The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
Amazing how much rubbish is parrotted without even understaning the implications.
Of course current results are not priced into the share price. Ben Davis (Librerum) is of the opinion that at 104p the shares pricing in only $4,000/oz rhodium. Arguably, it's not independend research (or qualifies as such), but it does give a rough ballpark on how ineficiently markets often operate.
And therein lies the opportunity indeed....
I'm on the thrity end of cheap ass investing... So I'm with iWeb.
Nothing yet.... am I bothered? Not particularly. It'll go towards the cash pile reseved for the next market panic.
IMO the SP will go to 0.10p after the divis paid out. You should all sell your stock now.
Please do.
(J/K)
It didn't take long to figure out that the initial report on BUR by MW was a lot of porkie pies.
In a way I was grateful for his report since it allowed me to take a stake in an excellent company at a return I find acceptable (I found it a bit too expensive before).
Unfortunately for Carson, he has lost a lot of credibility with his recent mis-judgements and one might wonder as to the motivation of his 'writings'. Shame really, he used to do some good work turning the heat onto dodgy far eastern scams....
Hi GTX
Indeed, BUR is an interesting opportunity with rather good potential. There is a bit of a lag period since the returns from capital deployed trickles in over time. This "lumpy" aspect of the revenue stream can skew the picture slightly.
But not for very long....
Looking at the free cash flow (an important metric for many), this is the first time in five years that it is positive---and by a meaningful amount. This is certainly good news to me and an important strep towards realising it's quality potential.
Right now the shares are still trading below intrinsic value, so it's easy to understand why directors use their bonus to purchase their shares. I doubt that with a market cap of 1.5bn, this will move the needle much.
I keep repeating that eventually the market will realise BURs fair value, I just don't know when. From my experience, these moves can manifest rather sudden and brusk, which is why I prefer to just "ride it out" than attempt to dance in and out.
From my perspective, the less decisions an investor has to make the better.
Best N
Sirius
I keep repeating to you that this is not a discounted cash flow calculation that I did (or sometimes do) ;)
It does however, often feature in the bags of things I do in order to shine a light on a position's prospects. (BTW, If I were to do a DCF, then 20% risk premium for SA is about right).
Best
Ooooh, the rule of 72. Never thought anyone would post that here ;)
Coming from the other direction, if you want to work out the effect of compounding interest (or returns in our case), is a function of the principal times the interest rate to the power of the number of years.
or
s = p (i^y)
for eg, investing £5000 for 12 years at an average return of 5%
s = 5000 (1.05^12)
s = 5000 (1.796)
s = 8980
Modest returns, when compounded long enough, turn into rather formidable sums.
Let's assume we can run this investment at a 5% return for 20 years....
s = 5000 (1.05^20) = 13266
FYI - the 5YR CAGR of NET PROFITS for SLP is 89%.... let that sink in....
My calculations for the intrinsic value of SLP assumed a return of 3.75% annually... and I got a clear buy signal. Of course I jumped in heavily. It is still looking rather good btw ;)
Halleluiah
Looks like platinum remains an important catalyst for H2 cells and in it's production. Albeit in conjunction with other metal (oxides).
The side effects are rather promising
https://scitechdaily.com/double-duty-new-catalyst-generates-hydrogen-fuel-while-cleaning-up-wastewater/
stoodio
There are some red flags with SLP. Let's not ignore them. Don't get me wrong, it's an remarkably well run business. Eventually it's time to talk about the business expanding, and not just the basket prices (which may well drop at some unforseen time).
AAPL in 2005 (with 30% net profit growth quarter after quarter) was my memorable investment. Nobody expected the iPhone (2007) and general negativity/pessimism was rather high, even though their products were flying off the shelves and an impressive trajectory. Mr Market nearly 7 years from thereon to price the company correctly.
Maybe it's worth talking about how SLP plans to expand their very well run business and brand? I do like a lot what they do and how they operate. It's time to widen the scope.
That COVID would increase demand on the court system was to be expected (see some of my musings about a year ago --- someone actually called me a fraud when I pointed this out, a real gem).
BUR is the best of class to put a bet on a court outcome with a 30% margin. I like that idea and they keep demonstrating that this has legs.
There are other companies on the LSE who, for e.g. used similar accounting practices like BUR a while ago, accounting their potential value as value realised -- which is what MW (correctly) criticized. All of them deal with intellectual property monetization and the companies they account as asset realised aren't even public. So the same criticism would apply.
I wonder whether these would survive the scrutiny. Burford did. With flying colours, may I add....
However, as attractive as I find their proposition, I would not go as far as compare them to Berkshire Hathaway. That's an entirely different animal. But that's OK. Patience is an important trait for investors. Will it show now? Who knows? There are still a few edges to soften and a couple of things to work on. But the recent results are encouraging to say the least.
It's important to keep level headed and let the results speak.
Happy holding.
(I'm still long and not regretting it).
Hi Nimrod
The company has a very clear plan on how to use their funds. Latest reports explain rather well how they are deploying their funds to grow the business with mineral asset development and opecast mining projects.
Some of these are coming online in the not too distant future:
"Volspruit Platinum Opportunity
Detail design for the Permitting Applications has been completed. Specialist work for updating the EIA and Water Use License will commence during Q3 as part of the overall process to conclude the final project authorisations. "
Other capital projects invoke improved processing facilities to extract even more PGMs from tailings and various other process optimizations.
Looks like they have a very good idea of what they need to do with the cash.
People often think that shareprice = business performance and try to explain everything in those terms (efficient market theory). I am not I'm that camp. Markets are driven by people. And a species we are a lot less intelligent than we delude ourselves to believe to be. In fact, we are generally emotional, irrational, slow and unreliable. And so are markets. Some investors use this insight to their advantage ;)
Look at the income and cashflow statement. Tells you all you need to know.
Forward P/E of 1,040.5 (current is negative). P/B 12.85, ROIC -0.8%, ROE -9.0%, Op Margin -0.83%. Book value is 49p. Maybe you find someone that gives you a multiple of 5 for this business?
It needs results to convince me going long on this one.
The next Amazon? Dream on.
"Archegos Capital, a private investment firm, was behind billions of dollars worth of share sales that captivated Wall Street on Friday"
------[Financial Times]
Ditto. Naturally, events like this can impact prices across all markets (higher supply). I'll ride it out.
Prices of securities increase when demand outstrips supply, and the reverse. It sometimes has to do with business performance, but not necessarily.
Indeed, if someone wants the money, for whatever reason, and it's a big enough tranche, then the price will go lower. Fund managers have the problem all the time because they cannot simply deploy these vast sums in one go. So they have to gently ease in or out.
This discrepancy is effectively a market inefficiency.
This business is not broken. It is fully intact and very well run. I am not worried. In fact, I am rather happy about the opportunity events like these present.
Consider APPL in 2005. I noticed that they grew their net profits by 30% every quarter. Yet, it was off many people's radar and there was general negativity on the stock. I took a rather meaningful position, only to see it, at times, tank by 30%. The business was effectively thriving but the market had a lot of emotions around this company who went nearly bust. I took Charlie Munger's advice and ' just ride it out'. Ditto.
The rest is history. The cherry on top of the cake was the iPhone launch in 2007.
The lesson I learned is that as long as the business is intact, is not grossly overvalued and has quality management, then its rather safe to ride it out and keep holding. I was rather happy at the further discounts and increased the position further.
I don't see a demand for their product suddenly dwindle, but as the price of Rhodium shoots up, the risk of sudden downward movement increases. So that's something to consider. However, at current valuation levels the share price doesn't even reflect the Rhodium boom. It is also still extremely well managed and the board knows the business inside-out.
Want to flog me your holdings for 100.00p? Yes please!
Patience.
I love pullbacks and market-panics. I absolutely love them.
This doesn't work for every security though, it needs to have solid management and a balance sheet underlining thier competence. Not many companies have that. SLP does.
Just look at their capex since 2014. You see how well they managed their expenditures and managed the operations into profitability. Annual report by annual report. These guys know what they are doing. It's rather beautiful looking at their journey from loss making startup to profitability. And this was under much less favourable market conditions than today.
So when a stock like this becomes heavily discounted, I am always happy to ask for further helpings. They are going to rebound pretty strong, we just don't know when.
The way it looks, it may not be in the too distant future.
Enjoy the sale.
Everyone likes a shorcut from time to time... even greats such as Ben Graham. So how can one quickly evaluate which one of both purchases yields more value, SLP or THS?
Operating Margin + Divi / Price to Book.
THS: (21.59 + 3.31) / 1.53 = 24.9
SLP: (55.57 + 3.79) / 2.26 = 26.26
So SLP marginally more. But both can be considered equal for what it's worth.
I do prefer a company with a higher operating margin (an enviable 55% for SLP) and negative net gearing. And thus SLP it was for me. Not sure why one wants to play both... but each to their own.
Who doesn't like a discount to intrinsic value? Apparently, some are much happier when paying premium prices. It's a well documented fact of human psychology. Everyone can get caught up in that....
When researching the company and looking at the MW report, the conclusion was that the report had not as much substance as credited. And the company was certainly not "effectively solvent" nor was it a ponzi scheme like some proclaimed. However, it must be said that accounting unrealised assets as realised was a bit naughty (slap!). So there was some justified criticism from MW, agreed. But at 630p and falling, it was a good opportunity to start building a position then.
However, the business is not broken and the company is still on the path to become an incredibly strong brand in this space. This is a very compelling reason to invest, but it requires patience.
To everything that has been said, I would like to add that I noticed that their free cash flow has noticeably improved. The cash position noticeably improved and net debt decreased. The operating profit margin is still enviable. Let's see whether other ratios improve over time. Their returns are still not where they ought to be, but given that a lot of cases where effectively deferred due to the pandemic, it is not unreasonable to expect a nice bump to manifest itself over time. The fact that during this period their performance didn't tank speaks for itself.
This is a very good reason not to give up and continue to watch the story unfold. My position is that eventually the market will realise the value, but I have no clue as to when this will happen. I'm sure that eventually it will.
Looks like a whole group of new investors is of the same opition.