My Investment Journey

[KnowThePast]

Can you elaborate on this purchase a bit more? How does it meet your criteria?

A quick way to describe it - it's cheap.
A more detailed way to describe it - it's very cheap.

Cash - Total Liabilities = $9.8m, it's almost a net-net.
For a market cap of $11m, you get some contracts that are bringing in $82m of revenue a year. It's low margin work, but the cost base would be fairly variable as well, I would imagine.

If this business ever achieves consistent margins of 2%+, it will be a good investment. With economies of scale and a few good contracts, this could well be around 10%, but as I said, I don't take it into account.

As I said, the cost base is relatively variable, they don't have much debt, management thinks that things are improving. And given its illiquidity and ugly past, noone is looking at them.

It's a high risk play that only makes sense in a diversified portfolio. Such as mine.

Have you been looking at them as well, skc? I didn't think they were your type.

 

[McLovin]

Cash - Total Liabilities = $9.8m, it's almost a net-net.

Where did you get the numbers for the calculation from?

From the 30 June accounts I see cash of $2,551 and total liabilities of $12,721.

Without knowing any better, and looking at their earn/burn of cash it looks to me like a cap raising is just around the corner.

 

[KnowThePast]

Where did you get the numbers for the calculation from?

From the 30 June accounts I see cash of $2,551 and total liabilities of $12,721.

Without knowing any better, and looking at their earn/burn of cash it looks to me like a cap raising is just around the corner.

Sorry, mistyped.

I meant Current Assets, not cash.

And yes, they may need cash if things don't improve.

 

[skc]

It's a high risk play that only makes sense in a diversified portfolio. Such as mine.

Have you been looking at them as well, skc? I didn't think they were your type.

I actually held them back in the days when they had heaps of cash on the balance sheet. This was my one line skinny on it from Feb 2011, when the share price was 36.5c

Telecom resale. SOI 70m. HY profit $0.7m (without interest). Cash $18.5m (26.4cps). PE=10, target 48c.

The business was at least profitable back with cash cushioning the downside.

But these days CLT doesn't have any profit to show for it's revenue. It has also breached it's debt covenant (interest cover ratio) so it will need a real turnaround just to stay a going concern.

I have to say it fits your criteria of "ugly" but I can't say it fits your criteria of "cheap".

 

[KnowThePast]

I actually held them back in the days when they had heaps of cash on the balance sheet. This was my one line skinny on it from Feb 2011, when the share price was 36.5c



The business was at least profitable back with cash cushioning the downside.

But these days CLT doesn't have any profit to show for it's revenue. It has also breached it's debt covenant (interest cover ratio) so it will need a real turnaround just to stay a going concern.

I have to say it fits your criteria of "ugly" but I can't say it fits your criteria of "cheap".

There's a great episode of Fawlty Towers, where someone complains to Basil about the level of service they receive at the restaurant from Manuel. But rather than apologise about it, he just start complaining about him right back at them. "You think you've had it bad, you have no idea what it's like to work with him every day"!

I feel like doing the same with CLT. I fully agree with you and feel like mentioning plenty more ugliness myself.

But, as I've written before, I think I do better if I just buy everything that meets my filter, rather than try and make individual picks. If there was already an announcement that the company is likely heading for administration, should something unlikely not happen, than I would exercise a manual override.

When one looks for things priced as low, one doesn't expect to have much positive to say. Here's a list of companies on a lower Price/Sales than CLT:

API
CGR
NAM
COF
OPG
DGX

With the exception of API, the rest aren't any prettier than CLT.

Does CLT deserve to be at the bottom of the valuation basket. Yes.
Does that bottom of the basket, as a whole, outperform the average historically? Yes.

It is not easy.

 

[KnowThePast]

Bought TTN, 2923 @ $0.43

Buying a falling knife, which fell a further 10% after I bought it. Nevertheless, it reached a price at which I am happy to take a risk.

 

[skc]

Bought TTN, 2923 @ $0.43

Buying a falling knife, which fell a further 10% after I bought it. Nevertheless, it reached a price at which I am happy to take a risk.

I bet you are buying WDS next

 

[pinkboy]

I bet you are buying WDS next

Read my mind when I read this earlier, after reading WDS thread earlier today!


pinkboy

 

[KnowThePast]

I bet you are buying WDS next

Thanks skc, you made me laugh.

And yes, it is looking very pretty today.

Having bought some more mining services stock lately, I am not sure how much more exposure I want.

But everything about WDS is a screaming buy to me, obviously.

 

[skc]

Thanks skc, you made me laugh.

And yes, it is looking very pretty today.

Having bought some more mining services stock lately, I am not sure how much more exposure I want.

But everything about WDS is a screaming buy to me, obviously.

Haha KTP, I enjoy your posts and love your attitude even though we rarely agree on your positions. If more people post and respond to critism like you, the world (or at least this forum) would be a much better place! Thanks for keeping up the effort on a great thread. I am happy to see you at least keeping an eye on the bold bit.

FWIW WDS has a stronger balance sheet than TTN... and TTN's revised guidance is still quite an optimistic forecast imo.

 

[KnowThePast]

Haha KTP, I enjoy your posts and love your attitude even though we rarely agree on your positions. If more people post and respond to critism like you, the world (or at least this forum) would be a much better place! Thanks for keeping up the effort on a great thread. I am happy to see you at least keeping an eye on the bold bit.

FWIW WDS has a stronger balance sheet than TTN... and TTN's revised guidance is still quite an optimistic forecast imo.

Thanks again skc.

Despite not agreeing with you on some of my positions, your critisicm has been very useful to me, and will be even more useful to look back upon in a couple of years when I will evaluate my current decisions against risks you so well describe.

On WDS, I fully agree with you that it is "better". Unfortunately, I've only seen it get pretty after executing the order for TTN. Had I known at the time, WDS would have been my choice.

How the mining services sector will evolve over the next few years is extremely interesting, my bet, obviously, is that there will be some value in it left.

 

[galumay]

I see TTN hit 47c today, that would have made you smile?!

 

[KnowThePast]

I see TTN hit 47c today, that would have made you smile?!

Yes, clearly proves my genius.

And did you see WDS, one that I said was better - up 23%.

I did a complicated projection, involving today's rise and a straight line, which forecasts with 100% certainty that I will be a millionnaire by Christmas.

Let me sit back and think about my brilliance.

Until the market open tomorrow morning, anyway.

 

[KnowThePast]

Sold SDI, 4000 @ $0.615 for a profit of $446 (22%).

This was one of my non-statistical purchases, which I was considering selling for a while now, especially after the 1 year mark passed.

While I very much like this company, it was the likely rate of growth that tipped me to sell. For them to significantly appreciate in value, they will need to keep their margins substantially above their long term average. They would also need to grow their same currency sales at a much faster pace then what they have historically done. A potential leadership change in the near future further adds to uncertainty.

This is far from a certain sell, but I think the odds of making money elsewhere are better.

In hindsight, I should have thought this out and acted on it many months ago. I got in because of favourable AUD and silver price movements. I ended up been perfectly right, and the share price increased to $0.77. I should have sold then, as it achieved my investment objective. The other metrics did not stand up to scrutiny, to hold longer at that price.

 

[KnowThePast]

Bought CND, 5128 @ $0.24

This was the worst timed purchase in my portfolio, dropped 20% immediately after I bought it.

It is another net-net, with $51.4m in cash and receivables and total liabilities of $23.8m. Market value of $21.5m.

The outlook given for 2015 is the most optimistic given in years, there's even a remote chance of them making a profit.

They are in the recruitment business, known for its high margins, customer loyalty and stability. </sarcasm>

Nevertheless, there are few fixed costs and no debt. The goodwill has been pretty much completely written off over the last few years and their cash flow looks significantly healthier than their P/L statement.

 

[KnowThePast]

Monthly update.

My portfolio fell a further $1,473, more so than the indexes, although I am I still comfortably ahead for the year.

 

[KnowThePast]

Bought FUN, 22786 @ 0.054.

A warning for those that are inclined to read annual reports and establish value based on earnings, etc - don't waste your time looking into this one.

What used to me a struggling wholesaler of toys is now a struggling manufacturer of toys. Because this super competitive industry was not difficult enough, management made some acquisitions, with an all too common result; years of terrible performance and write downs.

But beneath that, I think there's a profitable, albeit low margin base.

The current price is cheap enough for my filters, so this is an automated trade, although I've been following the company for many years.

 

[KnowThePast]

Another purchase, COF, 3873 @ $0.31.

My shopping basket is just about full.

 

[deingesicht]

I'm a bit confused at your investment strategy - you talk about preserving capital, but you are buying all these micro cap stocks.... I would have thought if keeping your capital was important, you would stay away from micro cap companies

 

[KnowThePast]

I'm a bit confused at your investment strategy - you talk about preserving capital, but you are buying all these micro cap stocks.... I would have thought if keeping your capital was important, you would stay away from micro cap companies

Hi deingesicht,

Because micro caps, as a group, in small portfolio, excluding explorers and other speccies, is not really any riskier than large cap stocks.

What makes you think otherwise?