Myer Share offer

[steveadl]

^ ^ Nice on JRC .

Not an ideal day to hit the bourses though.

My fiancée and I walked through Myer yesterday (escalators at Westfield were being repaired so needed to use the ones inside Myer) and as I walked through I asked her if she likes Myer. Said straight out "no" - she never shops there. I never do either (or DJ's/HS etc for that matter), we both prefer smaller boutique shops, or on occasion Target and Big W. Not really relevant, but just thought I'd share.

 

[Mike F]

so hope nobody bought this stock for stag profits on open day.

Was this thinking of it, lucky I didn't.

 

[Intrinsic_Value]

I'm not keen on this IPO because
1) its a private equity sell back to market. Previous private equity floats have not done very well, look at Pacific Brands for example.
2) you dont know the price, you have to pay upfront and the price will be determined by book build any where between i think its $3.80-$4.90. Thats a big variance to pay first and find out later.
3) its not 'cheap', especially as the expense 'fat' has already been scrubbed, so there is not the opportunity for cost cutting, only revenue expansion (margin expansion might be hard as well given that its already a lean operation).

There is probably a good chance of receiving a stag profit by selling on listing, but im not participating.

i'm in now though as of today with my first buy in point (from which i can start to dollar average downwards if the price contintues to fall).
1% of the portfolio allocated.

 

[Intrinsic_Value]

However having said the above, i didnt participate in the float.
Whats the worst case scenario: i missed an opportunity but i still have my capital.

When evaluating stocks always look at downside risk compared to upside potential.

This is a 'secret' that i have slowly learned over 15yrs of investing and have come to realise is one of the cornerstone investing principles of the true professionals. Most retail investors just focus on how much 'upside' is there (how much do you think a share can go up?). The professionals focus on the 'downside risk'.

Investing is like running a marathon. There is no point completing a leg faster than others if you fail to complete the race. Translated into investing, there is no point achieving 'super charged' investment returns, if you blow up all your capital during your investing lifetime.

Only allocate new capital where the upside potential significantly outweighs the potential downside risk.

And hence now i start to feel that upside potential is outweighing the potential downside risk.
Note hear the word potential.
Its like playing stud poker, i have now got a reasonable hand (but not invincible), hence i will buy into the game and see how it now plays, but not with all my chips.

 

[Intrinsic_Value]

And hence now i start to feel that upside potential is outweighing the potential downside risk.
Note hear the word potential.
Its like playing stud poker, i have now got a reasonable hand (but not invincible), hence i will buy into the game and see how it now plays, but not with all my chips.

And now with the price up some 15-25% i am starting to take some money off the table on positions acquired earlier.
All in all a reasonable return given the state of the market.

 

[oracle]

And now with the price up some 15-25% i am starting to take some money off the table on positions acquired earlier.
All in all a reasonable return given the state of the market.

IV, from reading your posts in the past I have gathered your investment strategy is mostly buy and hold. Buy stocks that are trading below intrinsic value for the long term. Correct me if I am wrong.

So then why you do you practice swing(short term) trading? You bought MYR in May '10 and are now starting to sell in Aug '10 after just holding for 3 months. Isn't that contradictory? How can the intrinsic value of the company change so rapidly even without any results announcement that 3 months ago it was a screaming buy and today it's over priced. To me that is how swing traders think to enter into a trade with few weeks to few months timeframe.

(PS: Nothing wrong with short term trading as long as your psychology is suitable for it)

Cheers,
Oracle.

 

[Ridin-High]

I presume because its now above what he thinks its intrinsic val is?

 

[Intrinsic_Value]

I presume because its now above what he thinks its intrinsic val is?

Thats spot on Ridin-High.

The answer is dependent upon
(a) how confident am i that my intrinsic value is accurate
(b) whats the future movement in the intrinsic value, the slower the increase in future movement the more i will be tempted to reduce holdings as the price moves above intrinsic value.
(c) whats the total weighting in my portfolio. The higher the weighting the more confident i must be above everything.
(d) what are the alternative opportunities out there?
(e) what are the future indicators telling me about the future health of the economy.

I started buying from memory around $3.10 and kept buying down to i think $2.90. I built up a 4% in the portfolio. With the price now around $3.60 i am happy to reduce this to a 2% position in the portfolio.

The key to remember is that i am investing in businesses, not in the market price as determined by Mr Market. My decision to buy/sell is not based upon Mr Market, but around the relationship between intrinsic value and what ever price Mr Market gives to me at a particular point in time.

 

[Intrinsic_Value]

How can the intrinsic value of the company change so rapidly even without any results announcement that 3 months ago it was a screaming buy and today it's over priced.
Cheers,
Oracle.

The intrinsic value hasnt changed much at all, but the market price has.
Also this type of company is not a 'fast grower' its a mature company already, so its intrinsic value wont change drastically over time.

The key to making really good returns from a buy and hold is to find a company that has rapidly increasing intrinsic value.
Then it pays to keep holding even though the market price is increasing (because the intrinsic value is also increasing).

Consider JBH when it first listed, COH, CSL etc when they first listed.

Consider the price movement in Myer for example compared to SIV. SIV was purchased at around $1.40-$1.50 and i only started taking money off the table when the market price moved above $2.80. Why?

 

[Mr. Fabulous]

IV, that's a pretty tiny margin of safety on Myer if you bought at (say) an average of $3.00 then sold out at $3.60 because you believe it's above intrinsic value. Not a criticism, just an observation.

 

[Intrinsic_Value]

IV, that's a pretty tiny margin of safety on Myer if you bought at (say) an average of $3.00 then sold out at $3.60 because you believe it's above intrinsic value. Not a criticism, just an observation.

Firstly i havent exited the entire position.
Just as i dollar cost downwards into a position, i dollar cost upwards and outwards of a position.

To me just dollar cost averaging downwards, and then holding the position (regardless of Market Price) only makes sense where the future intrinsic value is expected to rise rapidly.

But i understand where you are comming from. If the margin of safety is so narrow (less than 20%) why are you going there in the first place. To answer that i would state, look at when i first made the comment about buying in. It was the start of May, the overall market was much more expensive at the end of April to what it is now.

Hence at any point in time you have to look at 'what are the alternatives in the market place', and then compare everything to just putting the money in the bank.

My other consideration at the time would have been the dividend yld. At 7% net (10% gross including the benefits of franking credits), i am adequately paid for time. As the share price rises the yld drops, hence the compensation for waiting declines (unless you expect the company to significantly increase profits, which would both increase dividends and increase intrinsic value).

However i am not that confident of the near term future. By reducing the position i reduce the 'pressure' to be correct.

And part of those funds have been used to buy my first position in Hewlett Packard (HPQ), i picked up a small parcel of 300 shares at $40.01 last nite.

 

[Sunfish]

Let's cut to the chase IV: You're TRADING!!!!

But that's OK. The Graham logic says to buy undervalued stock and TO SELL when they become overvalued. What is absurd is the idea that you could correctly value a newly listed stock. If, however, you had said that you bought and was a little disappointed so sold, I would have given you credit for smart trading. I do that quite a bit.

 

[Intrinsic_Value]

Let's cut to the chase IV: You're TRADING!!!!

But that's OK. The Graham logic says to buy undervalued stock and TO SELL when they become overvalued. What is absurd is the idea that you could correctly value a newly listed stock. If, however, you had said that you bought and was a little disappointed so sold, I would have given you credit for smart trading. I do that quite a bit.

i feel flattered Sunfish, in another post you said you never read my crap

 

[Intrinsic_Value]

Exited a good portion of the remaining balance in Myer shares today, left with approximately 25% of the total after dollar averaging downwards.

For the record also dumping my Hewlett Packard position (at a small loss), i cant convince myself that i made the correct decision in buying an initial stake in this company.

 

[Ridin-High]

Exited a good portion of the remaining balance in Myer shares today, left with approximately 25% of the total after dollar averaging downwards.

For the record also dumping my Hewlett Packard position (at a small loss), i cant convince myself that i made the correct decision in buying an initial stake in this company.

Cheers for the update IV.
Good that you also sharing your mistakes as well.

Would you be able to elaborate what attracted you to purchase stocks in HP? (note i have no idea about this company, other then i have one of their printers and that i've never purchased a stock outside the ASX)

I recently added more BHP's in the low $38 range. Other then that sold Tab corp stocks (small profit after considering holding costs @ 6.66% Interest rate) i sold them after having a closer look @ the business (when purchased it was more like, hey this has a good yield rather then actually looking into the future of the business and the management etc. But you live and learn)

It does seem tho you are quite active on your buying/selling.

Only shares in my portfolio now that i would consider reducing slightly as said before is WES. Currently on 2010 PE of 23, compared to WOW who is 17 PE. But my portfolio is simply not the size of yours, so to do it once you consider transaction costs/tax is not worth it

Regards,

RH

 

[steveadl]

Took some profits on MYR to invest elsewhere as well, but still holding 70% of original parcel.

 

[Intrinsic_Value]

Would you be able to elaborate what attracted you to purchase stocks in HP? (note i have no idea about this company, other then i have one of their printers and that i've never purchased a stock outside the ASX)

i was attracted to their long term 10 year EPS and free cash flow per share growth. In traders terms it was a nice 'upwards movement from left to right on the chart'. However the PE has been contracting, so this represents a potential opportunity.

I subsequently changed my mind because:
(a) i heard that the ex MD had been scrimping on R&D, this can make the near term profit good, but in the long run for a tech company can result in loss of market share.
(b) i heard rumours of accounting irregularities.
(c) my position was less than 0.5% of the portfolio. Generally in cases like this i either increase the position over time if i continue to like the story or i exit
(d) i dont know much about tech in fact i know less than most others, so i am relying very heavily on an investment matrix (ROE, PE, growth rates, debt levels, profit margins etc). This means that i cant use market specific product knowledge to compensate for my worries above.

I could well be wrong in exiting, but i am not happy to add to my position and with it being less than 0.5% of the portfolio value its returns have no real impact on the overall portfolio. Therefore exit.

It does seem tho you are quite active on your buying/selling.

My decision to buy and sell is governed by three over riding factors:
(a) the relationship between intrinsic value and market price
(b) the state of my margin loan (generally i will increase the margin loan when i see very good buying opportunities, but then i will start to bring it back once those buying opportunities become less attractive). I will not just sit on a high LVR ratio with margin debt and hope for the best. Often this involves reducing positions with the 'least' upside potential at current market prices.
(c) my strategic investment view from which i cant yet form a conclusion as to whether we are in a secular or cyclical market. A buy and hold strategy is only appropriate in a secular bull market.

Only shares in my portfolio now that i would consider reducing slightly as said before is WES. Currently on 2010 PE of 23, compared to WOW who is 17 PE. But my portfolio is simply not the size of yours, so to do it once you consider transaction costs/tax is not worth it

Personally i would not be looking at 2010 anymore its historical now. The market is forward looking so you need to be forming a strong view on 2011 and at least a weak view on 2012.

 

[Intrinsic_Value]

Cheers for the update IV.
Good that you also sharing your mistakes as well.

Would you be able to elaborate what attracted you to purchase stocks in HP?

RH

And now ladies and gentlemen you can see why if i am to make money in the stock market i need to do it as a fundamental investor rather than a day trader.

Subsequent to selling HP at a loss on purchase price, the stock rises 5% odd.

Anyway still happy, and i doubled by exposure to microsoft which i am much more comfortable with.

 

[Ridin-High]

as long as u happy thats all that matters

But yeah seems to happen like that. I had a similar experience with selling Tab corp recently and buying wbc/bhp

 

[steveadl]

Sold the remainder of my MYR this morning.