Companies like CCV and TGA

[astro77]

Hi everyone

I recently sold a small business I started a few years ago and have been looking for a good place to invest the proceeds. I am looking to spread the money across 4 stocks.

So far I have invested 25% of the money in TGA which I bought at 2.02 and 25% in CCV which I bought for 0.78. I am still looking for another 2.

I have a very strict investment criteria:

* Simple business
* Not technology related
* Nothing to do with mining
* A brand name that I have heard of
* History of solid earnings and steady earnings growth
* Dividend payment steady or increasing (more than 4% is preferable but not essential)
* Good assets on the books
* Prefer small cap but not essential
* Excellent management
* low debt/equity prefer less than 20%

The current share price doesn't worry me. I can wait for the market to do something silly and buy when I feel they are going for a good price.

If anyone has a similar investment strategy and can point me in the direction of some stocks that meet these criteria I would greatly appreciate it. It's a sea of mining stocks out there and while they might be making some people a lot of money, they are not the type of businesses I am interested in investing in.

Any recommendations will be appreciated, of course I will do my own analysis of the stocks, just looking for a general point in the right direction.

Simon

 

[VSntchr]

Hi everyone

I recently sold a small business I started a few years ago and have been looking for a good place to invest the proceeds. I am looking to spread the money across 4 stocks.

So far I have invested 25% of the money in TGA which I bought at 2.02 and 25% in CCV which I bought for 0.78. I am still looking for another 2.

I have a very strict investment criteria:

* Simple business
* Not technology related
* Nothing to do with mining
* A brand name that I have heard of
* History of solid earnings and steady earnings growth
* Dividend payment steady or increasing (more than 4% is preferable but not essential)
* Good assets on the books
* Prefer small cap but not essential
* Excellent management
* low debt/equity prefer less than 20%

The current share price doesn't worry me. I can wait for the market to do something silly and buy when I feel they are going for a good price.

If anyone has a similar investment strategy and can point me in the direction of some stocks that meet these criteria I would greatly appreciate it. It's a sea of mining stocks out there and while they might be making some people a lot of money, they are not the type of businesses I am interested in investing in.

Any recommendations will be appreciated, of course I will do my own analysis of the stocks, just looking for a general point in the right direction.

Simon

CCP and TSM come to mind initially...

 

[Pioupiou]

You have done well, in my opinion, to select CCV and TGA. I owned both, but sold nearly all my CCV to buy more TGA. These are what I call Poverty Stocks - a good place to be. I prefer TGA, because it is substantially an Australian business, and hence I need not trouble my simple brain with currency considerations, plus the rental-stream nature of its core business insulates TGA from the vicissitudes of the economy. I may re-enter CCV if I have the funds, and the SP looks good relative to my intrinsic value.

I have not looked at it in depth, but CCP fits into the same Poverty Stock boat, except its history is not as clean, and published information in Morningstar (the stuff one gets via COMSEC and Westpac broking, for example) is probably offputting. This could be a turn-around stock.

As for the rest, I spend a great deal of time trying to find another TGA, but to little avail. TGA is the only stock that I have ever suggested to my friends, and at least two of them have done well as a consequence - one getting in at about 50 cents, in mid-2008 and and the other getting in at about $1 in early 2009. My buy-in prices have ranged between 55 cents and $2.03 recently, avearaging $1.07. I have invested $386,811 in TGA, and at today's closing price of $2.08, I am up $376,380 in capital profit alone, plus some for dividends received. The last $180K that I invested was recently, and at an average price of about $2. If TGA is not worth $2.50, then I am a monkey's uncle. Of course, I could be wrong.

I own SGH, and am up at least 40%, but shares issued to staff coming out of escrow bother me a tad, so I would not suggest it with the enthusiasm that TGA engenders.

If you locate a good-as-TGA stock, let me know. I would love to diversify.

 

[VSntchr]

Another stock which fits your description would be ARP. It is ARB corporation, the company that supplies bull bars etc for 4x4's.

ORL is another one...great fundamentals with a great leader.

 

[astro77]

ARP defiantly looks like it fits my criteria on first glance. I must admit I had CCP on my watch list for quite a while but have since removed them. I will do some more research in to TSM, ARP and ORL.

Up until recently I had been watching RFG, CAB and CCP but have decided not to invest in any of those.

Thanks for taking the time to reply it's very much appreciated.

Simon

 

[VSntchr]

ARP defiantly looks like it fits my criteria on first glance. I must admit I had CCP on my watch list for quite a while but have since removed them. I will do some more research in to TSM, ARP and ORL.

Up until recently I had been watching RFG, CAB and CCP but have decided not to invest in any of those.

Thanks for taking the time to reply it's very much appreciated.

Simon

No problem, hope that I have helped.
Can I ask what made you choose to ignore CAB and CCP? I currently have CAB on my watchlist at the moment but have not yet delved into an in depth investigation...

 

[astro77]

Also to Pioupiou about TGA. I also like this company a lot, it's tempting to just invest 100% in TGA and CCV but that goes against my strategy. My reasoning is that sometimes bad things happen to good companies so until I can find another suitable investment to diversify I'm just going to leave the funds in the bank collecting interest.

 

[astro77]

No problem, hope that I have helped.
Can I ask what made you choose to ignore CAB and CCP? I currently have CAB on my watchlist at the moment but have not yet delved into an in depth investigation...

Well I guess CCP looks ok on the surface. I am just trying to stick to businesses with a strong brand that I have actually heard of. I am pretty sure they have a good business model it just seems to lack a point of difference or safety moat.

CAB is still very interesting to me. I love their business, it's a strong brand. Has a monopoly in their niche and I can't see it changing anytime soon. Plus management seems ruthless in their approach. The only reason I haven't already invested in them is their current debt/equity is a little on the high side for me. I still am keeping an eye on them though and may buy them if their situation improves.

 

[Pioupiou]

No problem, hope that I have helped.
Can I ask what made you choose to ignore CAB and CCP? I currently have CAB on my watchlist at the moment but have not yet delved into an in depth investigation...

In the hazy mists of my mind I recall reading in the press that Cabcharge had by its arrogance, or some such characteristic, annoyed man taxi drivers, and that a percentage of them were ripe for a revolution. If I were considering CAB, I would look into that, and consider if this was a threat. A simple search produced:

http://www.smh.com.au/national/cabcharge-accused-of-bullying-its-competitors-20100728-10w2v.html

 

[Pioupiou]

Also to Pioupiou about TGA. I also like this company a lot, it's tempting to just invest 100% in TGA and CCV but that goes against my strategy. My reasoning is that sometimes bad things happen to good companies so until I can find another suitable investment to diversify I'm just going to leave the funds in the bank collecting interest.

You are right, I should learn to sit on cash. My SMSF which has about $1m invested in ASX-listed stock is fairly diversified. TGA is worth the most, but there are another 19 stocks making up two thirds of the total. TGA is as large as it is through growth, the investment was 15% originally.

Most of recent purchases of TGA have been made in my own name - in what I call the play pen, and I have been prepared to take risks there. I will sell some, but not soon.

I have looked at and liked a number of the companies mentioned in this thread - CCP, ORL and ARP for sure. However, when I next have cash looking for a home, I would have to re-evaluate them, because there is probably a reason why I did not buy them when I was looking.

 

[Pioupiou]

The list at http://www.wamfunds.com.au/WAM/media/WAMMedia/WAM Research/WAXNTAMar11.pdf

should be worth scanning for investment candidates. I provide the list below.

Of the small caps, I only hold TGA, but a few others are on my look-again list - e.g., APE, CCP, SGN, ARP, RCR, RKN, IRE and SSM. On re-examining these when I have funds to invest, I might reject them. I tend not to bother looking if I cannot buy.

WAM RESEARCH LIMITED (WAX)
ABN 15 100 504 541
INVESTMENT UPDATE & NTA – MARCH 2011

As at 31 March 2011 the top listed equities (value over $1 million) were as follows:

Code Company -------------------------------------- Market Value $ ---- % of Gross Assets
MMS McMillan Shakespeare Limited ----------------- 6,262,425 ----------- 5.7%
NAB National Australia Bank Limited ------ --------- 5,635,000 ----------- 5.2%
CCP Credit Corp Group Limited --------------------- 4,896,767 ----------- 4.5%
WBC Westpac Banking Corporation ----------------- 4,781,250 ----------- 4.4%
APE AP Eagers Limited ----------------------- -------- 4,289,173 ----------- 3.9%
WBB Wide Bay Australia Limited --------------------- 4,094,373 ----------- 3.7%
CBA Commonwealth Bank of Australia -------------- 4,029,560 ----------- 3.7%
SGN STW Communications Group Ltd ---------------- 3,951,256 ----------- 3.6%
MYS MyState Limited ----------------------------------- 3,438,413 ----------- 3.1%
RHG RHG Limited --------------------------------------- 3,144,182 ----------- 2.9%
ANZ Australia and New Zealand Banking Group Ltd - 3,113,750 ----------- 2.8%
BRG Breville Group Limited ---------------------------- 2,877,404 ----------- 2.6%
SAI SAI Global Limited --------------------------------- 2,598,938 ----------- 2.4%
TGA Thorn Group Limited ------------------------------ 2,522,541 ----------- 2.3%
ARP ARB Corporation Limited -------------------------- 2,394,277 ----------- 2.2%
BKL Blackmores Limited -------------------------------- 2,324,156 ----------- 2.1%
SKE Skilled Group Limited ------------------------------ 2,298,095 ----------- 2.1%
CAF Centrepoint Alliance Limited ---------------------- 2,070,518 ----------- 1.9%
NVT Navitas Limited ------------------------------------- 1,913,515 ----------- 1.7%
RCR RCR Tomlinson Limited ---------------------------- 1,877,329 ----------- 1.7%
CIW Clime Investment Management Limited --------- 1,802,987 ----------- 1.6%
AMM Amcom Telecommunication Limited -------------- 1,604,829 ----------- 1.5%
SVWPA Seven Network Limited Preference Shares –- 1,408,500 ----------- 1.3%
RKN Reckon Limited -------------------------------------- 1,391,954 ----------- 1.3%
IRE IRESS Market Technology Limited ----------------- 1,351,150 ----------- 1.2%
CTD Corporate Travel Management Limited ----------- 1,161,926 ----------- 1.1%
AAD Ardent Leisure Group ------------------------------- 1,072,501 ----------- 1.0%
AHE Automotive Holdings Group Limited --------------- 1,048,659 ----------- 1.0%
CWP Cedar Woods Properties Limited ------------------ 1,038,683 ----------- 0.9%
ALS Alesco Corporation Limited ------------------------- 1,024,634 ----------- 0.9%
REH Reece Australia Limited ----------------------------- 1,023,469 ----------- 0.9%
SSM Service Stream Limited ----------------------------- 1,006,365 ----------- 0.9%

As an aside, the most generous blurb that I have found for TGA is at:
http://www.theaustralian.com.au/bus...d-thorn-on-track/story-e6frgac6-1226043486422

This values TGA at $2.90. I have seen valuations as low as about $1.60. I have often found in life that the mid point between two extremes is not a bad number, which in this case is $2.25. I find these intrinsic-value-style numbers almost meaningless unless one can get the detail of the guesstimation, which is rarely provided, if ever.

 

[sasch]

This values TGA at $2.90. I have seen valuations as low as about $1.60. I have often found in life that the mid point between two extremes is not a bad number, which in this case is $2.25. I find these intrinsic-value-style numbers almost meaningless unless one can get the detail of the guesstimation, which is rarely provided, if ever.

Congratulations Pioupiou on making a motza on TGA! From a technical analysis perspective, TGA is giving some strong sell signals at the moment.

The long term uptrend on a weekly chart from July 2010 ($1.14) to February 2011 ($2.30) was broken and a trendline exit was given. There appears to be strong price resistance at $2.30 and a double top was confirmed in april 2011 at $2.29; a second strong sell signal.

Doing a price projection based on a fall in price from 150% to 250% from the first top and the low between,you could expect a target of $1.47 - 0.92.

If i was still holding ,i would use a dow theory exit and sell if the price dropped below $1.90 in the short term.

 

[Pioupiou]

Congratulations Pioupiou on making a motza on TGA! From a technical analysis perspective, TGA is giving some strong sell signals at the moment.

The long term uptrend on a weekly chart from July 2010 ($1.14) to February 2011 ($2.30) was broken and a trendline exit was given. There appears to be strong price resistance at $2.30 and a double top was confirmed in april 2011 at $2.29; a second strong sell signal.

Doing a price projection based on a fall in price from 150% to 250% from the first top and the low between,you could expect a target of $1.47 - 0.92.

If i was still holding ,i would use a dow theory exit and sell if the price dropped below $1.90 in the short term.

I had thought that I would sell 20,000 TGA when it was close to $2.30 some months ago, but the sell order at that price did not attract any buyers, and I have since been reluctant to sell at the much lower prices that followed. In fact I bought more at about $2.

When I last looked today, TGA was at $1.96, and somebody was trying to buy the "rights" (TGAR) at 12 cents, so this is akin to TGA cum rights being worth $2.08.

Anyhow, I'll watch it in coming weeks, and see what sentiment transpires.

 

[VSntchr]

I had thought that I would sell 20,000 TGA when it was close to $2.30 some months ago, but the sell order at that price did not attract any buyers, and I have since been reluctant to sell at the much lower prices that followed. In fact I bought more at about $2.

When I last looked today, TGA was at $1.96, and somebody was trying to buy the "rights" (TGAR) at 12 cents, so this is akin to TGA cum rights being worth $2.08.

Anyhow, I'll watch it in coming weeks, and see what sentiment transpires.

Your selling TGA now? Only a week ago you were talking about accumulating at prices of $1.98..

 

[Pioupiou]

Your selling TGA now? Only a week ago you were talking about accumulating at prices of $1.98..

I am not selling TGA, but if I could get $2.30 I would sell a small portion (just over 5%) to pay for the rights issue relating to my personal share portfolio, and/or repay some money I borrowed to buy TGA shares recently at about $2 on average.

Had I still been employed, I would not need to sell something soon. My employment contract was not renewed beyond 31/12/10, in spite of verbal suggestions it would be extended to 30/6/2011, so I am about $50K short of cash that I expected. I am now 70, so I'll not monger my services to the world again, and this, amongst other things (e.g., opportunities for alternative investment action) changes my ability to fund investments, and at what price I can buy, hold or sell.

I have 348,500 TGA (average cost $1.11), some in my SMSF and 181,500 held in my own name. I intend to take up the 1-for-8 rights issue at $1.85, so soon I'll have 392,063 TGA shares as a result. To be able to take up the rights in my personal portfolio, I need to sell something by 30 June, but it will not be TGA at current prices, and because I do not want the capital gain in 2010/2011. However, in the new tax year I would via selling shares like to decrease money that I borrowed from my family to invest in the ASX during the GFC, and some of these sales could be TGA.

Anyhow, if I do sell some TGA, it would not indicate my loss of faith in the stock, but rather the fact that my portfolio is massively (nearly 50%) skewed to owning TGA, and the rights issue will push that to over 50%. Also, there are other stocks that I would look at if I had the funds with which to play – in the poverty stocks line, I could consider beefing up my minuscule holding in CCV, and I would re-examine CCP and FSA, in which I have hitherto not invested.

On the matter of buying and selling prices, I noticed today on the MacroBusiness blog that the author valued TGA at $2.39, but as he likes to buy at between 40% and 50% below his intrinsic value, his buy-in price was stated to be $1.84. The author did not write at what price he would exit TGA if he now held it. I suppose this would vary from time to time on the basis of his “opportunity cost”. It's a bit like the 2-product diagram they use to teach Economics students about the Pereto optimum – if one could sell TGA shares at $2.20 each, and for $1.84 each buy alternative shares in XXX that one intrinsically values to be on par with TGA, then one would advantageously sell TGA at $2.20 to buy XXX, in spite of one having an intrinsic value of $2.39 for TGA.

To conclude, as an investor one could logically sell TGA at below one's IV in a better-opportunity setting, but the selling price would vary from person to person, even if, hypothetically, they had a common IV, which, of course, is not the case. Share traders, on the other hand, need not internalise these values like I do, they second-guess what the market will do, and buy or sell on the anticipation of this.

 

[ROE]

You could look at CCP, they been sell down for some reasons this week
I bought some more at $4.30.

CCP though small has a competitive advantages against their peer in debt collection.

it should deliver decent growth and increase dividend payout in the next couple years.

I have both TGA and CCV and I increase my CCV holding substantially with this week sell down

 

[Noddy]

TGA is currently in the market around $1.88 and has a dividend of around 5c attached, a net buy around $1.83.
They are in the middle of a capital raising of 1 for 8 at $1.85 with no dividend.
Why would anyone be interested in the present capital raising ?
All the capital raising has done is help trash the TGA share price.

 

[ROE]

TGA is currently in the market around $1.88 and has a dividend of around 5c attached, a net buy around $1.83.
They are in the middle of a capital raising of 1 for 8 at $1.85 with no dividend.
Why would anyone be interested in the present capital raising ?
All the capital raising has done is help trash the TGA share price.

If you follow the development with TGA sometimes ago when TGA release their latest result and acquire NCML they flagged a capital raising will follow shortly...

TGA did everything right, gave the market plenty of time to digest its purchase
and its future capital raising and when they do they do a 1 for 8 entitlement.

TGA protect shareholders at all level from big to small.

if the market think it worth a lot less it would have punish TGA well before today or this week

Capital raising gave institution an opportunity to acquire large block of share without drive up the share price.

If you are a retail investor you may be able to get it cheaper than $1.85 if share price drop that low but there is no way an institution can get that sort of price

even if TGA drop to $1.80 by the time they buy up, price would have gone up to $2 plus

Capital raising is not bad if you can maintain similar return on equity..

I'm more than happy to give TGA every dollar if it can deliver me ROE of 15% or better.

 

[Noddy]

If you follow the development with TGA sometimes ago when TGA release their latest result and acquire NCML they flagged a capital raising will follow shortly...

TGA did everything right, gave the market plenty of time to digest its purchase
and its future capital raising and when they do they do a 1 for 8 entitlement.

TGA protect shareholders at all level from big to small.

if the market think it worth a lot less it would have punish TGA well before today or this week :

Well aware of all that. Added to my holdings of TGA today around $1.87. and if the price drops further will add some more.
Point is that I can do better on market than taking up their capital raising offer.
In my view, capital raisings are bad news as they dilute holdings, and afterward the share price often stays down for long periods.
Have been already been caught this year with FRI and ASZ and now TGA.

 

[Tyler]

Bought CCV way back in 09 around 58c.
Currently holding CCV & DGX
DGX is a property development company, while it carries a lot of project financed debt, the market cap is 17mil & has an order book of 1.1bn.