NCM - Newcrest Mining

[dengo]

But how exactly do you get $11 from that chart?

Not saying it won't fall further Bintang but,

"Target: Once the breakout has occurred, the price projection is found by measuring the widest distance of the pattern and subtracting it from the resistance, (support IMO), breakout."

http://stockcharts.com/help/doku.php?id=chart_school:chart_analysis:chart_patterns:descending_triangle_

 

[Bintang]

Not saying it won't fall further Bintang but,

"Target: Once the breakout has occurred, the price projection is found by measuring the widest distance of the pattern and subtracting it from the resistance, (support IMO), breakout."

http://stockcharts.com/help/doku.php?id=chart_school:chart_analysis:chart_patterns:descending_triangle_

Thanks for the explanation. This charting stuff is a brave new world for me.

 

[dengo]

This guy has the uncanny ability to turn a pattern out of tea-leaves!

How do you know I'm a guy?

Gold = $1150 when/if recent support fails

 

[Country Lad]

Then again a serious investor would never put his capital base at such risk.
He'd average up NOT down.

It's about being profitable not clever--or right!

tech, the knife catching, averaging down brigade don’t believe us. I have stopped trying to get across the fact that risk management makes buying falling shares which have negative market sentiment in a falling market doesn’t make sense, so I just watch, bemused.

At some time they are right of course, it will probably go up some time but from how much a lower level than when they started buying?

Maybe it is worth looking at some possible support points. It appears to be sitting on one at the moment. After that I have them as around the $10.60, $8.20 and $7,40 marks.

Let's see which ones hold/fail.

Cheers
Country Lad

 

[Boggo]

They got ganged up by the analysts at a pretty major support level.

UBS yesterday and Citi and Credit Swiss put the boot in today, all downgrading NCM to sell.

So NCM drops an average of $10 per year for the last three years and these guys finally decided that its a sell, amazing !

Scary bit is that they are probably licensed to give financial advice

 

[galumay]

tech, the knife catching, averaging down brigade don’t believe us. I have stopped trying to get across the fact that risk management makes buying falling shares which have negative market sentiment in a falling market doesn’t make sense, so I just watch, bemused.....

I think that if you ignore fundamentals thats true, but the factor I would add in is the FA around the share, I am only interested in averaging down if the case for buying the share remains strong on that basis -increasing ROE, good management, likely strong earnings and therefore yield. In that case I dont mind if the market mis-values the share, in fact I welcome it.

In saying that it would have to be a compelling case, otherwise I am happy to retain my original stake, pick up the earnings and wait for growth to return when the price and the value cross paths again.

 

[Bintang]

So NCM drops an average of $10 per year for the last three years and these guys finally decided that its a sell, amazing !

Scary bit is that they are probably licensed to give financial advice

There always has to be somebody on the other side of the trade. Their 'friends' maybe.

 

[tech/a]

I think that if you ignore fundamentals thats true, but the factor I would add in is the FA around the share, I am only interested in averaging down if the case for buying the share remains strong on that basis -increasing ROE, good management, likely strong earnings and therefore yield. In that case I dont mind if the market mis-values the share, in fact I welcome it.

In saying that it would have to be a compelling case, otherwise I am happy to retain my original stake, pick up the earnings and wait for growth to return when the price and the value cross paths again.

I hear you.

But if you happily held for dividends say 7% the share has fallen 50% nearly 60% in 12 mths
Say $100K is now worth 40K +7K and to regain your capital you need the stock to return over 100%
Thats one hell of a bullish move in 12 mths or however long it takes.

So at what price Yield???

Arn't you better off sticking these "screaming buys" in a watch list and trading them when
its clear everyone agrees with you? No capital at risk.

Right now the only people agreeing seem to be posting here?
Even the so called "pro's" are deserting the cause.

 

[skc]

I hear you.

But if you happily held for dividends say 7% the share has fallen 50% nearly 60% in 12 mths
Say $100K is now worth 40K +7K and to regain your capital you need the stock to return over 100%
Thats one hell of a bullish move in 12 mths or however long it takes.

So at what price Yield???

Arn't you better off sticking these "screaming buys" in a watch list and trading them when
its clear everyone agrees with you? No capital at risk.

Right now the only people agreeing seem to be posting here?
Even the so called "pro's" are deserting the cause.

Sorry. No final dividend. $5-6B write down. No FCF in FY14.

This one is going to bleed badly today (and probably a capitulation low...)

 

[McLovin]

Sorry. No final dividend. $5-6B write down. No FCF in FY14.

This one is going to bleed badly today (and probably a capitulation low...)

These guys have destroyed shareholder value on a grand scale. It was only 3 years ago they paid $10b for Lihir. Now the combined entity has a mc of $10b. And that's before it gets routed today.

 

[galumay]

Arn't you better off sticking these "screaming buys" in a watch list and trading them when
its clear everyone agrees with you? No capital at risk.

I wouldn't, when everyone agrees with me the price will likely have crossed the value and the share will be overvalued. My yield will also be lower at that entry point.

If it meets the criteria to be on my watch list then I am looking for opportunities to buy when its under priced by the market.

I dont care where the price goes if the company continues to provide a high income stream, and the fundamentals remain good.

Mind you a company like NCM would never had made my watch list anyway so its probably a poor example for me to use to defend my strategy!

Also remember that those of us investing for the long term intend holding our chosen shares for very long time periods, longer than the average length of market cycles.

 

[Uncle Festivus]

There's going to be ramifications from this - insider trading? That is, if ASIC is not asleep at the wheel, again!

 

[tech/a]

I wouldn't, when everyone agrees with me the price will likely have crossed the value and the share will be overvalued. My yield will also be lower at that entry point.

If it meets the criteria to be on my watch list then I am looking for opportunities to buy when its under priced by the market.

I dont care where the price goes if the company continues to provide a high income stream, and the fundamentals remain good.

Mind you a company like NCM would never had made my watch list anyway so its probably a poor example for me to use to defend my strategy!

Also remember that those of us investing for the long term intend holding our chosen shares for very long time periods, longer than the average length of market cycles.

A couple of questions.

If NCM isnt one youd have in your watchlist then how is it that Bintang et'al find it a "screaming buy" and you dont?
How can there be such a wide devide in "Valuation"

Also remember that those of us investing for the long term intend holding our chosen shares for very long time periods, longer than the average length of market cycles

I like this.
So if you hold for 10 yrs and you recieve say 6% a year on investment and price slips 40% your up over all.
You have your income stream without thinking that much.

On the flip side though
Would it not be preferable to attempt to purchase more shares and hence increase returns
decrease capital erosion with far less risk than buying on the way down hoping that price will return to at least break even.

Dont get me wrong I can see what your doing---or attempting to.

 

[jancha]

A couple of questions.

If NCM isnt one youd have in your watchlist then how is it that Bintang et'al find it a "screaming buy" and you dont?
How can there be such a wide devide in "Valuation"



I like this.
So if you hold for 10 yrs and you recieve say 6% a year on investment and price slips 40% your up over all.
You have your income stream without thinking that much.

On the flip side though
Would it not be preferable to attempt to purchase more shares and hence increase returns
decrease capital erosion with far less risk than buying on the way down hoping that price will return to at least break even.

Dont get me wrong I can see what your doing---or attempting to.

Isn't this a thread on Newcrest?

 

[McLovin]

A couple of questions.

If NCM isnt one youd have in your watchlist then how is it that Bintang et'al find it a "screaming buy" and you dont?
How can there be such a wide devide in "Valuation"

Probably the same reason that one person's tea leaves are another person's pattern.

 

[Ves]

I like this.
So if you hold for 10 yrs and you recieve say 6% a year on investment and price slips 40% your up over all.
You have your income stream without thinking that much.

On the flip side though
Would it not be preferable to attempt to purchase more shares and hence increase returns
decrease capital erosion with far less risk than buying on the way down hoping that price will return to at least break even.

Whilst the bolded part relates to the question of investment philosophy / approach, I believe the actual result as you stated (40% capital depreciation over 10 years) is a most likely result of poor implementation of an investment philosophy.

I actually think if you held something for 10 years and it was still 40% under your buy price then one of two things has probably happened:

• You picked the wrong company (ie. the value of each $1 that the company re-invested in its operations is now worth less than a $1)
• Your assumptions were wrong in the first place; which means you paid over the odds

It would be very unlikely, but not impossible, for the market to be still divergent from current intrinsic value a decade later.

Ten years is a long time - the idea of investing should always be based around making sure the $1 you invest today is worth a lot more in the future.

 

[Bushman]

A tale of woe ... the comments about 'maintaining its credit rating' and 'cashflow neutral in 2014' means the business is trading on a knife edge and might even be trading cum-cap raising. They did spend their recent largesse on internal growth options which might stave this off. Falling AUD is helping.

Cutting the capex by $500m @ the sweep of the pen explains how tenuous all those WIP numbers for the mining service contractors is.

Too early for me on NCM. Bad news comes in threes is my rule of thumb.

In today’s business update, the following was announced –
• High AUD and falling US POG means NCM will be ‘cash flow neutral’ in 2014! This from a company that announced a $1bn cash bonanza in 2012.
• Asset write-downs of $5-6bn, inc the $3.6b of goodwill (otherwise known as hubris) booked for the Lihir acquisition.
• Not surprisingly, capex/opex/exploration are being slashed. Opex will be cut by 20%, including the closure of the Brisbane office. Capex will be cut by $500m. Exploration will also be cut significantly.
• 2H13 final div has been cut.
• Post the asset write-down, gearing will be 28-30% vs a mgt ‘target’ of 15%. While there are no covenant tests, a further deterioration in the POG or a rise in the AUD could well see a cap raise to save the credit rating. H/e, for the moment it is batten down the hatches and ride out 2014. Exp Cadia expansion cashflows to kick in for 2015.

Lihir really was the height of hubris. Special divs please ...

 

[skc]

These guys have destroyed shareholder value on a grand scale. It was only 3 years ago they paid $10b for Lihir. Now the combined entity has a mc of $10b. And that's before it gets routed today.

Most business textbooks will tell you how major M&A have a much higher chance of value destruction than value creation. And to me the problem is simply inherent in human nature - you need a lot of positive thinking to put on a big deal, and you need a lot of persuation to get it across the line. And that's the danger time when everybody simply think upside and not downside.

And what's the fun of NOT doing a deal? There's no bonus for passing up an acquisition, is there?

With depressed gold equity prices the time to do a deal is actually NOW. But how many deals have we seen in this space? A pitterly TRY taking on AZH. That's it.

There's going to be ramifications from this - insider trading? That is, if ASIC is not asleep at the wheel, again!

For once I agree... 3 analyst downgrades and 2 days later a massive writedown. Did NCM management read the analyst reports and realise they need to announce something? Or did the analyst get tipped off?

Anyhow, Macquarie actually reaffirmed their outperform buy today so that a case of bad timing for sure (and no insiders there!).

Speaking of NCM price - I think today's low of $11.4 will hold for some time. The gold price chart isn't actually looking as bad as it did several weeks ago. May be we have seen a capitulation low.

 

[Ves]

Most business textbooks will tell you how major M&A have a much higher chance of value destruction than value creation.

There's a guy over at Hotcopper called Camden, a very experienced Fundamental Analyst, who has what he calls the "5-4-1 rule" for acquistions. He believes that roughly 5 acquisitions destroy value, 4 are roughly value neutral in the long term (ie. they don't really add anything) and 1 actually adds value.

That's a 1 in 10 chance. Sounds about right, doesn't it?

 

[tech/a]

Whilst the bolded part relates to the question of investment philosophy / approach, I believe the actual result as you stated (40% capital depreciation over 10 years) is a most likely result of poor implementation of an investment philosophy.

I actually think if you held something for 10 years and it was still 40% under your buy price then one of two things has probably happened:

• You picked the wrong company (ie. the value of each $1 that the company re-invested in its operations is now worth less than a $1)
• Your assumptions were wrong in the first place; which means you paid over the odds

It would be very unlikely, but not impossible, for the market to be still divergent from current intrinsic value a decade later.

Ten years is a long time - the idea of investing should always be based around making sure the $1 you invest today is worth a lot more in the future.

While I understand this is an NCM thread the investment philosophy here is one of value infact buying it now and anywhere under $20.I'm questioning that thinking.

• You picked the wrong company (ie. the value of each $1 that the company re-invested in its operations is now worth less than a $1)
• Your assumptions were wrong in the first place; which means you paid over the odds

At what point do you say Im wrong.
1 yr/5/or more.
Doesnt it become a point of Damn Im not going to realise the loss so Ill just keep it and get the dividends.
The fall may occur in the first year and remain there for years.

In 1993 NCM had a high of $7.50 than plummeted and didnt se that value again for 9 yrs.
It then went to $45 ish in the next 10.
Thats the 10 Id want to be on.
Not averaging down for 10 yrs hoping it would hit pay dirt.

Easier to hold recieving dividends if your capital is INCREASING!

Oh the measured move on an ABC correction on the Monthly chart just happends to be around $7.50-$7

Its often said a bubble returns to its origins.

Probably the same reason that one person's tea leaves are another person's pattern

Patterns play out even tea leaves.
You can clearly see your wrong.

In the case of NCM there seems to be a blurring of analysis.
No accepted right or wrong.