Our thinking, for members.
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New Additions to the Portfolio
Baby Bunting Group Ltd (ASX:BBN) Last month we purchased shares in Baby Bunting (BBN) following a sharp fall in its share price. The baby goods retailer updated the market on its half-yearly results, reporting lower-than-expected earnings in the first half. We like BBN for the following reasons: 1. It currently trades at an attractive relative and absolute valuation. At its…
What is Earnings Quality?
With an overwhelming amount of short-term remuneration linked to share price targets, investors need to be aware of the financial alchemy available to management. Companies have various tools in which they’re able to paint an image of financial health, stability of earnings, or revenue growth. Although earnings management isn’t a new theory, companies can often go years without fault. However,…
Why Invest in Small Caps?
“All great companies started as small companies.” – Ian Cassel There are several benefits to investing in smaller companies in favour of large-cap stocks. Below we outline three reasons why you should invest in small-cap stocks. 1. Less coverage Most small-cap stocks have little or no broker coverage in comparison to larger-cap stocks. Therefore, companies with a small market capitalisation…
The Wonders of Compounding
As global markets continue to tread water, a common mistake is placing undue importance on short-term forecasts, rather than focusing on fundamentals. Importantly, times of uncertainty can create the greatest of opportunities for patient investors. As such, now could be a good time to look for quality businesses selling at affordable prices. While it can be difficult to peer through…
Finally the emergence of value
I recall being taught about this new valuation methodology called EV/Sales or EV/Revenue when I was new in the industry. It was the new paradigm and I was told it was the new way to value companies. I was running a small LIC at the time and was investing in things that looked incredibly cheap on a cash flow or…
Is Value Dead?
The turnaround in equity markets globally has been nothing short of astonishing and something that has taken a lot of seasoned investment professionals by surprise. The composition of the recovery has been surprising also, rather than a flight to quality there has been a flight to tech and growth stocks with little or no earnings, which presents a challenge in…
Investing – it’s not all about the numbers
German payment processor Wirecard was one of the hottest technology firms in Europe. In 2018, the company was valued at over €20 billion, more valuable than Deutsche Bank. The company entered the DAX index, a club of 30 major German companies. However, the share price has plummeted in one week by 96% from EUR 103 to EUR 3.5. What can…
A Stock Pickers Market
DONT BUY THE INDEX After the widespread selling in March some stocks have rallied and pushed through their old highs. Afterpay has gone from $8 - $40 and while it’s in the ASX100 now you won’t get that type of return buying the index. When you own the index, you are going to get exposure to a lot of businesses…
Buying good stocks in dips
Volatility is a frightening word to many investors and many of you will no doubt say that you have seen enough of that lately. We agree, insofar as providing a smooth investment journey to our shareholders is important to us, but we also know how to make a bit of hay when the sun shines. The investment team at Glennon…
The case for small caps
Within Australian equities, investors may choose between large caps or small caps. In the long term, large caps grow at, or around, GDP and are generally heavily weighted with financial and material stocks (see the graphs below). This does not provide sufficient diversification for most investors. Many investors may utilise ETFs to get the exposure to the ASX100, but they…
What's Your Risk Budget
Glennon invests in Australian small and micro cap companies, most of which have earnings, prospects of growth and a valuation that makes them attractive. We stick mainly to industrials but will invest in resource stocks but prefer them to have earnings or a clear path to earnings. For a small portion of the fund we believe there is room for…
The Downside of Issued Shares
I recently wrote about thinking like an owner, including the way it makes you look closely at board decisions. Today I wanted to discuss how going into investments as though you are the owner of the business can give you a good indication of the effectiveness of the board as well as the amount and price of capital that is…
Thinking Like An Owner
So you have made an investment in a company, you think it’s a good investment and you’re optimistic about having bought a great business at an attractive price. The business is either cheap considering it’s what you currently know about the company, or cheap when you take into account what you think the business could achieve. You’ve ticked all the…