Investors Chronicle should rename to Speculators Chronicle, because it promotes just that (look at Ben Grahams definition of both).
I do like the earnings power (coupons) that SLP provides though (so there is no mis-understanding), and I am long on this security. But pimping future behavior based on hope, is pure speculation and has nothing to do with investing.
Stay safe.
I would not call efforts to value a stock independently of its market price as trolling/rubbish (intrinsic value estimations).
For what it's worth, intrinsic value is also known as: indicated value, central value, normal, value, reasonable value or fair value. A general definition of such would be "that value which is justified by facts---e.g. assets, earnings, dividends, definite prospects." It is the indicated average future earning power.
Why is this so important? Because markets are inefficient and it can take considerable time to price a security correctly, especially when factors beyond the company's control affect how the market sees it. This is important because it allows investors to reign in their sentiments as the market attempts to find a correct price.
Ben Graham aptly described it as: "In the short term the market is a voting machine, in the long term it is a weighing machine".
I would not consider such statements rubbish since the track record of it's pupils speaks for itself.
For those interested, it is described in great detail in: Security Analysis, by Graham and Dodd.
Hope this helps.
What drives share price? Supply and Demand. There exist a plethora of reasons people sell, not just news or sentiment. Insurance companies need to pay out huge sums due to storm damage, ie they need to liquidate some of their holdings.
I'd rather concentrate on the intrinsic value (range) rather than on market sentiment and pricing. Markets aren't efficient. I've seen it take several years for markets to price a security correctly.
For e.g. Apple was considered finished in 2004 (they were growing spectacularly already then) and there was huge sentiment against them. Even without the iPhone the net income grew superbly. It traded way below it's intrinsic value for years. I was very grateful for that opportunity :)
True.
However it is the "smoke" pointing Carson to look deeper into the company's governance and operations. IIRC Manolete has exactly the same accounting practices, yet it appears off the MW radar (similar negative cashflow). Go figure.
Thanks for shedding a light on this. Back to the financial reports....
Selling securities before they matured is a guaranteed method of losing money.
There are numerous reasons why people sell their positions. In Woodford's case he pretty much had to sell everything that was liquid, regardless of maturity. A substantial portion of his portfolio was illiquid -- which is what landed him in trouble with the regulator.
BUR had a very nice run, even though it received a haircut once MW discovered the leadership with "their hand in the cookie jar."
It all comes down to a few simple things.
A) do we need to adjust our estimates of intrinsic value and does this adjustment still make it an attractive proposition (I answered that with yes)
B) Is the company's business model broken? (I answered that with no).
Although difficult to understand and predict, the court sheets don't lie and BUR has shown some rather amazing performance. Their challenge is how to account for their business activities so it gives a fair view on their intrinsic value. Which is where MW attached them and managed to stir huge sentiments against their operations.
If I am right, then this is a nice opportunity to buy into a rather phenomenal business at a discount. Over time this will lead to market beating results.
If I am wrong than I may lose my money, but that's a bit difficult to see since the security trades near NAV.
I would have never bought into BUR at previous (lofty) valuations. But at these levels it's certainly worth a wager.
A business isn't failing because of someone's opinion on price they are prepared to pay for it. Markets aren't efficient.
As Syoun11 correctly stated, it's all down to results.
For those who think this company is doing a great job and this accounting 'scandal' is temporary, then rejoice and build a meaningful position with a nice margin.
Otherwise it's probably advisable to sell.