Fess up! You haven't even read that book, have you? If so, show me the part in it where it claims Warren Buffett was nearly made bankrupt by credit default swaps.
TGA - Thorn Group
- Thread starter McCoy Pauley
- Start date
-
- Tags
- tga thorn group
Fess up! You haven't even read that book, have you? If so, show me the part in it where it claims Warren Buffett was nearly made bankrupt by credit default swaps.
McCoy Pauley
Get out of here Budweiser!
- Joined
- 12 November 2009
- Posts
- 616
- Reactions
- 0
Coca-Cola has its formula for its products locked up very tight. Much imitated; never replicated.
McDonald's moat lies in its franchise system that means that (in theory, not always in practice) what you buy in Melbourne tastes exactly the same as what you buy in Moscow.
IMO, the moats of these companies are much stronger than I think you give them credit for.
Otherwise, I agree with the thrust of your post.
tech/a
No Ordinary Duck
- Joined
- 14 October 2004
- Posts
- 20,400
- Reactions
- 6,317
I knew it. Do you even know what credit default swaps are? Don't google it!
skc
Goldmember
- Joined
- 12 August 2008
- Posts
- 8,277
- Reactions
- 329
Off topic... Coke was never about its secret formula. It's the world's best marketing organisation... selling an image. It's also the world's best distribution system. If you are thirsty and go and buy a drink, chances are you will see Coke in prominent display.
The secret formula is probably free on the internet somewhere... but no one would be able to sell the same thing in another label.
tech/a
No Ordinary Duck
- Joined
- 14 October 2004
- Posts
- 20,400
- Reactions
- 6,317
Don't have the book on my desk at the office but ill have a look through it on the W/End.
When i find it Ill post the page up for reference.
Then you'll have to buy the book to verify it.
Ill also take a pik of it in my library with a copy of this post just to appease
your girlish glee.
Do you really want me to type up a post on Credit default swaps?
Happy to if it will help you.
Let me make it easier for you: find me a single internet reference to Buffett going almost broke because he wrote credit default swaps. Google it and tell me what you find.
McCoy Pauley
Get out of here Budweiser!
- Joined
- 12 November 2009
- Posts
- 616
- Reactions
- 0
I agree with all that (though I don't think you could find the formula anywhere). The Coca-Cola Company is a brilliant case study in marketing, all the way down to Santa Claus as he's currently envisioned.
And it tastes good! You all seem to have forgotten that.
tech/a and nutmeg can you take your bickering to pm's or something, its starting to get way off topic from TGA.
See its holding reasonably well at the $1.40 mark, will be interesting if it can hold here until the annual report and then see where it goes from there. If it broke down heavily just before the annual report you'd have to see that as a big warning sign but I guess its time to see how it plays out.
See its holding reasonably well at the $1.40 mark, will be interesting if it can hold here until the annual report and then see where it goes from there. If it broke down heavily just before the annual report you'd have to see that as a big warning sign but I guess its time to see how it plays out.
- Joined
- 2 June 2011
- Posts
- 5,341
- Reactions
- 242
That, and it's cheap, so there's no need to switch. During the Cola Wars Pepsi was encouraging people to "take the Pepsi challenge" and was winning over consumers because it tasted better. That all came to a head when Coke shot itself in the foot with New Coke.
Nah, it's very much secret. There are a lot of attempts to work out what it is though. If it was widely available, then they wouldn't spend all that effort transporting syrup from Atlanta to all four corners of the globe.
Then ignore it, you hippy.
- Joined
- 28 May 2004
- Posts
- 10,834
- Reactions
- 5,178
Back on topic please everyone. TGA and related discussion only in this thread.
And a reminder to all that insults and personal attacks are not permitted.
And a reminder to all that insults and personal attacks are not permitted.
Yep - that is true, TGA's size is important. I imagine that a competitor like Mr Rental and Radio Rentals in SA (which is not a TGA unit) probably take their pricing cues from TGA's outlets (Rentlo in SA, Radio Rentals in other states). I would like to know more about TGA's competitors, but I do not, other than what one picks up on the Internet (Mr Rental is a NZ-founded franchising operation with outlets in NZ and Australia).
One can add TGA's buying clout as a moat. TGA's buying power is huge, because although it is a middling-sized supplier, its narrow product range means that when it plonks down the oof in front of a would-be supplier, TGA has the negotiating dynamics in its favour. In furniture lines, the suppliers would be small if local, and much tempted to pick up the extra volume focused on one or two items they make - economies of specialisation (read all about it in Adam Smith's book).
To put the matter of the series of moats that TGA has in one place, I repeat what I wrote earlier - namely: ". . . Firms like Coca Cola and McDonalds only have their names as a moat, but that seems to suffice to allow them to be profitable for a long time. TGA has a few weak moats. Its strong balance sheet is one - a new competitor needs a pile of cash to have a business like TGA. A second moat is that its business is so bloody boring, that it would not excite yuppies as a business option. TGA's core skill is customer management in the sense of screening them for reliability, and cajoling them into meeting their commitments, a skill that is not as generally available as one may think, and one that carries enough social odium to keep the yuppies away. Perhaps the limited size to which TGA can grow acts as a minor moat - big money would not be interested. These are not individually strong moats, but collectively they seem to have sufficed for a long time.
Now back to valuing stocks – TGA specifically.
When we read the next annual report, we will have a six-year record of a fistful of performance metrics, plus risk-related matters like the debt/equity ratio and management cues as to how well TGA is travelling. We can then invent a growth scenario, subjective as it will be. These things should impact the multipliers (or other bundles of arithmetic) that we use to postulate what a fair-value SP might be. On the moat, we may simply have a 0-9 scale, and factor this into out calculations. If we use a multiplier approach, we should be able to say that a stock with metrics A, B, C, D and E should have a multiplier X (PER, EBIT multiplier, whatever we use). Use the same approach on a few other stocks, just to see if the comparisons with TGA are intuitively digestible. Consequently, if we value stock X at $3, and it has no moat, and it has high debt, and it has low growth, then we should be able to value it at a higher price if it had a grade 6 moat, 8% debt to equity ratio and we guesstimate that it is growing at rates (for individual outyears) that are respectable.
Why all the intellectualising? Because without knowing how my and other target SPs are invented, one cannot gain much from them. I think many target SPs for TGA are based on facts that cannot stand the light of day.
Why do I own so many other crappy stocks? Because I have delinquently failed to devote time to think about them. When I have honed my way of thinking about TGA, I'll apply much the same approach to stocks that I own, and candidate stocks that I might buy in their stead. Culling is the easy part – selecting investment candidates for the money realised is where I want intellectual and factual rigour.
Calculating a target SP is like calculating the weight of a pig. You put it on the end of the shorter arm of a see-saw contraption that has one arm of 2.7653 metres and the other of 3.7988 metres. You counter balance the pig with a large rock. You then guess the weight of the rock, multiply by 3.7988/2.7653, and voilà , you have the weight of your pig. Is it a reliable technique? It can be made to appear so if you give the answer to a number of decimal places, and call the technology something like “offset cantilever porcine weighing apparatus”, and if you refer to the resultant calculation as “intrinsic weight” to expunge any notion that subjectivity is involved, or that the result should be questioned.
- Joined
- 2 June 2011
- Posts
- 5,341
- Reactions
- 242
Thorn is a member of NARTA. The prices they pay for electrical goods would be the same as HVN is getting (with some exceptions that where I have been told HVN rort the system a bit). Generally, there are two ways for retailers to get lower cost goods, either through their buying group (eg NARTA) or if they are doing big volume in their own right (which I'm reliably told TGA would qualify for) direct from the manufacturer. Mr Rental is also part of NARTA, however they probably don't do the same volume to qualify for all of the discounts available.
Thanks for that. TGA also imports direct. Last annual report states "The increase in gross profit from $86,475,000 to $99,714,000 was favourably impacted by the introduction of a direct import program under the Thorn brand name and the appreciation of the Australian dollar." Under the heading "Highligts" the report lists "Thorn brand flat panel TVs introduced". In effect this just solidifies the concept that TGA's buying power is a moat, albeit a shallow one through which big retailers could wade if they wished to get into the TGA-style game.
Did some quick calcs. Assuming that you loaded up during the GFC at the low of $0.415. And managed to sell, like Harry Hindsight always does, at the peak of $2.26. (edit: You're heavily into analysing volume, what effect does selling 470,000 shares on the market on those particular days have on the share price - would you have been able to sell every single one of them at the peak?)
Accounting for 46.5% tax rate (less 50% discount for the holding period) you would have net sell price of $1.83 per share. Let's call it $1.82 after brokerage shall we? Is 0.5% too generous?
If you had have held you would have stock worth $1.42 at this weeks close. Plus $0.0895 per share in fully franked dividends. Let's say $1.52.
This is a difference of $0.30 per share. Which is a 16% net difference if you sold at the peak.
Doesn't look as interesting when you look at the real numbers if you ask me. Including accumulated dividends you'd still be miles ahead of the GFC low in this scenario. With a bigger one coming in July.
Let's revisit this in July after the 2012 figures are known, and the dividend has been paid Tech/A. I will be interested to see what the gap between selling at the peak and still holding is by then. I am making no estimates because I do not have a crystal ball to predict the share price.
My investment philosophy is to exchange capital for cash flow.
There is only one price that really interests me and that is my buy price. It is my buy price that determines my future return. Everything beyond the buy price is a cash flow stemming from the buy decision. – including the sale price if I decide to sell. So long as nothing is going wrong with the business I would only sell if the market is offering more than my estimation of future cash flows.
TGA, at $2.20 odd was arguably not priced excessively enough to have a margin of safety on the sell decision and pay the CGT. Sure there may have been some TA signal that would have got you out a bit past the top and will get you back in a bit past the bottom, but the same TA will whipsaw the crap out of you with smaller retracements and it’s only hindsight that tells you the depth. You get the best expectancy by identifying the best stocks, buying them at the right price and sticking with them until the business changes.
I have control of my buy price and hence have some control over initial drawdown but not over what the market will do to the share price subsequently. If the price runs ahead and pulls back then so be it. The risk of trading and loosing exposure to a good business is not worth it. If the price falls further that is no reason to turn my future cash flows into a loss. Only the business performance dictates my actions, not other peoples onion of its value (aka price)
Successful value investing is about taking meaningful exposure to great businesses and staying the course until the business fundamentals tell you it’s time to leave. The market can do what it dam well likes in the mean time. I’m not going to listen to the market when I know investing in great businesses is and has been life changing, All I have to do is buy right and hold tight, so long as the business performs how I expect.
If you don’t have the analysis skill or the temperament to sit through whatever the market will throw at you then don’t start down the FA road it will be a disaster for you. If however you do have the aptitude there is plenty of opportunity out there.
How about digging us out a technical system for trading TGA since listing and then work out the result from taking ‘every’ signal.
With history to curve fit, you should be able to quickly work out a system to flog any buy and holder
who has a a 15%+ CAGR since listing.
Oh yeh - don't forget your tax, or commissions for that matter.
