Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Agreed - we are already some way towards reaching correction levels (i.e. 10% from peak) in US markets. We just need a final capitulation and you could see sub 2500p in BATS, although best be quick as I don't think it will hang around there for long.
Why not buy some now and then some more 'if' it reaches 2500p. You think BATS is not good value at 2575p but suddenly at 2500 it becomes good value?
I actually seem to notice it often goes up when the US market opens, however this is a loose observation so not guaranteed of course!
As an investor in BATS the only thing you should be worried about is the earnings per share. As CHRI55 sells out, this to me is actually a signal that we could be bottoming out here, not that it really matters, as I am just looking forwards to the next divi payout in a few weeks.
Every day the company is reducing the debt and accumulating dividends due to be paid out each quarter. There has quite literally never been a better opportunity to buy BATS shares. Remember that as the share price stagnates or falls, the risk actually decreases!
I said it before that I personally expect the share price to languish until the first quarter of 2022, when hopefully buybacks will be re-started.
Personally I think the management have been making a big mistake focusing on reducing the debt, as I am sure the interest rate on any debt being repaid is considerably less than the current 8% dividend yield currently offered and as the shares are bought back the net debt target will be reached in due course. Interest rates are at a record low, that is not the time to be paying down debt, especially when the shares are the cheapest they have ever been!!
My guess is this could drift down to the all time lows around 2400p and bounce around there for a while. I can't see it dropping below that without a dividend cut or a big fall in earnings (which I believe to be unlikely to happen).
Personally I don't think we will see a significant move upwards until share buybacks resume....hopefully in early 2022. However, between now and then I would take any drop from here as an opportunity to add to your holding.
If there was ever a situation where buybacks make sense - this is it!! Personally I would rather they forget about trying to reduce the net debt and just buyback shares now. In the current interest rate environment it really doesn't make sense to repay debt, especially when the business is being valued at significantly less than 10x earnings!!!
The madness of it all is that they increased debt to way over 5x to acquire Reynold back in 2017 at multiples double what BATS is being valued at now, however now that the share-price of BATS has halved they think that repaying debt is a better use of funds! Arrrgh
Anyway, the latest announcement did confirm they are on track to reduce net debt to 3x by the year end, so hopefully we won't have to wait much longer for them to introduce a more sensible capital allocation policy going forwards!!!
It's true that if you had bought at the peak back in 2017 you would be sitting on a sizeable loss currently. However, the earnings of the business are actually higher today and so if you value your investment in terms of its ability to generate profits, one could argue you have done quite well even though you may be sitting on a capital loss. This doesn't mean you were wrong to invest , it simply means that market disagrees with you.
If you look at it another way, you could be sitting on a share that had doubled over the last five years but its profits had halved. In this case you may be sitting on a sizeable capital gain, but I would question the market in this case. Remember that markets are not always rational, so it really is a mistake to be drawing conclusions from the share price alone, especially in the case of BATS due to the controversial nature of the product it sells - this is all driven by emotions!
Ultimately you have to decide whether you agree with the market's valuation or if you believe the intrinsic value to be higher. In the base of BATS I believe the latter and if the market fails to see the value then the cash flows will speak for themselves eventually.
The price of BATS is especially intriguing when you compare it to all the sky high multiples (of revenue) being applied to many US technology stocks which are loss making! I think too many investors are chasing a stock price and forget that the reason you should be investing in stocks is their ability to generate cashflows.
I have been slowly buying a pretty large position in this company over the last 6 months and continue to buy more at it reaches new lows. I view it as an interesting experiment to see whether I can get my investment back in dividends before the company goes to zero.....anything received in excess of this will be my profit!
If BATS can maintain its current profits with no increase whatsoever, I should get my money back within 10 years. Any residual value after this will be pure profit. Given that the company is actually still increasing its profits and revenue, this seems like a decent bet. Contrary to what many people believe, the number of smokers in the world is actually increasing currently due to population growth, not to mention that some proportion of future profits will be coming from non-combustibles which in theory could generate profits into perpetuity.
I think its pretty clear that you are getting a huge discount here for a company that others are unwilling to buy at any price due to the harmful product it sells. There is just simply very little demand from institutional investors due to the absurd suggestion that they are being socially responsible by not owning tobacco shares. Even if the shares fell 99% with no reduction in profitability, these institutions would still be unable to buy the shares.
I think it's worth remembering at this point that when you buy a share you are buying part of a company.
Downtrends....uptrends....etc. etc. these are not real. What is real is cash in the bank. Does the company make profits. Is the company growing.
I would much rather that the directors of the company focus on running and growing the business than keeping speculators happy about movements in the share price.
Everyday the price hits a new low, take this as a gift. Why does it matter if the price falls 50% or more. Eventually the price always aligns with the fundamentals.
If you haven't topped up already, you are very lucky and I would advise doing so ASAP.
I've reduced the base cost of my overall holding to under £20 now, which I never thought I would be able to do.
I can't wait to hear what they are going to do with the over £100m cash reserves, which I am sure they will furnish us with details of in the January trading update.
Yes, but shorters are sellers of the stock. Shorters borrow the stock from other shareholders, and immediately sell the stock in the hope of buying it back at a cheaper price.
Of course while they are shorting it, as the price falls, this causes weaker holders to panic out, as they wrongly assume the market must know something they don't thereby further exacerbating the fall. It also rattles peoples confidence in the stock and so people are reluctant to add to their positions.
Eventually someone armed with solid fundamental analysis will decide to start accumulating shares again and then the reverse occurs, the shorters start to panic as the price rises and suddenly the price will whoosh up.
Just my theory.
Clearly the current action is being completely driven by speculators who are trying to make a quick buck dipping in and out. This can be evidenced by the way in which the share price drifts lower and then suddenly jumps 2-3% in a matter of minutes as the shorters try and book a profit.
The stock has been completely hijacked at this point, being used as a tool for day trading gamblers who are being attracted by the large intra day movements.
Eventually the price will stabilise once these guys go find some other stock to play around with leaving the serious investors to establish the price again.
In the meantime, take advantage of their stupidity and buy some more!! I guess we should be thanking them for driving the price lower :) In six months time we will all be looking back at this period kicking ourselves for not having the balls to buy more.
Panic sellers are driving the fall at the moment. Once the institutional investors believe these have been exhausted they will step in, who knows when that will be but in the meantime great opportunity for us private investors to grab a bargain.
I think initially this has fallen due to a less than stellar report from Nielson.
However, the fall today imo is simply herd mentality on which you really should be taking advantage.
£19.00...another order filled :) :)
January!
When there is blood on the streets........
Time to buy here guys.....downside is very limited at this level. I'm guessing there are plenty of institutional investors waiting on the sidelines with this one, ready to pounce if it falls another 5% or so, not to mention a takeover is becoming more likely at these levels.
Big news guys!!!
Smithson Investment Trust which is overseen by the legend investor Terry Smith has just purchased shares in Fevertree.
Check out the following article:
https://portfolio-adviser.com/smithson-jumps-on-the-fevertree-bandwagon/
These guys are very strict in only selecting the very best, high quality global growth companies, so nice to have this seal of approval.
Sorry, but this was clearly the reason. The market just overreacted and this brought the buyers back in.
Here's the reason for the drop....
https://www.sharesmagazine.co.uk/news/shares/revealed-the-key-data-which-sees-fevertree-shares-fall-flat
This is looking extremely tempting again. I didn't expect to see these levels again.
This is a bargain now for what is a very unique asset in its space.
In other news I also received my tickets to the Fever-Tree championships this week. Can't wait to sip on a refreshing Fever-Tree G&T whilst watching some quality tennis.
Absolutely, based on fundamentals this is way oversold - that is of course if you believe the company can maintain it's earnings for the foreseeable future. At the moment we can only believe the company will achieve its forecast 3-5% earnings growth forecast for the year.
There are a few factors that are holding things back and creating a real opportunity here.
Firstly, investors are becoming increasingly ethical in their investment decisions and as such numerous investment funds are restricting themselves and also divesting in tobacco assets. This has significantly reduced the pool of buyers of this stock. The impact of this may be more considerable than people think - of course for the rest of us this is great as we get to buy it cheaper!!!
I believe there are reports that Woodford has been selling quite dramatically over the last few months, as he investors are withdrawing from his funds. He invests in quite a few unquoted companies and liquid stocks so has become a forced seller of IMB.
The impact of the above combined has also created a very pessimistic environment causing further panic selling and people just simply getting fed up with the falling price.
Finally there was a report that tobacco volumes in america have been falling much faster than anticipated, however I wouldn't put too much weight on these reports. I have seen more often than not these fail to materialise in company performances.
In essence, this is a fabulous opportunity to buy into a wonderful business at a very fair price.