Review of Nov 2011 blog.
PIC up 106% over 6m. Finally. It was trading at a PER of 2.4 at the time.
Quote by Tom Gayner: "If you want to beat the S&P 500, here’s what you do, you buy 500 stocks, and then you sell the airlines. You should do better."
LMS – I said was almost a "no-brainer". It was on 0.72 PTBV, SP 56.5p, and was winding down its portfolio of quoted securities. Now 59.8p (+5.8%). ASX +1.9% over same period. OK, but I could imagine a stronger return.
WEIR was identified as a solid compounder. Down 17.5% over 6m. I expressed some concerns of commodity supercycle.
SGE (Sage) also identified as a quality compounder. Down 7.0% over 6m. Although it is lagging the ASX over 6m, it looks OK as a company.
SGP (Supergroup) – I said it was a "riskier one" – I wasn’t wrong, either. Down 27.9% over 6m.
Sage words from Jeremy Grantham: "the outperformance of value stocks is a compensation for the near-wipeout investors suffer in a value portfolio when very hard times hit. Grantham also points that high-quality stocks out-perform the market. Quality is important, especially in times of deep economic trouble but value stocks rarely possess quality attributes." "When you buy a stock, because it has surplus assets or a good yield or a great safety margin, you are really making a bet on regression to the mean. Statistical fact: industries are more dependably mean-reverting than stocks." The full post by me is available here. Grantham’s article is one of the most thought-provoking I’ve read.
PTEC – much maligned by me – up 55.3% over 6m.
GMG – I said that we’re in the end game – and indeed we were. Game over.
ICP up 14.0% over 6m. "cheap, with bags of upside". That still looks to be the case.
OPTS – I liked it. It’s been a case of up and down for OPTS. Over 6m, it’s down 2.2%. It’s on an EV/TBITDA of 4.96. Looks good value.
DPLM – up 35.7% over 6m. This thing keeps on motoring, propelled by increases in EPS. Still not expensive, although I don’t expect the level of outperformance to continue. I judged it "Very good buying opportunity, especially at these levels.". Yip.
Warren Buffett quote: "None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What’s required is thinking rather than polling." Wise words indeed.
STB – I rated "an easy avoid". Up 23.0%in 6m. Oops.
Hugh Hendry on China: GDP doesn’t necessarily mean wealth. If you make a building, then that contributes to GDP, but if that building remains empty, then it doesn’t constitute real wealth.
Greenblatt: Look for value with a catalyst, so nice things happen sooner. Special situations is value investing with a catalyst. Try to figure out what "normalized earnings" will be in 3-4 years time. Ensure stock is cheap based on normalized earnings. 5-8 securities can make up 80% of portfolio. One position would be up to 30%. Concentration works well for "lazy" people. Always consider the downside. Usually spends one month or so to do research. For difficult situations, research could take months. If there is a great opportunity which wont last and they feel they understand it, they sometimes use "Ready, Fire, Aim!" [sic]. Has financials and utilities in the portfolio. Prefer numbers over assessments of management. Ignore the macro picture. Everything is cyclical. Ignore stock market prices and volatility – it’s more important to be able to value companies. He warns against merger risk arbitrages (too many uncertainties, chance of being burned are high). Contrariwise, merged securities are more interesting.
Crushed by xmas: Motley Fool identified "5 companies that might go belly-up over crimbo: BSLA (Blacks Leisure), CC (Clinton Cards), HMV (HMV), JJB (JJB Sports), LMR (Luminar). " Excellent calls by them, although xmas was a little too early. BLSA, CC and LMR as now gone. HMV and JJB are still a mess. JJB +31.1% over 6m, HMV -5.8% over 6m.
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