Which one do you use? Technical or fundamental analysis?

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Wayne,

My point is Buffett did not invest is small undiscovered lightly traded small caps when he had less than $1 Million. Why would he now if he had less than $1M??

It is not his style.

Ben Graham (Buffetts mentor) does invest in undiscovered lightly traded small caps but only if they have a NTA of over 1.5

If their (tangible assests less liabilities) is greater than the Market Cap by about 150%. And they make a profit year after year and they pay large dividends. He'd buy them.

The only ASX company I can find like this is CMI - I have bought them and lost a bit so far.

My worst investment this year actually

As a trader what do you think of CMI?

 

[BSD]

Re: Which one do you use? Technical or fundamental analysis

Unlike most others, I see investing as a business of long term survival first, returns second.

Lots of claims (from all camps) around "beating the market is easy" and "not being satisifed with 12%" really fascinate me.

Too much studying risk perhaps.


Absolute performance, as opposed to relative performance, is more important in my world. All the rest is a d$ck measuring contest.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

"not being satisifed with 12%"

If I could get a 12% return after all taxes and expenses and dividends year after year I'd be absolutely stoked.

 

[Bobby]

Re: Which one do you use? Technical or fundamental analysis

If I could get a 12% return after all taxes and expenses and dividends year after year I'd be absolutely stoked.

Well maybe I can help you ?
Try stopping the VB , that should be worth the 12% your after

Or get a sponsor to pay you for each post on ASF !

Have Fun
Bob.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Try stopping the VB

But for every VB I buy, I get 0.00001 cents back via Fosters dividends.

The more I drink the more money I make. Cheers!

 

[MichaelD]

Re: Which one do you use? Technical or fundamental analysis

As a trader what do you think of CMI?

**** This is not advice to buy or sell. This is what MY system would tell ME to do. MY system applies only to ME. As far as anyone is concerned, MY system is useless for THEM. ****

1. CMI is not within my trading universe so I would not have entered it at any time.

However, my system is still profitable when applied to the Entire Market (just a lot more choppy), so IF this stock were in my trading universe;

2. In the last 12 months, I would have received buy signals on 10-8-2005, 4-10-2005/5-10-2005 and 31-3-2006/3-4-2006. The first trade, if entered, would have exited as a breakeven trade. The second and third trades would have exited as 1R losses.

3. Currently CMI is not giving a buy signal, but is giving sell signal after sell signal.

It's a dog from technical point of view - long term downtrend, and currently trading below a long term moving average.

 

[Julia]

Re: Which one do you use? Technical or fundamental analysis

If I could get a 12% return after all taxes and expenses and dividends year after year I'd be absolutely stoked.

Really? So what returns are you expecting from your current portfolio?

Julia

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

3. Currently CMI is not giving a buy signal, but is giving sell signal after sell signal.

It's a dog from technical point of view - long term downtrend, and currently trading below a long term moving average.

No surprises there. they are going down and down and down

Fundamentally it is quite excellent though. P/E of 5.18 a P/B of 0.4

They've made a growing profit and paid growing dividends for 10 years in a row.

They have 60M in debt but 114M in Assets - that is $54M up, the market cap is only $38M.

And the dividend yield is 11.3%

Fundamentally that is a fantastic company.

Have they sent out profit warnings recently or something that I missed?

If they make $7M profit again this year I'll be stoked. This is worth holding for the yield alone!

I suspect Ben Graham would buy CMI

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Really? So what returns are you expecting from your current portfolio?

My Nasdaq shares doubled last year. So I got a huge return, they've eased back this year slightly and I get no dividends from them. I'll need to sell some soon and pay tax as well - dammit! They are too risky to buy and hold unfortunately.

But for the ASX - I'd be happy with a 12% return this year. 4% from dividends, 8% from growth.

So far I am up slightly for the year. And the All Ords is up slightly.

$100,000 invested in shares adding $40K mopre shares a year and 12% a year return would give me about $9M by the time I retire. (And Ill retire quite early)

That's just shares, I have super already and will buy property as well.

12% is a fantastic return after expenses and tax whichever way you look at it.

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

If their (tangible assests less liabilities) is greater than the Market Cap by about 150%. And they make a profit year after year and they pay large dividends. He'd buy them.

The only ASX company I can find like this is CMI - I have bought them and lost a bit so far.

My worst investment this year actually

As a trader what do you think of CMI?

WARNING - I'm not an accountant and not even that experienced in reading annual reports - so the statements below could contain significant factual errors and should be independantly verified before making any decisions based upon them.

Realist out of curiosity I had a look through CMI's annual reports and company announcements (yep its scary that someone would spend their spare time doing these sorts of things ).

I don't know if you noticed the various announcements last year about their converting preference shares being converted into Class A shares but it you look at that in detail it might cause a rethink of how you view their EPS and/or NTA from a value investment perspective.

My interpretation, and I'm no accountant and could have this completely wrong, is that there are about 26 million Class A shares on issue, in addition to the 36 million ordinary shares on issue.

If you read the reason that their converting preference shares were converted to class A shares it is because Australian accounting standards classified that the CPS shares should be counted as debt not equity - which sounds justifiable given that the CPS shares have preferential treatment both for dividends and return on capital - yep sounds like debt to me .

The conversion to Class A shares seems to have gotten around this accounting requirement however as far as I can tell the Class A shares still have preferential treatment in the event of a return of capital, and also preferential treatment in relation to dividend distribution, which is locked in at 14c per share per annum until 2015 and remains preferential beyond that date.

I haven't done the exact numbers but clearly depending on how you interpret this situation it could have an impact on a view of either EPS or NTA from a value investment point of view.

It would be interesting to hear a qualified accountant comment on this stuff from an opinion point of view (and they could clarify how accurate the stuff above is as well).

WARNING - I'm not an accountant and not even that experienced in reading annual reports - so the statements above could contain significant factual errors and should be independantly verified before making any decisions based upon them.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Realist out of curiosity I had a look through CMI's annual reports and company announcements

Where did you get them from??

Their website doesn't haev them does it??

My interpretation, and I'm no accountant and could have this completely wrong, is that there are about 26 million Class A shares on issue, in addition to the 36 million ordinary shares on issue.

Wow, that is interesting.

Thanks. You know your stuff. Fortunately I bought only 1000 shares (my smallest investment presently). I just wanted to experiment with undervalued small caps - it backfired though.

Still with a P/E of 5, even doubling the amount of shares is not a killer. Or do you think it is? Others do obviously.

I bought it for the yield. And it may be a takeover target.

What do you think? Would you buy shares in CMI ? Even with $26M in extra debt they are a reasonably valued company...

 

[wayneL]

Re: Which one do you use? Technical or fundamental analysis

The only ASX company I can find like this is CMI - I have bought them and lost a bit so far.

My worst investment this year actually

As a trader what do you think of CMI?

Well I only have access to the last 1 year of data, because I don't trade ASX.

But looking at whats in front of me:

As a trader, its way to illiquid at this point. Average daily turnover is about $55k average. My normal position size is nearly that!

So potentially I could move the market and I need to get out fast, thats a humungous negative. Even if it could be shorted, I wouldn't go there because of said illiquidity. Short squeezes in such circumstances could be lethal.

Apart from that, a solid down trend. It would not even appear on a scan. i.e. no interest in something like this at all.

Bear in mind thats a traders perspective.

Cheers

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

i.e. no interest in something like this at all.

No one does except me.

 

[Bobby]

Re: Which one do you use? Technical or fundamental analysis

No one does except me.

Hullo Realist,

When you bought CMI, did you at any time have a look at their chart ?
If you did , were You upside down ?

Bob.

 

[cuttlefish]

Re: Which one do you use? Technical or fundamental analysis

Where did you get them from??

Their website doesn't haev them does it??


Still with a P/E of 5, even doubling the amount of shares is not a killer. Or do you think it is? Others do obviously.

I bought it for the yield. And it may be a takeover target.

What do you think? Would you buy shares in CMI ? Even with $26M in extra debt they are a reasonably valued company...

I read them on the announcements section of comsec, but you can also get them for free from the asx site:

http://www.asx.com.au/asx/statistics/announcementSearch.do

Yeah I'd agree that even considering those class A shares they still seem fairly conservatively valued, but not necessarily a standout.

That fact that you've had a go at doing your own research and then backed it is commendable. I've made all sorts of mistakes (and will continue to do so) in relation to the fine detail of issued capital in stocks that have got me unstuck in the past, and as a result tend to sift through the reports and announcements pretty carefully myself to verify it.

Its also a very good idea to look through their P&L and balance sheets for anomolies and discrepencies between the previous year. On that side, as far as I can tell this company has all the hallmarks of a classic boring earner with no great surprises year on year - though they did mention they expected difficult trading conditions this year but didn't go into much detail - you'd probably have to do some research on the auto industry sector to get a better idea of the factors at play there. But I'm pretty sure somewhere in there I read that they restated their earnings guidance for fy05/06 as in line with the first half, so I don't see any indication they expect any significant slump in earnings.

One thing I've found in looking for true value buys is sifting out the good ones from the potential candidates - it takes a fair bit of time and research - and I've been caught out by all sorts of unexpected things, which is why I always tend to get down to the raw announcements and read the actual reports.

 

[ghotib]

Re: Which one do you use? Technical or fundamental analysis

No surprises there. they are going down and down and down

Fundamentally it is quite excellent though. P/E of 5.18 a P/B of 0.4

They've made a growing profit and paid growing dividends for 10 years in a row.

They have 60M in debt but 114M in Assets - that is $54M up, the market cap is only $38M.

And the dividend yield is 11.3%

Fundamentally that is a fantastic company.

Have they sent out profit warnings recently or something that I missed?

If they make $7M profit again this year I'll be stoked. This is worth holding for the yield alone!

I suspect Ben Graham would buy CMI

In your dreams, my blond friend.

In the real world Ben Graham would have needed a heck of a lot more information than you've given here before he made any decisions. He did not equate NTA with intrinsic value and he did not consider PER as fundamental to the value of the business.

Your system might be fantastic, but you're kidding yourself if you think it's following either Graham or Buffet. Do you have a copy of the Essays of Warren Buffet (edited Lawrence Cunningham)? I suggest you read the one called "Value" Investing: A Redundancy several times before you spend another cent on shares, and then take another hard look at your strategy. If you're still happy with what you're doing, terrific, but don't call it following Buffet.

None of which necessarily means that CMI was a bad buy. But if you were really following Buffet you wouldn't need to ask; you'd have done your own detailed analysis of the company and you'd know exactly what you thought its value was and why you thought so. I didn't go as far as Cuttlefish but I did take a look at the ASX summary, and FWIW the questions that leapt out at me from that were provisions for updating machinery and variations in metal prices. The answers should be in the financial reports, and one day I'll feel confident that I can find them... I hope.

Maybe it's time to go curly brunette for a while; better protection when you beat your head on the wall

Ghoti (I don't think Buffet has all the answers and I know I don't)

 

[It's Snake Pliskin]

Re: Which one do you use? Technical or fundamental analysis

No one does except me.

Maybe there is a message in that for you.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

When you bought CMI, did you at any time have a look at their chart ?

No.

Your system might be fantastic, but you're kidding yourself if you think it's following either Graham

Well Graham liked : Relatively large unpopular large companies. The Purchase of bargain issues. and Special situations or "Workouts"

A bargain issue is quoted as

Quoted from Graham's book "The type of bargain issue that can be most readily identified is a common stock that sells for less than the company's net working capital alone, after deducting all prior obligations."

Had a compay's NTA less liabilities been much larger than their market cap, in other words you could liquidate it for more than you bought it for - he'd have bought it.

Grahams brokerage firm bought many small caps low high P/B ratios, hundreds infact - he diversified big time on them of course.

And yes P/E is a big part of Grahams philospohy. Add up the last five years earnings to get an average earnings though - do not just use the latest P/E given.

I don't try and follow Buffet as such - I try and follow Grahams ideas though.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

Maybe there is a message in that for you.

Well Snake, it is my worst investment in the past couple of years, and it gives a 12% yield. And has made a profit for 10 years in a row. I'll just hold and "hope".

It is also my smallest investment - it did not seem entirely right to me at the time. You live and learn.

 

[Realist]

Re: Which one do you use? Technical or fundamental analysis

One thing I've found in looking for true value buys is sifting out the good ones from the potential candidates - it takes a fair bit of time and research - and I've been caught out by all sorts of unexpected things, which is why I always tend to get down to the raw announcements and read the actual reports.

Thanks for your advice Cuttlefish.

I looked long and hard for the CMI annual report or balance sheet and could not find it. I trusted Commsec.

I still can not find it Cuttlefish. Not on ASX or CMI website...