Comments for UK Value Investor

Comment on BAE Systems – How to re-value a company you already own by John Kingham

John Kingham — Wed, 22 Feb 2012 13:47:20 +0000

I think you’re not alone when you say you don’t understand them. BAE is a huge company doing a vast number of different things with different clients across the globe. I don’t even begin to attempt to understand it. I think it’s much more rational to just look for long-term stability and buy it when it looks cheap. My assumption is that their products will, unfortunately, always be in demand to a level that is broadly similar to today’s.

Comment on Flybe – A low cost airline in every sense by John Kingham

John Kingham — Wed, 22 Feb 2012 13:43:02 +0000

Hi Eugen. Not sure how I’d change the management! Personally I don’t like airline businesses because they’re really tough and I don’t think they make good investments most of the time, so Flybe is a bit of a surprise.

Regarding the portfolio structure, you’re exactly right. The portfolio is widely diversified because in each individual case the stocks are gambles rather than investments (which I just wrote about here http://bit.ly/wKYfpk). But, if the risks are asymmetric to the upside then with enough rolls of the proverbial dice the portfolio should come out ahead with little chance of losses over longer time periods.

And by being widely diversified the portfolio has more chance of picking up natural hedges like you said with solar panels and airlines. Thanks for pointing that out.

Comment on Why Uncertainty is the Cornerstone of Every Sound Investment Strategy by Investing and gambling – Can you tell the difference? | UK Value Investor

Investing and gambling – Can you tell the difference? | UK Value Investor — Wed, 22 Feb 2012 08:02:58 +0000

[...] An understanding of uncertainty of at the cornerstone of every sound investment strategy [...]

Comment on Flybe – A low cost airline in every sense by Eugen

Eugen — Tue, 21 Feb 2012 21:43:55 +0000

Don’t let the management generate economic value, try to change the management as it is incompetent. This is a cut throat cyclical business in which the price of oil can change valuations in minutes. I would stay away.

I like the idea in which you build your portfolio. I am more of growth investor and I like to take bold bets based on valuation and macroeconomics. By creating a portfolio of 60+ pure value stocks you are guaranteed success. In itself FlyBe is a risky bet but within a portfolio of 60+ value stocks it can help you get a winning portfolio. In your portfolio there would be plenty of stocks which are negative corelated with oil price, PV Cristalox Solar is one of them, which can benefit.

Comment on BAE Systems – How to re-value a company you already own by Eugen

Eugen — Tue, 21 Feb 2012 21:24:21 +0000

As I have a military formation I used to understand this kind of companies and to invest in them. Today, I can’t say I understand them anymore, I am under impression there will be higher cuts than we can think of in the defence sectors, from UK to Saudi Arabia. I may be wrong and if Iran makes a ‘mistake’ the defence sector will rerate.

On the positive note, BAE is in the elite UK CROCI index made only of 15 UK stocks. That means it is ‘undevalued’ based on the information it will meet its consensual targets as agreed by its stock analysts. To be part of that index the stock should have some ‘margin of safety’ as those components of the index are chosen based on how deep undervalued the stock is believed to be.

Comment on Centaur Media – Do Intangibles Have Value? by John Kingham

John Kingham — Tue, 21 Feb 2012 21:10:02 +0000

Hi Marcel. Generally I’d agree with that but for certain industries it may not be quite so bad. With media companies they don’t have much in the way of assets and physical assets are not how they generate earnings, so if Centaur bought up a competitor at 10x earnings (a fair price) then it might be 100x book value which would of course load up their own balance sheet with lots of goodwill.

Whether the goodwill can actually generate enough earnings to justify its existence is another matter entirely.

Also, in my experience media companies do like to expand by acquisition. Perhaps it’s more exciting to be involved in takeovers?

Comment on Centaur Media – Do Intangibles Have Value? by Marcel

Marcel — Tue, 21 Feb 2012 19:31:24 +0000

Another good article. well done John.

The problem with large intangibles is that it may be a sign of incompetent management. Usually intangibles consist of the excess over asset value for acquisitions. Therefore large intangibles could be a sign that management have paid too much for acquisitions.

The best companies rarely make acquisitions of course as they fund organic expansion through free cash flow.

Comment on 3 Signs that AGA Rangemaster Could be a Bargain by Centaur Media – Do Intangibles Have Value? | UK Value Investor

Centaur Media – Do Intangibles Have Value? | UK Value Investor — Mon, 20 Feb 2012 13:01:53 +0000

[...] 3 signs that AGA may be a bargain [...]

Comment on 21st Century Net-Nets by Centaur Media – Do Intangibles Have Value? | UK Value Investor

Centaur Media – Do Intangibles Have Value? | UK Value Investor — Mon, 20 Feb 2012 13:01:04 +0000

[...] Centaur has £126m of intangible assets on the balance sheet. This gives the company a book value of £124m (because tangible book value is negative). This in turn means that they have a lot of ‘assets’ relative to their earnings so they are more likely to turn up on low book value based screens like the one I use for small caps. [...]

Comment on Risk is a Three Legged Beast by Weekend links…(18th February 2012) | jml2.com

Weekend links…(18th February 2012) | jml2.com — Sat, 18 Feb 2012 20:00:38 +0000

[...] Thoughts on Defensive Strategies (alt-mcarter.blogspot.com) Risk is a Three Legged Beast (uk value investor) Individual Investing Can Be Tough (The Aleph Blog) From External Links Posted by JML on [...]