Bristlemouth - A Value Investing Blog

Bristlemouth

A Value Investing Blog

Posted on 27 Apr 2017 by Daniel Mueller

Unlocking the Value Inside Enero

Unlocking the Value Inside Enero

 

Marketing conglomerate Enero Group (EGG) has been a volatile and frustrating investment in recent years. Following a near death experience under previous management, the current management team gradually increased EBITDA margins. It looked like Enero was reaching its potential after a long, grinding turnaround. But in the last 10 months things started to go wrong.

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Posted on 20 Apr 2017 by Alvise Peggion

Lessons from the Founder of Nike

Lessons from the Founder of Nike

 

In the 1970’s a group of eccentrics created one of the most powerful companies and recognisable brands of our times – Nike. How did they do it? Co-founder Phil Knights highlights several factors behind Nike’s success in his book titled Shoe Dog. Below are three of the book’s key lessons. Perhaps unsurprisingly these apply not only to keen entrepreneurs but also to aspiring investors.

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Posted on 14 Apr 2017 by Kevin Rose

Straight Path to a Pot of Gold

Straight Path to a Pot of Gold

As an investor, I find it important not to let work go wasted. If I spend the time to learn about a company but decide not to invest, I have still acquired a sum of knowledge that may become useful in the future. A better entry point might later present itself, and having that knowledge base makes things easier. This extends to stocks you have owned in the past. It is easy to forget about a stock once it leaves the portfolio. But continue to track it because something might happen to change the risk/reward equation. Beware, though, sometimes you get a humbling. Continue reading “Straight Path to a Pot of Gold”

Posted on 10 Apr 2017 by Alvise Peggion

Investing in an Oil Price Recovery

Investing in an Oil Price Recovery

 

The oil price’s stunning decline of the past four years from above US$100 per barrel to below US$50 has wreaked havoc across the oil industry globally, providing investors with a prospective place to look for cheap stocks. While internationally there were, and still are, plenty of them, we are not so lucky in Australia. The fortune of our local energy companies relies more on the price of gas than that of oil.

In the Australian stockmarket, it’s easier to gain exposure to a recovery in the oil price through oil services companies. As pointed out in the January monthly report, the Fund holds four stocks that should benefit indirectly from a higher oil price. These are Cardno (CDD), GR Engineering (GNG), LogiCamms (LCM) and Matrix Composites & Engineering (MCE). The Fund also owned shares in MMA Offshore (MRM). We sold them last year, adding to the existing investment in Matrix.

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Posted on 06 Apr 2017 by Gareth Brown

Twitter No Comprende

Twitter No Comprende

 

Jack Dorsey is a busy man. Ill-advisably running both Twitter and Square, with prêt-à-porter aspirations on the side. At Twitter at least, he’s not doing a great job.

The company has a lot to learn about advertising.

Twitter knows that I post in English, mainly follow people who also post in English, that my main interest in the platform revolves around investment, that I live in Vienna but also spend a lot of time in Sydney and travelling around Europe.

Last week, I met with Kevin and Steve in Madrid. In between hunting for bargains, company visits and an investing conference, I occasionally checked my twitter feed. Surprisingly, the advertisements I got were nearly all in Spanish, for products targeted at locals. There were ads for telcos, for IBM cloud services, even an ad in Spanish for English lessons.

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Posted on 23 Mar 2017 by Daniel Mueller

Going Super Mental

Going Super Mental

 

Today’s AFR contains an interesting article on housing affordability and a new front on the crisis. It addresses the emerging issue of retirees draining their superannuation savings to pay off their mortgages and then go on the aged pension. Effectively defeating the purpose of superannuation.

But in my view, the article fails to highlight the root cause of this.

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Posted on 21 Mar 2017 by Steve Johnson

B&C Speakers Shows What Makes a Real Successful Investment

B&C Speakers Shows What Makes a Real Successful Investment

 

I presented a webinar for Netwealth last week on value investing in small and mid cap stocks. Even after a couple of decades practising value investing, going back to basics gets me thinking about the fundamentals of what we do. And it helps, a lot.

The value of any financial security is the present value of the cashflows it is going to deliver to its owner.

That is the fundamental principle of value investing. How much am I going to get? When am I going to get it? How certain am I? Answer these three questions accurately, buy with an appropriate margin of safety and you don’t need to worry about anything else. The share price can go up down or sideways. It doesn’t even matter where the shares trade at all. The business you own is going to provide you with the return you require.

Despite knowing this, despite repeating it ad nauseam to investors and potential investors alike, I still get lured into letting share prices define our success. Sotheby’s (NYSE: BID) share price has doubled since we bought it, therefore we were right. Countrywide (LSE: CWD) is down 60% over the past few years, therefore we stuffed it up. Continue reading “B&C Speakers Shows What Makes a Real Successful Investment”

Posted on 06 Mar 2017 by Steve Johnson

Blame Central Bankers for the Lack of Productivity Growth

Blame Central Bankers for the Lack of Productivity Growth

 

They get the blame for a lot these days. Asset bubbles, moral hazard, banking crises, deflation, inflation. It’s all the fault of the central bankers.

Some of the criticism is warranted. Some of it is not. As Sebastian Mallaby concluded in his excellent biography of Alan Greenspan, central bankers don’t have the power many people attribute to them. One contributor to the financial crisis was the widespread assumption that Greenspan had the power to avert it.

But I would like to lay one more issue at the central bankers’ feet. Is the long term decline in productivity growth a consequence of modern monetary policy?

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Posted on 03 Mar 2017 by Steve Johnson

Final Week in CIMIC vs Macmahon

Final Week in CIMIC vs Macmahon

 

Construction giant CIMIC (CIM) has fired its final bazooka in its attempt to gain control over mining contractor Macmahon (MAH). Yesterday it declared that it won’t be extending the bid beyond 9 March and it won’t be raising the price above $0.145.

I’ve received a number of queries from fellow Macmahon shareholders about events over the past few weeks so. With the deadline now locked down, I’ll lay some thoughts out for investors to consider.

We weren’t particularly impressed with CIMIC’s $0.145 bid to start with. They will get no argument from us about Macmahon’s woeful historical performance. The losses being generated at its newish Telfer contract are completely unacceptable and the company hasn’t, until now, been winning enough new work to justify its overheads. Continue reading “Final Week in CIMIC vs Macmahon”

Posted on 02 Mar 2017 by Daniel Mueller

Bears, Bulls and Barbecues

Bears, Bulls and Barbecues

 

Want to know what a pretty picture looks like in the eyes of a contrarian investor? Today’s Australian Financial Review (AFR) provides the answer. For those who have a hard copy, turn to page 15 of today’s edition. There are three very bearish articles on three different asset classes, Australian stocks, global stocks and Australian bonds. All three quote experts in their field, forewarning investors that all three assets classes are to be avoided, at least for 2017. And if you flick through the pages there are some very bearish articles on the banks and Telstra (TLS). So why am I not partaking in the gloom and doom?

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