DNO (Domino Printing Sciences) has been nominated twice in the Motley Fool competition. It should be interesting to read the write-up. DNO trades on a PER of 13.7, with a ROE of 22%. There have been some interesting developments lately, so I thought I'd just trot out the latest news.
14-Dec-2011 Citigroup upgrades DNO from neutral to buy (not sure that's a good thing)
14-Dec-2011 Moneyshow runs the headline "A Rock Solid UK Dividend Stock". It's website seems to be out of action, though.
19-Dec-2011 The website "Labels and Labeling" (I have to stifle a yawn just thinking about it) reports strong growth in Middle East, Africa and Asia, but declining sales in UK, Germany, and parts of North America. Record turnover and profits were reported, allowing the group to extend the range of new products, progress rationalization, and invest in the development of new inks. An investment of $50m was made in TEN Media, to participate in new opprotunities for egg coding in the US. Manufacturing facilities will expand in China and India. Their UK factories are close to capacity, and they intend to build a new factory. More people are being employed, principally in Asia.
Despite management's caution of the general economic slowdown, that all sounds very bullish to me.
03-Jan-2012 DNO acquires the remaining 5% of issued share capital of APS (Alternative Printing Services GmbH) for €831k. APS makes a range of thermal inkjet printers.
04-Jan-2012 PrintWeek reports that DNO's digital label press will be core to its offering in 2012 as the inket specialist looks to further boost uptake of the technology. "We've spent the last two or three years developing our product line and I anticpate 2012 will see further growth in the label part of the business and hope for a good level of uptake"
Showing posts with label dno. Show all posts
Showing posts with label dno. Show all posts
Friday, January 6, 2012
Tuesday, December 13, 2011
Diary: AFF, CPP, DNO
I'll tell you this for nowt: the market knows how to seriously test your convictions. The last couple of days have been very, um, "exciting" for me.
Yesterday, DNO (Domino Printing Sciences) dropped 12% on anticipation of today's results. A sure sign that the results will be bad, right? Wrong! In the final results RNS, it announced underlying EPS up 9%, 33rd year of sales growth with record profit. Dividends increased by 20%, currently standing at a yield of 3.99%. Come to daddy! It's currently up 12% in trading today - although there's obviously volatility there. Poster on ADVFN writes:
CPP dived a lot yesterday - about 12% if memory serves. The trading statement made for unpleasant reading:
Yesterday, DNO (Domino Printing Sciences) dropped 12% on anticipation of today's results. A sure sign that the results will be bad, right? Wrong! In the final results RNS, it announced underlying EPS up 9%, 33rd year of sales growth with record profit. Dividends increased by 20%, currently standing at a yield of 3.99%. Come to daddy! It's currently up 12% in trading today - although there's obviously volatility there. Poster on ADVFN writes:
I agree, impressive numbers, though the rate of growth in H2 did slow quite a bit. The main worry must be the segmental dependence on Europe, which seems determined to embrace austerity, and I think that is what is spooking the markets.
AFF (Afferro Mining) is a minnow iron ore miner that's really been putting my portfolio through the grinder. I had bought after seeing reports about the likely NPV calculations on its resources, suggesting it was severely undervalued. People were getting puzzled about the directors quietness as to its funding arrangement, with everyone wondering if there'd be dilution of holdings, or liquidity problems. Anyway, all that got blown out of the water yesterday when it announced:
115m USD is 64m GBP. The company has a market cap of £57m, plus a lot of resources to exploit. This company looks very undervalued. It rose about 38% yesterday (!), and is down 4% after such a massive runup. I have renewed confidence in this company. The company has a tendency to spike up on good news, but then sag down. I'm thinking of waiting for the dust to settle and top up. Riskier play, and it is a commodity company, but I think that topping up is the right way to go. Unless Europe and China slide into the sea, of course, then not so good.Afferro divests interest in the Putu Iron Ore Project for minimum US$115 million cash ... allows the Company to focus on its 100% owned flagship Nkout project and minimises shareholder dilution. With the focus and cash, Afferro will be extremely well placed to enter a new and exciting phase of growth.
CPP dived a lot yesterday - about 12% if memory serves. The trading statement made for unpleasant reading:
The FSA investigation ... continuing to have a material impact... in the UK. A new, non-insured service product ... will not be adopted by business partner. [In] 2012, there are good opportunities to achieve improved revenue growth compared to 2011. Underlying Group operating profit in 2012 is likely to be significantly lower than 2011An ADVFN poster writes:
The bottom line is that they have lost millions already due to the lenght [sic] of the investigation and will then doubtless have to pay a fine on top of the lost business.Stay tuned on this one. It still has high ROE and low price.
Tuesday, November 15, 2011
Diary: Dividend growth
An article at Dividend Growth Stocks got me to thinking about using dividend growth as a filter for investing. The aim would be to try to pick out low risk, high quality companies obtainable at a reasonable price. An investor could look at the current debt situation, and factor in some light-weight qualitative factors. By "reasonable price", I mean anything below 16X PER. It's not a cigar-butt technique; think Marks & Sparks, not Primark.
I just picked out a few examples off of the top of my head (I own all of them except Tescos), and compiled the following table:
All of the shares listed have had increasing dividends for the last decade; some of them spectacularly so. BLT increased its dividends a massive 27% pa for the last decade, which is truly staggering. The performance of the share prices was very good, too, averaging +255% over the decade - that's about 14% pa. By contrast, the FTSE returned 4% pa. all of them beat the FTSE, except VOD. They had a 7:8 share split in 2006, for which I'm too lazy to adjust the dividends for. Also, its share price plunged precipitously during 2002, which is what I think at a very high PER at the beginning. So a sensible investor would have been able to avoid VOD shares.
This is, of course, hindsight bias (except the VOD thing - a lot of tech stocks at ridiculous multiples could have easily be avoided by those with just a modicum of investment skill). We of course know what you should have done: buy companies that will increase their dividends steadily over the next decade. They'll likely do fantastically well. Ah, but which ones will they be?
I think this is where the "light-weight qualitative factors" comes in. You're looking at the historical record and asking yourself if it's likely to continue. You might look at BLT, and conclude that seeings as it's a commodity company, the future is too unpredictable, and you should avoid.
But there are other candidates, like BATS, which seems in a pretty stable industry. Analysts expect EPS to grow 12% in 2011, and a further 9% in 2012. It currently yields 4.4%, and is on a PER of 14.9. z-score is over 3, so that's pretty good. I look at it this way: I can probably get a better than 10% total return for this stock over the next year. Considering that the market has been flat for the last decade, that's a pretty good return. And remember, you're getting this with minimal risk.
If you look at VOD, analysts are expecting a whopping 31% increase in dividends in 2012 - although that is exceptional, of course. VOD trades at a PER of 11.4, and a PBV of 1.1. It seems to be doing OK in new markets, too. Probably not a choice that will astound Buffett with the depth of your insight into the company, but it looks like it will spit out the goods. Divvies have been growing at only 7% pa over the last 5 years, so it's probably entering a slower phase than in the early 2000's. Like I say, there's nothing I consider inspired about the pick, other than the fact that investors will probably do OK.
DNO looks pretty good on paper. It makes industrial printers - for stuff like printing expiry dates on food products, printing on eggs (no joke!) and printing despatch labels for packages. It's on a PER of 14.5, has a market cap of nearly £600m, and has net cash of £12m, and negative gearing. Interest cover is 201, z-score is 5.98, so the balance sheet is clearly very solid indeed. Its ROE is 21%, compared with a decade mean of 19%. It wins design awards. I like the fact that it has a very nice cash position, and is small enough that there's plenty of room for expansion.
I reckon that if an investor can put together about a dozen issues like DNO, and is patient, they'll do well. Not "Buffett well", but "market beating" well. Some of them will be duds, of course, as no-one can predict the future. There's a poster I respect who found good results over the last decade by buying good-quality low-risk companies at reasonable prices. It seems that the market tends to overlook them in favour of cheap junk or overpriced high-growth shares (some of which turn out to be junk in the end, anyway). BATS is up 19% YTD, compared with FTSE down 6% - a comparison that you are no doubt tired of. I like making that comparison because it just goes to show how a boring, non-esoteric, reasonably priced good-quality company can slaughter the index. That's a serious out-performance. Admittedly, we may be having market conditions that are conducive to such outperformance; but it still makes me think.
I just picked out a few examples off of the top of my head (I own all of them except Tescos), and compiled the following table:
CDR SPR
DNO 18% +483% Domino Printing Sciences
SN. 9% +49% Smith & Nephew
BATS 16% +415% Brit Amer Tobacco
BLT 27% +534% BHP Billiton
VOD 24% -10% Vodafone
Legend:
CDR: Annual Compound Dividend Rate over last decade
SPR: Share Price Return over last decade
All of the shares listed have had increasing dividends for the last decade; some of them spectacularly so. BLT increased its dividends a massive 27% pa for the last decade, which is truly staggering. The performance of the share prices was very good, too, averaging +255% over the decade - that's about 14% pa. By contrast, the FTSE returned 4% pa. all of them beat the FTSE, except VOD. They had a 7:8 share split in 2006, for which I'm too lazy to adjust the dividends for. Also, its share price plunged precipitously during 2002, which is what I think at a very high PER at the beginning. So a sensible investor would have been able to avoid VOD shares.
This is, of course, hindsight bias (except the VOD thing - a lot of tech stocks at ridiculous multiples could have easily be avoided by those with just a modicum of investment skill). We of course know what you should have done: buy companies that will increase their dividends steadily over the next decade. They'll likely do fantastically well. Ah, but which ones will they be?
I think this is where the "light-weight qualitative factors" comes in. You're looking at the historical record and asking yourself if it's likely to continue. You might look at BLT, and conclude that seeings as it's a commodity company, the future is too unpredictable, and you should avoid.
But there are other candidates, like BATS, which seems in a pretty stable industry. Analysts expect EPS to grow 12% in 2011, and a further 9% in 2012. It currently yields 4.4%, and is on a PER of 14.9. z-score is over 3, so that's pretty good. I look at it this way: I can probably get a better than 10% total return for this stock over the next year. Considering that the market has been flat for the last decade, that's a pretty good return. And remember, you're getting this with minimal risk.
If you look at VOD, analysts are expecting a whopping 31% increase in dividends in 2012 - although that is exceptional, of course. VOD trades at a PER of 11.4, and a PBV of 1.1. It seems to be doing OK in new markets, too. Probably not a choice that will astound Buffett with the depth of your insight into the company, but it looks like it will spit out the goods. Divvies have been growing at only 7% pa over the last 5 years, so it's probably entering a slower phase than in the early 2000's. Like I say, there's nothing I consider inspired about the pick, other than the fact that investors will probably do OK.
DNO looks pretty good on paper. It makes industrial printers - for stuff like printing expiry dates on food products, printing on eggs (no joke!) and printing despatch labels for packages. It's on a PER of 14.5, has a market cap of nearly £600m, and has net cash of £12m, and negative gearing. Interest cover is 201, z-score is 5.98, so the balance sheet is clearly very solid indeed. Its ROE is 21%, compared with a decade mean of 19%. It wins design awards. I like the fact that it has a very nice cash position, and is small enough that there's plenty of room for expansion.
I reckon that if an investor can put together about a dozen issues like DNO, and is patient, they'll do well. Not "Buffett well", but "market beating" well. Some of them will be duds, of course, as no-one can predict the future. There's a poster I respect who found good results over the last decade by buying good-quality low-risk companies at reasonable prices. It seems that the market tends to overlook them in favour of cheap junk or overpriced high-growth shares (some of which turn out to be junk in the end, anyway). BATS is up 19% YTD, compared with FTSE down 6% - a comparison that you are no doubt tired of. I like making that comparison because it just goes to show how a boring, non-esoteric, reasonably priced good-quality company can slaughter the index. That's a serious out-performance. Admittedly, we may be having market conditions that are conducive to such outperformance; but it still makes me think.
Saturday, October 15, 2011
Diary: Peter Lynch, csinvesting, HIK
Peter Lynch
Here's an article in Yahoo Finance, which was originally published on Stockopedia, which advertises their screener. They put together the following criteria to emulate Lynch growth:
There is also a link to a discussion of growth investing on Stockopedia.
Blog: csinvesting
I just discovered a value-investing blog, csinvesting, which has some interesting content. Check it out.
HIK: Hikma Pharmaceuticals - Pharma & Biotech - 636.3p/£1.2bn
I was on the lookout for a growth company, and came across this stock. HIK is a pharmaceuticals company, with three segements: branded, injectable, and generic. It's on a PER of 18.97, so scrapes through as a GARP. Gearing is 41%, and interest cover is 10.6. It has net debt of £196m. I was going to write that off as an "immediate fail", but I think things aren't so bad. Net profit for last year was 61m, add back exceptionals of 3m, and you get an adjusted net profit of 64m. So it could pay off its debt in 3 years (196/64). It's median PER since flotation in 2005 is 18.7 - so it's about in-line. Revenue growth has been about 30% pa over the last 5 years, whilst operating profits have grown at a rate of about 24% pa. 5-year EPS growth is about 20%. Directors own about 30m worth of shares, which is a reasonably chunky amount. Median ROE over the last 5 years was 12%, which is a bit disappointing. I'd hope for 15%. Median 5-year operating margins were 19.6%, which look uninspired against AZN (Astrazeneca), which has a margin of 31%, and GSK (Glaxosmithkline) of 34%. Take a look at the interview with CEO Said Darwazah for a run-down on the results for 2010. Motley Fool also wrote an article about it in August 2011. I can see the attraction in it, and I wouldn't necessarily rule it out as a GARP share. It doesn't seem to get much of a following on the boards. Perhaps one to keep on a watch list. If I had a choice, I'd rather have my CTN shares (I'm taking price into consideration).
Growth opportunities
My shares in IQE have been rocketing lately. I bought at the end of September, and have seen them go up 20% in the space of a little over 2 weeks. If only they all did that! It just goes to show that you can get some good things happen to you in depressed markets if you spot some companies with good growth opportunities. Much more exciting than owning those boring go-nowhere companies! IQE currently trades on a PER of 18.8, so I wont be looking to add more at these prices. This one to look out for dips. IQE hasn't been much of a victory for me, you should understand, because it only makes up 0.7% of my portfolio. I was waiting for my CTN money to come through, and anticipating further drops in the market.
I think there are some cracking growth companies still worth buying in the current markets. One is PTEC (Playtech), that provides software to online gaming companies. It's on a PER of 7.6, has ROE of 29%, and oodles of cash. Another one is PIC (Pace), the set-top box maker. It's on a PER of 4.4, has a ROE of 29%, although admittedly the debt situation is not good. Prospects do seem good, though. I also think SBT (Sporting Bet) offers very good value at a PER of 6.5, high ROE, and plenty of cash. I think it's important not to over-concentrate in a sector - especially in online gaming, which is one with many uncertainties surrounding it. If you're willing to cough up a little more, and go where there isn't as much growth, but still above-average growth, then I think there's quite a lot of opportunities: SN. (Smith & Nephew), BATS (Brit American Tobacco), MRW (Morrisons), DNO (Domino Printing Sciences), and I'm sure many many others that you could come up with that I had never even heard about.
Here's an article in Yahoo Finance, which was originally published on Stockopedia, which advertises their screener. They put together the following criteria to emulate Lynch growth:
- Annual EPS Growth Rate >= 15% but <= 30%.
- PEG < 1.0
- Institutional ownership <50%
- Total Debt / Total Equity < 25%
- .Market cap less than $2 billion
- Operating Margin 5-Year Average >= 50% * Current Operating Margin. This is an attempt to screen for consistency of earnings, although this is difficult to do so effectively. One should ideally study the pattern of earnings, especially how they reacted during a recession
- Price-Earnings: The price-earnings ratio is less than the industry's median price-earnings ratio and less than the five-year average price-earnings ratio. Finding a good company is only half the battle in making a successful investment. Buying at a reasonable price is the other half
- No Financials
- Hot stocks in hot industries
- Companies (particularly small firms) with big plans that have not yet been proven
- Profitable companies engaged in diversifying acquisitions. Lynch terms these "diworseifications."
- Companies in which one customer accounts for 25% to 50% of their sales
There is also a link to a discussion of growth investing on Stockopedia.
Blog: csinvesting
I just discovered a value-investing blog, csinvesting, which has some interesting content. Check it out.
HIK: Hikma Pharmaceuticals - Pharma & Biotech - 636.3p/£1.2bn
I was on the lookout for a growth company, and came across this stock. HIK is a pharmaceuticals company, with three segements: branded, injectable, and generic. It's on a PER of 18.97, so scrapes through as a GARP. Gearing is 41%, and interest cover is 10.6. It has net debt of £196m. I was going to write that off as an "immediate fail", but I think things aren't so bad. Net profit for last year was 61m, add back exceptionals of 3m, and you get an adjusted net profit of 64m. So it could pay off its debt in 3 years (196/64). It's median PER since flotation in 2005 is 18.7 - so it's about in-line. Revenue growth has been about 30% pa over the last 5 years, whilst operating profits have grown at a rate of about 24% pa. 5-year EPS growth is about 20%. Directors own about 30m worth of shares, which is a reasonably chunky amount. Median ROE over the last 5 years was 12%, which is a bit disappointing. I'd hope for 15%. Median 5-year operating margins were 19.6%, which look uninspired against AZN (Astrazeneca), which has a margin of 31%, and GSK (Glaxosmithkline) of 34%. Take a look at the interview with CEO Said Darwazah for a run-down on the results for 2010. Motley Fool also wrote an article about it in August 2011. I can see the attraction in it, and I wouldn't necessarily rule it out as a GARP share. It doesn't seem to get much of a following on the boards. Perhaps one to keep on a watch list. If I had a choice, I'd rather have my CTN shares (I'm taking price into consideration).
Growth opportunities
My shares in IQE have been rocketing lately. I bought at the end of September, and have seen them go up 20% in the space of a little over 2 weeks. If only they all did that! It just goes to show that you can get some good things happen to you in depressed markets if you spot some companies with good growth opportunities. Much more exciting than owning those boring go-nowhere companies! IQE currently trades on a PER of 18.8, so I wont be looking to add more at these prices. This one to look out for dips. IQE hasn't been much of a victory for me, you should understand, because it only makes up 0.7% of my portfolio. I was waiting for my CTN money to come through, and anticipating further drops in the market.
I think there are some cracking growth companies still worth buying in the current markets. One is PTEC (Playtech), that provides software to online gaming companies. It's on a PER of 7.6, has ROE of 29%, and oodles of cash. Another one is PIC (Pace), the set-top box maker. It's on a PER of 4.4, has a ROE of 29%, although admittedly the debt situation is not good. Prospects do seem good, though. I also think SBT (Sporting Bet) offers very good value at a PER of 6.5, high ROE, and plenty of cash. I think it's important not to over-concentrate in a sector - especially in online gaming, which is one with many uncertainties surrounding it. If you're willing to cough up a little more, and go where there isn't as much growth, but still above-average growth, then I think there's quite a lot of opportunities: SN. (Smith & Nephew), BATS (Brit American Tobacco), MRW (Morrisons), DNO (Domino Printing Sciences), and I'm sure many many others that you could come up with that I had never even heard about.
Friday, October 7, 2011
Diary: CPP, DNO, gold
CPP - CPP GROUP - (Financial) Support Services - 121.90p/£209m
CPP is a "life assistance" products. Basically, if your credit card missing, or something like that, CPP will sort things out for you. I had a new credit issued to me the other day, and had to phone a number to activate it. That, of course, presents an opportunity to sell you typical financial product garbage. If you listen to the spiel over the phone, you realise that that's where our good friends over at CPP come in.
CPP floated in March 2010. At the end of March 2011, the FSA decided to investigate some of the stuff (I hesitate to call them "products") that CPP was selling, and the share price duly plunged. FT Alphaville referred to them as basically just another busted IPO. So, lots of bad sentiment surrounding it. I noticed that, at that time, the company was a "magic formula" company, for those who have read the writings of Joel Greenblatt. It generates very high returns on equity, and was available at a low PE.
Anyway, I decided to pass on the company at the time, figuring that it was high risk, and I couldn't be sure if the the whole thing would be a complete bust. As the weeks passed, the share price recovered, and I figured that I had missed the boat and that was the end of that.
Then, in about July, the whole market tanked, taking CPP down with it. In August, I realised that I had a second chance to buy into it if I so wished, so I took it. It was, in part, eventdriven's interest in the company that caused me to reappraise it. The directors have a massive stake in the company (£120m against a market cap of £209m), so I could be pretty sure that it wasn't going down without a fight. The directors had announced that it had re-engineered some of their products (which I assume means something along the lines of "same pig, different wig"), so the FSA investigation might not be as damaging - and more importantly not fatal - as I had originally supposed.
Other negatives pointed out on a thread on Motley Fool: negative tangible assets, and "its business stinks, selling the kind of insurance that nobody really wants but are sold on the sly."
So, where we stand today, at a share price of 122p, we are on a PER of 6.1, yield of 7.2%. The company has a high return on equity (115%). It has net debt of 7.2m, compared with net profits of nearly 16m at the interim stage. So the company looks fine from a debt angle. It trades at an EV/EBITDA of 3.8, which looks cheap to me.
Analysts have pencilled in a 15% rise in EPS for 2012, for those that have faith in that kind of thing. The company has also announced that it sees India as a growth market for its wares.
So, in summary, CPP is on a cheap rating, has high returns on equity, has recently been dumped on scary news, which looks overblown, plus it has identified real prospects for growth. That was my reasoning behind my purchase, anyway.
DNO - Domino Printing Sciences - Electronic and Electrical Equipment - 444.7p/£493m
DNO released an RNS yesterday, saying that it has taken its holding in Kameleon Source Codes from 10% to 98%. It comments:
Gold
An article in Yellow Capital, dated 02-Sep-2011, speculated on the price of gold. He is bullish on it:
CPP is a "life assistance" products. Basically, if your credit card missing, or something like that, CPP will sort things out for you. I had a new credit issued to me the other day, and had to phone a number to activate it. That, of course, presents an opportunity to sell you typical financial product garbage. If you listen to the spiel over the phone, you realise that that's where our good friends over at CPP come in.
CPP floated in March 2010. At the end of March 2011, the FSA decided to investigate some of the stuff (I hesitate to call them "products") that CPP was selling, and the share price duly plunged. FT Alphaville referred to them as basically just another busted IPO. So, lots of bad sentiment surrounding it. I noticed that, at that time, the company was a "magic formula" company, for those who have read the writings of Joel Greenblatt. It generates very high returns on equity, and was available at a low PE.
Anyway, I decided to pass on the company at the time, figuring that it was high risk, and I couldn't be sure if the the whole thing would be a complete bust. As the weeks passed, the share price recovered, and I figured that I had missed the boat and that was the end of that.
Then, in about July, the whole market tanked, taking CPP down with it. In August, I realised that I had a second chance to buy into it if I so wished, so I took it. It was, in part, eventdriven's interest in the company that caused me to reappraise it. The directors have a massive stake in the company (£120m against a market cap of £209m), so I could be pretty sure that it wasn't going down without a fight. The directors had announced that it had re-engineered some of their products (which I assume means something along the lines of "same pig, different wig"), so the FSA investigation might not be as damaging - and more importantly not fatal - as I had originally supposed.
Other negatives pointed out on a thread on Motley Fool: negative tangible assets, and "its business stinks, selling the kind of insurance that nobody really wants but are sold on the sly."
So, where we stand today, at a share price of 122p, we are on a PER of 6.1, yield of 7.2%. The company has a high return on equity (115%). It has net debt of 7.2m, compared with net profits of nearly 16m at the interim stage. So the company looks fine from a debt angle. It trades at an EV/EBITDA of 3.8, which looks cheap to me.
Analysts have pencilled in a 15% rise in EPS for 2012, for those that have faith in that kind of thing. The company has also announced that it sees India as a growth market for its wares.
So, in summary, CPP is on a cheap rating, has high returns on equity, has recently been dumped on scary news, which looks overblown, plus it has identified real prospects for growth. That was my reasoning behind my purchase, anyway.
DNO - Domino Printing Sciences - Electronic and Electrical Equipment - 444.7p/£493m
DNO released an RNS yesterday, saying that it has taken its holding in Kameleon Source Codes from 10% to 98%. It comments:
Domino has been developing its label generation and printer integration capability using Kameleon software since taking an initial 10% stake in the business in 2010. The move to acquire the balance of the company gives Domino full control over the deployment and future development of its software solutions that will enhance Domino's coding automation capability and offer customers the means to achieve enhanced productivity and coding reliability. The acquisition is expected to enhance future sales growth opportunitiesDNO trades on a PER of 12, yield of 3.8%, with net cash of £12m. It has a ROE of 21%, and analysts expect 10% EPS growth in 2012. Looks good to me.
Gold
An article in Yellow Capital, dated 02-Sep-2011, speculated on the price of gold. He is bullish on it:
Western Governments are dealing with a solvency crisis not a liquidity crisis. Money printing is the only way politicians believe they can cure the patient. Austerity measures don?t win elections, only brave and patriotic leaders would embark on political suicide. Expect further devaluation of currency and my guess is one major default before or during 2012. Till [sic] then I will hold gold in its physical form.He observes that there has been a 20-year bear market in gold, creating an under-investment in the gold mining sector. It takes an average of 10 years to get a mine operational and produce gold. Further:
Everything, I believe happens in cycles. World stock markets crash or dip severely roughly every 4.5yrs, property tends to have longer cycles due to its illiquid nature and tends to be at least 9yrs to 15yrs if one measures peak to trough.Summing up:
gold experienced a twenty year bear market from 1981 to 2001 and is likely to experience a bull market of twenty years from 2001 to 2021.
Friday, September 23, 2011
Diary
Market changes
Don't worry, I'm not going to report on market prices every day. I thought that, given I made some observations on market movements yesterday, I thought I'd see how things had changed. FTAS (FT-All share) was up 0.3% to 2626.
IND - IndigoVision
IND makes business-grade (as opposed to retail grade) CCTV cameras that work over ethernet. It's been very interesting to watch this company, although I've never actually owned any shares. It is a small (13m cap) company, and is considered a growth share. The share price is down 66% YTD. It gapped down about 34% on 16 June after issuing a profit warning. It reached a high of approx 950p in 2007, and now sits of 170p. It has a massive spread, so what the share price is is dependent on what figure you use.
IND currently has a PER of 21 - which sounds a lot, but its recent results have been poor. PBT in 2010 was 3.1m, and the finals in 2011 were 1.2m. So you could argue that the high PER is an anomolous figure (although I'm not saying that that's my argument). Oliver Vellacoot, a director, owns nearly £3m of shares. So he has skin in the game.
IND is followed extensively on one of the Motley Fool boards. Some of those investors are very probably amongst the savviest private investors in the UK.
The whole issue surrounding the collapse of the IND's share price is as to whether the company has gone ex-growth or not. The fact there is no concensus view does, I think, demonstrate just how hard it can be sometimes to determine the future prospects of a company. A lot of experience and intelligence can go into a difficult problem, and yet it's still not clear who is right. Some poster worked out that the company might acutally slip into a loss, given its high operational leverage.
There's been a lot of good debate on the TMF boards, and this post by Paul Scott summarises his position:
On interesting aside: a few weeks ago, a poster said that investors were panicing. This suggestion was rebuffed, saying that on the whole, investors were not panic selling but instead hanging on. This stuck in my mind - because I felt that that probably indicate further downward movement: people weren't yet capitulating. Since then, the shares have, indeed, moved lower.
It is interesting to consider this company from an investment case. There seem to be so many pros, cons and undecidables about it that it makes one wonder how one should approach it, if at all. I had been thinking about this today, and came up with the following idea: instead of worrying about exactly IF their Canadian sales would do this, or their US sales would do that, let's look at it this way: we basically can't be sure, but let's say there's a very plausible case for the company's growth phase to continue. We - or rather I - just don't know the probability. So, I figured, if one could purchase the company cheap enough, then it would make an attractive bet. Remember that management is committed. So, IF one could purchase the shares as a net-net, then I think it would make a very interesting purchase as a bargain share with the distinct - but by no means guaranteed - chance of growth. If you look at it that way, then I think it's worth the risk. I wouldn't bet the farm, but I do think it would be a viable idea.
IND has net current assets of 12.6m, and negligible non-current liabilities. So its NCAV is about 12.6m. Graham would insist on purchasing it at 2/3 of NCAV (a tall order). The company's market cap is 13m, so the shares would need to fall about another 33% for that condition to hold. At 172.5p, the share price would therefore need to fall to 115p to make the play.
Don't worry, I'm not going to report on market prices every day. I thought that, given I made some observations on market movements yesterday, I thought I'd see how things had changed. FTAS (FT-All share) was up 0.3% to 2626.
- CHW - down 1.6% (down 0.9% yesterday)
- CTN didn't budge, same as yesterday. As expected
- DLAR - unmoved, same as yesterday. A strangely stubborn beastie. I wonder if anyone is accumulating this one.
- DNO - up a fraction, same as yesterday.
- DPLM - down 1.4% (yesterday down 0.2%)
- IND - down 5.5% (unmoved yesterday)
- GDL - down 2.2% (down 1.7% yesterday)
- JD. - up 2.1% (yesterday fractionally up)
IND - IndigoVision
IND makes business-grade (as opposed to retail grade) CCTV cameras that work over ethernet. It's been very interesting to watch this company, although I've never actually owned any shares. It is a small (13m cap) company, and is considered a growth share. The share price is down 66% YTD. It gapped down about 34% on 16 June after issuing a profit warning. It reached a high of approx 950p in 2007, and now sits of 170p. It has a massive spread, so what the share price is is dependent on what figure you use.
IND currently has a PER of 21 - which sounds a lot, but its recent results have been poor. PBT in 2010 was 3.1m, and the finals in 2011 were 1.2m. So you could argue that the high PER is an anomolous figure (although I'm not saying that that's my argument). Oliver Vellacoot, a director, owns nearly £3m of shares. So he has skin in the game.
IND is followed extensively on one of the Motley Fool boards. Some of those investors are very probably amongst the savviest private investors in the UK.
The whole issue surrounding the collapse of the IND's share price is as to whether the company has gone ex-growth or not. The fact there is no concensus view does, I think, demonstrate just how hard it can be sometimes to determine the future prospects of a company. A lot of experience and intelligence can go into a difficult problem, and yet it's still not clear who is right. Some poster worked out that the company might acutally slip into a loss, given its high operational leverage.
There's been a lot of good debate on the TMF boards, and this post by Paul Scott summarises his position:
- the doubts that IND will make a loss, regardless of what sales as margins do. The company will protect its cash
- it's cheap, so if you think it will recover, it will multi-bag
- if you don't think it will recover, then don't invest
- it has a mkt cap of 12m, and net cash of 5m
- it's in a growing sector
- he has had a senior management role in a growing company. As such, he is aware that things are rarely smooth. Things can often get bumpy.
On interesting aside: a few weeks ago, a poster said that investors were panicing. This suggestion was rebuffed, saying that on the whole, investors were not panic selling but instead hanging on. This stuck in my mind - because I felt that that probably indicate further downward movement: people weren't yet capitulating. Since then, the shares have, indeed, moved lower.
It is interesting to consider this company from an investment case. There seem to be so many pros, cons and undecidables about it that it makes one wonder how one should approach it, if at all. I had been thinking about this today, and came up with the following idea: instead of worrying about exactly IF their Canadian sales would do this, or their US sales would do that, let's look at it this way: we basically can't be sure, but let's say there's a very plausible case for the company's growth phase to continue. We - or rather I - just don't know the probability. So, I figured, if one could purchase the company cheap enough, then it would make an attractive bet. Remember that management is committed. So, IF one could purchase the shares as a net-net, then I think it would make a very interesting purchase as a bargain share with the distinct - but by no means guaranteed - chance of growth. If you look at it that way, then I think it's worth the risk. I wouldn't bet the farm, but I do think it would be a viable idea.
IND has net current assets of 12.6m, and negligible non-current liabilities. So its NCAV is about 12.6m. Graham would insist on purchasing it at 2/3 of NCAV (a tall order). The company's market cap is 13m, so the shares would need to fall about another 33% for that condition to hold. At 172.5p, the share price would therefore need to fall to 115p to make the play.
Friday, September 16, 2011
DNO IMS disappoints
DNO (Domino printing Sciences) slid 11% today on publication of their IMS. Some points that seem to be causing concern to investors:
DNO still looks a good quality company on a reasonable valuation, and I think it will continue to do well in the long term. My mistake was in becoming too eager on it earlier in the year. I would have been better off exercising more patience. With the benefit of hindsight, and a cooler head, I would probably now wait until DNO looked more oversold before buying, despite the 11% drop today.
- At the half year sales growth was 8 per cent; in the subsequent four months sales were 1 per cent below those of the corresponding months in the prior year.
- demand levels for new equipment in Western Europe and North America have been subdued, especially since the beginning of August, and are expected to remain so for the balance of the year
- Sales activity for new equipment in Asia, Middle East, South America and parts of Europe remains good, with our overall strength in these regions positioning us well for continued development and growth.
- In April 2011 we announced that we had invested US$50 million for a 15 per cent interest in TEN Media, a business set up to provide solutions to the egg industry. Progress has continued to be positive and we expect the first financial returns from this business to start in the second quarter of our next financial year.
DNO still looks a good quality company on a reasonable valuation, and I think it will continue to do well in the long term. My mistake was in becoming too eager on it earlier in the year. I would have been better off exercising more patience. With the benefit of hindsight, and a cooler head, I would probably now wait until DNO looked more oversold before buying, despite the 11% drop today.
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