Robusta fundamental, leveraged investments

[robusta]

I wouldn't be too adverse to doing that with equity but I'd be careful doing so with leveraged LOC. No one position should take you out of the game (e.g. margin called).

No worries there SKC it is a line of credit on my mortgage so no margin calls, only the chance of terrible losses or incredible profits or more likely something inbetween.

 

[robusta]

NEW INVESTMENT

FGE - Forge Group

Yet another business I hold in my SMSF and my second largest holding next to MCE at that. FGE is one of those rare businesses with the ability to retain a lot of profits and maintain a great ROE. If history is anything to go by I think FGE is worth about $8.00 and I should have loaded up and made it one of my largest holdings but the uncertainty of a tightening labour market and a unproven ability to win larger contracts decided how much capital to allocate.

Portfolio Position

Starting line of credit $30,000.00

Bought
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)


Brokerage Paid = $60.00

Lenders Mortgage insurance $667.81 paid


All ords @ 25/07/11 4603.80

 

[McLovin]

Hmm every company you have been buying I've been buying lately too! Great minds think alike, fools seldom differ!!

 

[kermit345]

Robusta,

Agree wholeheartedly on Forge. In my valuation tool I created in Excel it basically has Forge well under its intrinsic value and utilising an equation I put together has it at about 92% in terms of positive buying sentiment. (The higher the percentage, the more positive my system is in terms of buying the stock, Qantas for example gets about a 30% sentiment in my system).

If Forge can meet or better the consensus earnings estimates while at least maintaining their order book then, in my opinion, they must move back towards at least $7.

I'm very interested in following your portfolio Robusta as it seems to follow very closely in the strategy i'm developing.

Cheers

 

[robusta]

Robusta,

Agree wholeheartedly on Forge. In my valuation tool I created in Excel it basically has Forge well under its intrinsic value and utilising an equation I put together has it at about 92% in terms of positive buying sentiment. (The higher the percentage, the more positive my system is in terms of buying the stock, Qantas for example gets about a 30% sentiment in my system).

If Forge can meet or better the consensus earnings estimates while at least maintaining their order book then, in my opinion, they must move back towards at least $7.

I'm very interested in following your portfolio Robusta as it seems to follow very closely in the strategy i'm developing.

Cheers

Thankyou for that Kermit, FGE is certainly one of my top picks. I think there are a few of us who follow the Graham, Buffet, Fisher, Montgomery style of investing.

The challenge for me is I see some value around and hear all the "bad" news (US debt ceiling, Greek debt...) and like a poker player I want to go "all in". The trouble with this strategy is the opportunity costs missing out on even better bargains if / when the Chinese miracle economy comes back to reality.

A handful of patience is worth more than a bushel of brains. - Dutch Proverb

Sometimes I am afraid I am short on both.

 

[kermit345]

Thankyou for that Kermit, FGE is certainly one of my top picks. I think there are a few of us who follow the Graham, Buffet, Fisher, Montgomery style of investing.

The challenge for me is I see some value around and hear all the "bad" news (US debt ceiling, Greek debt...) and like a poker player I want to go "all in". The trouble with this strategy is the opportunity costs missing out on even better bargains if / when the Chinese miracle economy comes back to reality.

A handful of patience is worth more than a bushel of brains. - Dutch Proverb

Sometimes I am afraid I am short on both.

I must admit I made that mistake and went 'all in' during the lows of last year and i'm paying for it a bit now with minimal funds to make some great purchases. I'm working towards finalising my strategy and my coded spreadsheets that will allow me to follow it. Would be interested in possibly sharing with you to get your thoughts once i've finalised it if your interested?

I'm basically working on 3 spreadsheets: Valuation, Portfolio, Trading.

Valuation - This excel file allows me to put in a stock code and instantly updates with current, historical and future valuations as wells as other data to allow me to make an investment decision.

Portfolio - This excel file tracks the portfolio I construct in terms of overall portfolio gains etc as well as individual stock gains, stops and price data.

Trading - Simply follows the buys/sells I make and provides statistics on the performance of my trades/portfolio.

Don't wish to hijack your thread, just thought you may be interested and happy to discuss further via PM.

Cheers

 

[skc]

No worries there SKC it is a line of credit on my mortgage so no margin calls, only the chance of terrible losses or incredible profits or more likely something inbetween.

Your thread title says "leveraged investments" so I thought the $30k LOC goes into a margin loan or something...I suppose it's good that's not the case.

 

[robusta]

Your thread title says "leveraged investments" so I thought the $30k LOC goes into a margin loan or something...I suppose it's good that's not the case.

Cheers skc, I would have a little trouble sleeping with a concentraded portfolio that was nearing a margin call

I must admit I made that mistake and went 'all in' during the lows of last year and i'm paying for it a bit now with minimal funds to make some great purchases. I'm working towards finalising my strategy and my coded spreadsheets that will allow me to follow it. Would be interested in possibly sharing with you to get your thoughts once i've finalised it if your interested?

I'm basically working on 3 spreadsheets: Valuation, Portfolio, Trading.

Valuation - This excel file allows me to put in a stock code and instantly updates with current, historical and future valuations as wells as other data to allow me to make an investment decision.

Portfolio - This excel file tracks the portfolio I construct in terms of overall portfolio gains etc as well as individual stock gains, stops and price data.

Trading - Simply follows the buys/sells I make and provides statistics on the performance of my trades/portfolio.

Don't wish to hijack your thread, just thought you may be interested and happy to discuss further via PM.

Cheers

That is very interesting kermit and light years ahead of me - I am working with pen and paper and a Casio calculator.

 

[robusta]

NEW INVESTMENT

SOO - Solco Ltd

This may seem like a strange decision when you look at the various State Goverments reduction in the Feed in Tariff schemes for residentual and small businesses. This may cause a tough year for this part of the business but with either a carbon tax or direct action in the long term I can see traditional electricity generation getting more expensive and solar getting cheaper, if current trends continue the price will quickly reach parity and not long after solar will be cheaper IMO.

SOO is much more than a importer of panels for your roof, they also have a profitable solar pumping division and are also involved in small to medium power generation projects for commercial and utilities as customers.

With no debt, about 1.8 x book value and a ROE of about 40% I think I will be happy to ride out the tough year to come and wait for the growth to take off.


Portfolio Position

Starting line of credit $30,000.00

Bought
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)
29,524x SOO @$0.105 = $3100.02 (01/08/11)

Brokerage Paid = $79.95

Lenders Mortgage insurance $667.81 paid

Credit available $10,197.97

All ords @ 25/07/11 4603.80

 

[tigerboi]

maybe you should have followed me...??
TIGERBOI:
13th april 11,258 WPG @ $0.75 for $8443.....now $1.03 +37.33%

 

[McLovin]

NEW INVESTMENT

SOO - Solco Ltd

This may seem like a strange decision when you look at the various State Goverments reduction in the Feed in Tariff schemes for residentual and small businesses. This may cause a tough year for this part of the business but with either a carbon tax or direct action in the long term I can see traditional electricity generation getting more expensive and solar getting cheaper, if current trends continue the price will quickly reach parity and not long after solar will be cheaper IMO.

SOO is much more than a importer of panels for your roof, they also have a profitable solar pumping division and are also involved in small to medium power generation projects for commercial and utilities as customers.

With no debt, about 1.8 x book value and a ROE of about 40% I think I will be happy to ride out the tough year to come and wait for the growth to take off.


Portfolio Position

Starting line of credit $30,000.00

Bought
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)
29,524x SOO @$0.105 = $3100.02 (01/08/11)

Brokerage Paid = $79.95

Lenders Mortgage insurance $667.81 paid

Credit available $10,197.97

All ords @ 25/07/11 4603.80

Another one I've got. I see this as more spec and haven't put much in at all. The industry as a whole is growing very fast, their topline revenue is growing fast but their bottomline is not growing anywhere near as quickly. It's hard to see a long run competitive advantage that they have. They essentially run a distribution business. Having said that I bought because the industry is growing so fast and the company has a decent bottomline growth rate.

 

[robusta]

Another one I've got.

Either you own a lot of different companies or we like the same sort of businesses

I see this as more spec and haven't put much in at all. The industry as a whole is growing very fast, their topline revenue is growing fast but their bottomline is not growing anywhere near as quickly. It's hard to see a long run competitive advantage that they have. They essentially run a distribution business. Having said that I bought because the industry is growing so fast and the company has a decent bottomline growth rate.

I have to agree with you there McLovin, that is why SOO is my smallest holding. With this portfolio I decided $3000 would be my minimum investment, looking at the massive discount to IV I could not resist throwing a extra $100.00 at it.

Competitive advantage is hard to find except maybe exclusive products and the distribution system, however I could not go past SOO with such a strong ballance sheet and phenominal growth, time will tell if it pays off.

 

[robusta]

maybe you should have followed me...??
TIGERBOI:
13th april 11,258 WPG @ $0.75 for $8443.....now $1.03 +37.33%

Congratulations tigerboi that is a great return in a short time period. However WPG is not something I would look at as it is outside my circle of competence.

 

[robusta]

NEW INVESTMENT

ZGL - Zicom Group

Yet another business I hold in my SMSF, maybe I need to find some new ideas ZGL has a great cash flow, decent ROE good growth profile and powered out of the GFC when opposition were trying to raise equity.
Guidance for 2011 out today; revenue up 36%, NPAT up 30-40%, the market did not like it!! I wish I was sitting at a computer all day and could have got in at the low of $0.35 but fairly happy to pick up @ $0.43, what a wild ride.

My portfolio is looking a little sick after today, I will update returns (losses) towards the end of the month when I will probably be fully invested.

Portfolio Position

Starting line of credit $30,000.00

Bought
7,142 x TSM @ $0.66 = $4713.72 (25/07/11)
546 x MCE @ $6.95 = $3797.70 (25/07/11)
853 x CCP @ $4.48 = $3821.44 (26/07/11)
385 x FGE @ $5.37 = $2067.45 (26/07/11)
291 x FGE @ $5.34 = $1553.94 (27/07/11)
29,524x SOO @$0.105 = $3100.02 (01/08/11)
7407 x ZGL @$0.43 = $3185.01 (05/08/11)
Brokerage Paid = $99.93

Lenders Mortgage insurance $667.81 paid

Cash contributed $40.00
Credit available $7032.98

All ords @ 25/07/11 4603.80

 

[VSntchr]

Finally we disagree!
Sold my ZGL for 0.435 today. Even if earnings do increase over 12 - 18 months as projected...I just dont see this as undervalued anymore..IMO its about fair value...and when theres a whole host of companies going for MOS of 30%+ ive found it too tempting to switch...

Different views make a market however. My father still holds this stock so good luck to you both.

 

[skc]

NEW INVESTMENT

ZGL - Zicom Group

Have you look at their announcement and disect the numbers?

H1 NPAT was S$9.09m on S$71m revenue. The full year guidance are S$13-14m on S$146. That means in the second half they were busy (revenue $75m) but didn't make any money ($4-5m).

Unless there are good seasonal reasons for changes between H1 and H2, I tend to just pro-rate the latest half year for a yearly run rate. If you do that they are at a lower case of S$8m run rate (~A$6.3m, or ~3c EPS).

You are no longer buying value (you paid PE = 14). You are buying turnaround and putting faith in a fragile work economy...

 

[suhm]

Seems like ZGL was a good offload given the poor update, was really expecting to go gangbusters given all the O&G activity, I was actually more worried about currency issues given the rampant AUSD. Management seems pretty upbeat about the future whereas they were quite low key from memory in the last profit release which could prescint for the future.

Though nearly every offload has been a good idea over the last few months.

 

[robusta]

Finally we disagree!

AT LAST!!!

Sold my ZGL for 0.435 today. Even if earnings do increase over 12 - 18 months as projected...I just dont see this as undervalued anymore..IMO its about fair value...and when theres a whole host of companies going for MOS of 30%+ ive found it too tempting to switch...

Different views make a market however. My father still holds this stock so good luck to you both.

Good luck to your dad and me and good luck with your buying today.

 

[robusta]

Have you look at their announcement and disect the numbers?

H1 NPAT was S$9.09m on S$71m revenue. The full year guidance are S$13-14m on S$146. That means in the second half they were busy (revenue $75m) but didn't make any money ($4-5m)..

I am looking forward to the annual report to really disect the numbers ,the fall in profit margin is a worry however ZGL in the half year has made a small acquisition PGH for $300,000 and is in a business that often has lumpy returns due to timing of payments for contracts and capital expenditure.

Unless there are good seasonal reasons for changes between H1 and H2,

This from todays guidance

"The Group’s orders for deck machinery had been affected by the slackened ship
building orders for offshore vessels during the recent global financial crisis. Demand
for offshore vessels generally precedes demand for our deck machinery by 1-2 years.
We expect to continue with slackened demand for our deck machinery in the next
financial year.
However, strong world-wide resurgence in demand for offshore rigs particularly for
deep seas exploration and production in the last 9 months has increased demand for
deep seas offshore vessels. A gradual build-up in demand for our deck machinery has
emerged. We expect this to gain momentum in the next 12-18 months.
b) The slack in our deck machinery was expected to be taken up by the substantial
orders received by us for oil and gas turnkey projects in hand. However, delays in
implementing these projects within the second half year caused by slow engineering
approvals, had caused the contribution from these projects to be pushed into the next
financial year.
We are confident that in the medium to long term, incremental growth in our offshore
marine oil and gas segment will be maintained."

I tend to just pro-rate the latest half year for a yearly run rate. If you do that they are at a lower case of S$8m run rate (~A$6.3m, or ~3c EPS).

That is a good rule of thumb but sometimes you have to look past one good or bad half of growth.

You are no longer buying value (you paid PE = 14). You are buying turnaround and putting faith in a fragile work economy...

I hesitate to bring this up but I do not look at PE at all when making investment decisions. The numbers I look at are ROE, equity/ share, debt/equity and cashflow. It is a long argument but when I am valueing a company why would I want to bring price into the equation, I want to value the business and then compare it to the price and buy or sell accordingly.
As for the fragile work economy I have no idea, boom, bust or muddleing through. I am however confident in the long term we need more oil and gas and ZGL will supply deck machinery to the ships.

 

[skc]

I am looking forward to the annual report to really disect the numbers ,the fall in profit margin is a worry however ZGL in the half year has made a small acquisition PGH for $300,000 and is in a business that often has lumpy returns due to timing of payments for contracts and capital expenditure.

Lumpy payments do not equal lumpy profits because revenues are recognised in the period which the work is done. Cashflow however can be lumpy due to timing of payments.

That is a good rule of thumb but sometimes you have to look past one good or bad half of growth.

I run a mile away from anyone who delivers a bad half. Yes it might very well be just a rough patch. But my theory is that the market isn't in the mood to give out benefit of the doubt... and you can always jump back on when they release the next positive guidance (which is how I jumped on ZGL back in Feb).

I hesitate to bring this up but I do not look at PE at all when making investment decisions. The numbers I look at are ROE, equity/ share, debt/equity and cashflow. It is a long argument but when I am valueing a company why would I want to bring price into the equation, I want to value the business and then compare it to the price and buy or sell accordingly.
As for the fragile work economy I have no idea, boom, bust or muddleing through. I am however confident in the long term we need more oil and gas and ZGL will supply deck machinery to the ships.

You bring the price into the equation because it is the price you pay. You can have the most profitable, high growth and fantastic company in the world...but you will only get subpar return unless you buy them at a fair or low price.

The PE gives you the quickest answer on whether it is cheap or not. Based on your assessement on things like ROE, cashflow and earnings per share, a company deserves a certain PE. You can look around for similar peers to make such assessment. In other words, low PE is your margin of safety. I am not saying buy a stock because it has a low PE, I am saying buy a good company when it has a low PE. And better still, buy a good company when it has a low PE and is about to experience some catalyst to move up.

Anyway.... all my opinion of course and my portfolio is also being torn to pieces like everything else. I hope I don't sound too critical in my post and good luck with the investments