involved in plus all the regulatory stuff associated with being a listed company but to be honest I'm wary especially after the CCP **** up.

RM is very good at talking the talk but im not sold he/Clime can do the walking bit over time !

Montgomery is certainly a very good salesman. He's been buying Clime himself lately, FWIW. I bought at the IPO and I've increased my holding since. It's a significant part of my share portfolio and I ain't real happy about the CCP thing or the current share price, but I'm holding and at this price I'd consider buying more if bank deposit rates get less attractive

Ghoti

 

[The Trooper]

Agree with Ghotib...happy as with CAM strategy despite the CCP debacle...have been working for and involved with public companies for a while now and have seen the companies do best when the directors have their own interests at stake...if you invest with CAM you are in essence making a commitment to a long term prospect and CAM definitely seem open, honest and keen to learn from their mistakes...haven't seen any other public company who takes so much effort in providing a monthly commentary to the market, it's normally just form this, appendix that so welcome the fresh approach...and they stick to their guns...also don't think you can get away from directors from public companies stuffing up or making fraudulent claims about the state of the company they work for...just need to think what you would do in the same situation...i would think the short term gain would pale against never being taken seriously again.

 

[hangseng]

Roger Montgomary has been involved in all sorts over the years and many things have come onto the scene with a bang only to disappear after a year or so, not going to bag him but basically hes a very good salesman, anyone remember the Sherpa software ?, or the AGI futures trading system he sold under the banner investors advantage.

Clime has been going for a while know and is in a different league to anything else hes been involved in plus all the regulatory stuff associated with being a listed company but to be honest I'm wary especially after the CCP **** up.

RM is very good at talking the talk but im not sold he/Clime can do the walking bit over time !

A hint of the past still remains.

http://www.investorsadvantage.com.au/media/qbe031007.htm

The one thing I do like about CAM/RM is openess. A trait many a company director could use. That alone is a tick in the box.

Stockval I don't have but have followed with interest an I am considering a trial. Not completely convinced I need to change anything I do at present though, without software.

 

[notabclearning]

interested in this stock. Anybody have an opinion?

 

[robusta]

interested in this stock. Anybody have an opinion?

On the face of it as a LIC to buy $1.00 NTA @ $0.66 seems very good. Do you know how much management charges to manage these assets?