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No Ordinary Duck
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Really!
So IOOF ceasing to be a substatial holder
PERPETUAL the same
and a share price visiting the south pole.
Not a consideration?
TGA - Thorn Group
- Thread starter McCoy Pauley
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Really!
So IOOF ceasing to be a substatial holder
PERPETUAL the same
and a share price visiting the south pole.
Not a consideration?
tech/a
No Ordinary Duck
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So 12 mths ago you paid $1.90 ish and today you can get $1.30 ish.
Let me see
7% return against 35% loss of capital.
Carry on.
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Actually, IOOF just became a substantial holder on 17/04. PPT are dumping their holdings, as they've done with other stocks that are performing well.
The other is kinetic, who have cut down on their holdings.
I still don't understand why I would care if these companies want to take their profits now...?
The company has virtually no debt, and strong recurring revenue, so it's not going bust anytime soon... so my shares won't be worth $0 in the coming months.
I just fail to see the logic in wanting to sell because you see the guy next to you doing the same thing. I'm human, not a sheep!
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In my mind, something with no cashflow is worth nothing. As a minority equity holder, liquidation value means very little. Companies usually die, they don't liquidate their balance sheet. Management are incentivised (ie paid) not to wind up the business. Agency risk is a real thing and shouldn't be discounted. I'm buying cashflow and ultimately that's what drives the assets price. As long as that cashflow continues, I don't particularly care what the asset's price does. Others can and do disagree. To that extent, residential property offers me the most stable cash flow and is the least likely to fall to zero, outliers notwithstanding. I don't own residential property, because I don't like the cash flow. However RRE has the most stable cash flow outside of fixed interest, IMO.
I'm not disagreeing with that. I'm disagreeing with the idea that buying one share or one house, all other things being equal, has the same degree of risk. Agency risk alone means they don't.
Do you know why they are selling or either's entry point into the stock? If not, then what's your point?
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But I didn't buy it 12months ago, as it wasn't 'undervalued', as the FA would suggest.
And the SP drop is due to negative sentiment, not because the company is being run to the ground.
It's like if you bought a house for $200k, that returned 20k a year in rental returns (just an example). The housing market is in a downturn, but that's a yield of 10%. Would you wait until the market comes good before buying (and therefore probably buy the thing at a higher price, because everyone else will be jumping on board)?
How much anyone has invested in TGA is their own business.
Personally, I'm with Julia on the general question of diversification - yes, the doubters sometimes deride it as "diworsification" - but I've seen enough apparently sound companies go belly up in my time to put me off the big betting the farm technique!
Anyone remember Standard Insurance or Reid Murray from the 1960's? No? - well how about Timbercorp, ABC Learning or Babcock and Brown from more recent days!
Nothing to do with TGA, of course, but they demonstrate the downside of concentrated risk when things go wrong.
Personally, I'm with Julia on the general question of diversification - yes, the doubters sometimes deride it as "diworsification" - but I've seen enough apparently sound companies go belly up in my time to put me off the big betting the farm technique!
Anyone remember Standard Insurance or Reid Murray from the 1960's? No? - well how about Timbercorp, ABC Learning or Babcock and Brown from more recent days!
Nothing to do with TGA, of course, but they demonstrate the downside of concentrated risk when things go wrong.
On the matter of investing between $500,000 and $600,000 in a rental property versus TGA, I presume the former will make about 5% return a year, and then there is the hoped-for capital appreciation. If you bought TGA shares at $1.40, and got 10 cents fully franked dividend, the dividend and the franking credit would be worth 14.3 cents, a return of 10.2%. In my case my 470,000 TGAs cost me $564,392, and I'll presume that the dividends received suffices to ignore the time value of money. My current return on 14.3 cents a share is 11.9%, and I expect my capital appreciation in the next few years will surpass that of a rental property, but it might not. How the value of my TGAs, or the value of a rental property, may wobble for a year or so does not unduly bother me, the $67K of dividend and franking credits allows me to sit through the wobbles. If TGA slips into decline it will be a slow process because of its strong cashflow and near-zero debt, rather than an over-night wipe out. Hence the chances of losing it all are low.
The advantage of high-commitment investing is that it implies that one knows the target investment well, and takes the trouble to continually research it – effort and talent that would be misapplied if one merely tossed beer money at it. I hold 16 other stocks in my portfolio worth roughly as much in total as TGA, and I find that with most of them, I do not invest the time to understand them, which is why I am gradually whittling down the number (was 30 stocks some years ago). I would rather hold five stocks that I understood very well, rather than thirty that I do not.
The more one knows, the less the risk, and hence the more comfortably one is with the risk. I have no certain knowledge that Black Caviar is going to win its next race, but I know enough to venture that at odds of twenty to one, I would have a flutter, rather than avoid it, because the mare might not win. It's all a matter of PERCEIVED upside versus downside, and one's ability to handle the worst-case downside, which will vary from person to person. The more you know and evaluate an investment, the better the quality of the PERCEPTION will be.
TGA could go into decline, as did the Dutch East India Company (started in 1602, went bankrupt in 1800). The TGA business, commenced in 1937 as Radio Rentals, and I am sure it will see out the next five years. Investor watching TGA carefully will see the signs (declining ROE, EPS, revenue, customers, etc) before the herd see them, and they will be able to skip out early. This brings me to what I think we this forum should be debating – that is, what we think TGA's EPS is going to be for the next few years. In this regard, when wondering what could happen if customers/revenue cease to grow, it is worth considering two long-established TGA-style stocks in the USA. Aaron's (AAN) is growing revenue and EPS. Rent-A-Centre (RCII) is not growing, but because it does not need to fund growth, funds have been diverted to buying back shares, and hence its EPS has continued to grow. You can find their metrics by googling - morningstar aan aarons "annual report" - and - morningstar aan aarons "annual report" - or simply go to:
- http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=aan
- http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=rcii
When I looked at these months ago, AAN was trading at 18 times YE 30/12/2011 EPS, and RCII at 13 times YE 30/12/2011 EPS.
Bear in mind that what tends to spook the market (welching Greeks, oil prices, interest levels, unemployment in Patagonia, civil war in Azania, etc) has little impact on TGA's EPS growth, whereas more Australians households on welfare and more of our money hurled at them helps its ROE and EPS growth.
What is your prognosis of the forward EPS metrics?
The advantage of high-commitment investing is that it implies that one knows the target investment well, and takes the trouble to continually research it – effort and talent that would be misapplied if one merely tossed beer money at it. I hold 16 other stocks in my portfolio worth roughly as much in total as TGA, and I find that with most of them, I do not invest the time to understand them, which is why I am gradually whittling down the number (was 30 stocks some years ago). I would rather hold five stocks that I understood very well, rather than thirty that I do not.
The more one knows, the less the risk, and hence the more comfortably one is with the risk. I have no certain knowledge that Black Caviar is going to win its next race, but I know enough to venture that at odds of twenty to one, I would have a flutter, rather than avoid it, because the mare might not win. It's all a matter of PERCEIVED upside versus downside, and one's ability to handle the worst-case downside, which will vary from person to person. The more you know and evaluate an investment, the better the quality of the PERCEPTION will be.
TGA could go into decline, as did the Dutch East India Company (started in 1602, went bankrupt in 1800). The TGA business, commenced in 1937 as Radio Rentals, and I am sure it will see out the next five years. Investor watching TGA carefully will see the signs (declining ROE, EPS, revenue, customers, etc) before the herd see them, and they will be able to skip out early. This brings me to what I think we this forum should be debating – that is, what we think TGA's EPS is going to be for the next few years. In this regard, when wondering what could happen if customers/revenue cease to grow, it is worth considering two long-established TGA-style stocks in the USA. Aaron's (AAN) is growing revenue and EPS. Rent-A-Centre (RCII) is not growing, but because it does not need to fund growth, funds have been diverted to buying back shares, and hence its EPS has continued to grow. You can find their metrics by googling - morningstar aan aarons "annual report" - and - morningstar aan aarons "annual report" - or simply go to:
- http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=aan
- http://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=rcii
When I looked at these months ago, AAN was trading at 18 times YE 30/12/2011 EPS, and RCII at 13 times YE 30/12/2011 EPS.
Bear in mind that what tends to spook the market (welching Greeks, oil prices, interest levels, unemployment in Patagonia, civil war in Azania, etc) has little impact on TGA's EPS growth, whereas more Australians households on welfare and more of our money hurled at them helps its ROE and EPS growth.
What is your prognosis of the forward EPS metrics?
That sounds plausible as a general proposition but it does so precisely because it is so generalised and not specific to any particular stock. Most investors don't buy "stocks": they buy shares in a particular business. Do you think the homeowners who bought those properties referred to in the Guardian article take much comfort in general propositions that a house has less risk of capital loss?
Who are you talking about? My entry price is $1.48.
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They may or they may not. How does that article prove that houses are less risky than buying a single share?
With respect, the last three companies were never great companies. The warning signs were always there for all to see. Their balance sheets were simply awful. You need to compare like to like.
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You beat me to it - Security Analysis FTW.
It doesn't. But I am not trying to prove a general proposition. You are.
Agency risk is part of the valuation. The best an investor can do is try and compare the expected value of two investment opportunities. I love expected value.
Cheers
Oddson
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I'm not trying to prove it. Just sayin'.
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But there are so many variables that go into estimating cash flow, that's why the margin of safety is so useful, it acknowledges one's own shortcomings. If I buy in a good inner-city location, I may not generate the same return, but my earnings risk is much lower, at least IMO.
Anyway, well OT now.
You're obviously better versed in TGA's business than most of us. But I think TGA is at something of a turning point which makes estimating its future earnings with any accuracy fraught with difficulty. New businesses (NCML) and new business lines (furniture and gym equipment) without a long or any established track record of earnings have been acquired and developed that put TGA on a steady but perhaps not stellar path to growing earnings.
I've only entered TGA recently, so I will want to consider its FY report before proferring any estimate. In particular, I want to see if there is any evidence for the assumptions in Macquarie's report that has TGA's business basically treading water for the next two years. Personally, I think that report has underestimated the ability of TGA's management to grow TGA and the adaptability of the rental business. Basically anything can be leased/rented if there is a demand for it and it is often very profitable. In this regard, people should look at MMS when it bought Interleasing. Ultimately, why stop at leasing only household items and basic office equipment? I think there's tremendous tax incentives for corporations to lease a whole variety of essential business equipment rather than outright purchasing of it.
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No Ordinary Duck
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So all of you have just purchased this?
Pioupiou have you held these (Yours ) for long?
Pioupiou have you held these (Yours ) for long?
Perhaps my view of the world is wrong. Personally I look about 5 years out for any business (including property investment), I calculate expected value taking into account all risks (inflation, financial, earnings etc) and compare it against the expected value of a 5 year term deposit at a leading bank. It is the best I can do. It is when performing this comparison exercise, I do not understand why people property invest in the current market, until the rental yields are double digit it is far from safe, in fact to obtain reasonable returns the investor is reliant on capital growth, which if the property market in general is not rising then the investor is reliant on their skill in picking the right house on the right street in the right suburb and making the right modifications to obtain capital growth for their investment timeframe. Taking $500k of capital and allocating it to the right house on the right street in the right suburb and making the right modifications is no different to putting $500k into a carefully selected stock it is one investment decision. One must allocate capital into the investment with the highest expected value. This is why putting a lot of money into one stock is not “risky” if you have done your homework, however it is very “risky” just like property investment if you have not done your homework. Agree well OT now.
