Monday, November 27, 2006

BrickWorks bucking market conditions

The Sydney morning herald writes that Brickworks (ASX:BKI) is confident that it will perform during what is perceived to be an oncoming downturn in its markets. The company increased its profit by 16.6 per cent to $A101.9 million in 2005-06, in spite of the difficult market conditions. The company believes that one of the company's strengths is that it has other income streams. It is generating income from the sale of property and the generation of income from its property portfolio. It has also made acquisitions to diversify its products and its geographic spread and it seems that this is paying dividends for the company.

Persinally the company is still overpriced at the current level. It needs to drop a fair bit before I would feel it is back at a reasonable price. I do like the company but it just doesn't fall in a good price range at the moment.

Good Luck Investing

Strong Outlook for Gloucester Coal

Gavin May, CEO of Gloucester Coal(ASX:GCL), has suggested there is a strong outlook for the company. Gloucester recently discovered the Clareval coal seam at its tenements, which is more than 30m thick and sufficient for it to commence planning to increase production by 40% from 2009. To allow for this increase in production, it will require a $A30m investment in a module at its Stratford plant.

This current find and outlook statement suggest this could be a good stock for the future. At the moment it is sitting on PE ratio of around 9 times earnings. It has a good dividend yield which should hold the stock price up. Its share price has been climbing the last few months and its return on equity for the last few years has been phenomenal. At this stage I am wary of resource companies but this company seems to have a solid base and a future ahead of it.

I must say its not the worst company out there and if I had some spare cash at the moment I would be be buying a small stake.

Good Luck Investing.

Sunday, November 26, 2006

Have you got an investment philosophy ?

You should develop an investing strategy if you are to succeed in the marketplace. When I first did this it was very hard to know what I should include and how it could be structured. They are of little concern now and are a minor detail compared to the other considerations for an investment philosophy.

To help you out I have written some important steps below that will help you formulate your philosophy.

1. Put them in Writing
putting something in writing makes it real. Without it in writing you can easily change your philosophy with the change of your mood. It also helps you to crystallize your thinking and acts as a signpost when the market moves and you are pit against your emotions of greed and fear.

2. Read about others Investment Philosophies
There are heaps of different ideas on how to make money from the market. You should read about other successful investors such as Warren Buffett or Phil Fisher. Read everything and anything you can on investing and make up your own mind on what you think is common sense and will work.

3. Make it yours
You can copy someone else but you will never learn that way. It also gives you an out to blame someone else for your losses. You need to make your philosophy your own and develop it yourself. It can take flavors from other investors but you should be comfortable in what you are doing and why you are doing it.

4. Experience
You need to understand how the market works and be involved. You will take a few losses and get a few winners. The idea is to get a feel for it as experience is the best teacher. I find every major loss I have teaches me something new which strengthens my investment philosophy.

5. Don't rely on backtesting
I can come up with numerous systems that work when back tested but do not work in real time. It is easy for a computer to optimize everything for a system so it shows huge gains in the past but it fails in the future. A good quote from Warren Buffett is that investing by looking backwards is the same as "driving a car [forward] with the rearview mirror". Make sure your investment philosophy is based on principles that are so ingrained that they should work in the future and are not some optimized number.

6. Patience
patience must be a key element. If you are developing a long term investment philosophy you need to have confidence and patience that it will work. For a short time frame 3 years is usually enough to see if your philosophy is working or whether you need to change it. Remember if you are going to buy a stock you are buying the company and not renting it for a short term period.

7. Measure your Progress
Your plan should have points to measure against the market. These may just be profit or may be risk adjusted profit. You should measure against industry funds and indexes so that you have a reference point on how you are performing.

8. Known your Assets
You should invest in areas you are comfortable. If you do not understand drilling reports then do not invest in oil exploration stocks. Stay in the area you understand. This can be broad enough to cover a few industries providing you have a good grasp on the industry outlook and you feel you can get a good understanding of the companies involved.

Now get going and write down that investment strategy that you are going to follow.

Good Luck Investing.

The ASX stock exhange has an interesting article on Long term investing using fundamental analysis in the sharemarket.

It is available here

An extract which I thought particularly interesting was :

If you aren't willing to buy shares in a company and forget about them for
the next ten years, you really have no business owning those shares at all. The
simple truth is professional money managers attempt to beat a benchmark such as
S&P/ASX 200 yet the majority do not. Rather the way to create long term
value has historically been to select a great company, pay as little as possible
for the initial stake, begin a dollar cost averaging program, reinvest the
dividends and leave the position alone for several decades.

You should also check out the links in the upper right corner to other techniques for investing so that you can decide what type of investing is right for you. I have tried most of them myself and have found the best technique for me is value investing. I can consistently get 30% plus returns on each trade using this technique.

Good Luck.

Westfield idea - using options

I have been looking at a play on westfield group for some time and thought I would write about it.

The stock is currently showing a 5.3% dividend yeild which is ok but not the greatest for an income providing security. I think we want to get at least 6% on our money otherwise we could just drop it in a high interest bank account.

Lets assume we are working on the dividends for 2007 which are estimated at 106.9c. They are paid in Feb and Aug.

We first work out the 6% yeild price. This is approx $17.80 The current price is $19.65. This is a fair bit away from our target price.

The only way we can get into WDC out our price is to use options. For this I am looking at my reutrn over the next 7 months as this will take us to the end of the financial year.

If we were to buy WDC we would get a dividend of approx 54c before july and would have the chance for a possible capital gain. This yeilds us approx 2.7% for the 7 months.

Alternatively we could do the following :

Put the money ($19,650) in an ING account at 6.0% for 7 months which would return approx $690. We then sell an option at 18.00 for April at 30c returning approx $300. This means in the time till July we have produced an income of $990 opposed to the dividend of only $540.

We have given ourselves a chance to get into the stock out our own price and we have effectively movedthe yeild from 5.3% to approx 8.6%.

There are numerois other shares you can do this with. The trick is to stick to good shares and have a target price.

Good Luck

12 from 13 tips Successful

I gave a few speculators back at the end of September ( 28th). Its available here.

An update on the movement of these shares is below :

AMM has moved from 16c to 19c for a gain of 18%.
LGD has moved from 64c to 77c for a gain of 20%.
AJL has moved from 79c to $1.05 but was as high as 1.25. Still $1.05 is a gain of 32%
RHD has moved from 53c to 65c for a gain of 22%.

The average gain in 2 months has been 23%. Annualised gain is 138%.

The other shares I suggested a few weeks ago have done the following :

ITD up from 39.5c to 43c for a gain of 9%
AVE up from $2.20 to $2.24 for a gain of 1%
AIE up from 37c to 38.5c or a gain of 4%
SFC has moved from $6.12 to $6.38 for a gain of 4%
OST has moved from $4.38 to $4.49 for a gain of 7%
BSL has moved from $7.34 to $8.08 for a gain of 10%
CKL has moved from 55c to 57.5c for a gain of 4%
FEA has moved from 63c to 60.5c for a loss of -4%
RHD has moved from 59c to 65c for a gain of 10%

This is a gain on average of 5% in approx 2 weeks. This works out to be an annulaised return of roughly 130%.

The good thing to note here is the strike rate of the shares I am saying are undervalued. I have had 13 tips for 12 winners. Of course it is still too early to say whether these shares are going to move on but I do expect larger gains for most of them especially those we have only been in for 2 weeks.

Good Luck.

Thursday, November 23, 2006

PE Ratio (Price Earnings Ratio)

Here is a good article on the Price to Earnings Ratio, how it is calculated and when / when not to use it.

The Price to Earnings (P/E) Ratio is the most commonly used valuation metric used by investors to help determine is individual stocks are reasonably priced. It is a simple ratio to calculate but can be confusing to interpret. The ratio can be useful in some cases yet useless in others. The ratio was popularized by Benjamin Graham - author of "The Intelligent Investor" (a must read for all serious investors). Graham used this financial ratio as a quick way to determine if the company stock was trading on an investment or speculative basis.

Find the rest of the article here

Its important to understand how Price to Earnings is calculated and it is one of the initial tools I use to limit the amount of stocks I need to look through to find a golden opportunity.

Good Luck investing

David Jones reports unexpected growth

David Jones Ltd (ASX:DJS), increased sales in the first quarter of 2006-07. Sales revenue was $A430.3 million. This is a rise of 6.3 per cent. This is higher than anticipated as the company had envisioned growth of between two per cent and four per cent. Mark McInnes (CEO) said that the company is prepared for strong sales in the Christmas period, which usually accounts for one third more sales than the first quarter.

I have never been a fan of this company but it is a turnaround story. Whenever I walk into the David Jones near my place it is only ever filled with the older generation and it doesn't seem to cater for the younger crowd. It may just be this one store but because of what I see I have always steered clear of it.

I might need to change my view of the company.

Good Luck investing.

Qantas for Sale ?

The Macquarie Bank in Australia (ASX:MBL) is part of a group which has bid $A10 billion to buy Qantas. The Australian Government will have a big say on whether the bid succeeds, via the Foreign Investment Review Board. My understadning of this is that 51% must be kept undr Australian control, and only 49% can go to foreign hands. Macquarie has joined the US private equity group, Texas Pacific Group, in its $A5.20 per share bid for Qantas. However, institutions are dubious about this offer gaining sufficient support. Meanwhile, there are conflicts of interests involved, because Macquarie has a fund that is the largest stakeholder in Sydney Airport. There has been some political anger at the move, as many want Qantas to remain largely in Australian hands.

This is a good sign for recent investors in qantas who have wanted to own an icon Austrlaian business. I wrote a short time ago on QAN being a good buy when it was around $3. At $5.00 it is a great price to sell. There is a lot of political risk at th moment with this share and although I don't own any qantas shares I would be selling into this news.

Good Luck Investing

Tuesday, November 21, 2006

Incetive Schemes scrapped

Incentive schemes for financial planners are being scrapped by two large Australian financial planning groups. Genesys Wealth Advisers and Retireinvest announced on 20 November 2006 that their financial planning franchises would no longer reward planners for recommending particular products. The payments, known as rebates, in some cases comprise up to 50 per cent of the income earned by financial dealer groups.

This could be disasterous for some financial planners. At this stage I would steer clear of any financial planning groups in the market so that you can see the full effect in the next report. It has been an area that has been exploited a lot of investors that are not wise in financial dealings. They usually have little money and just follow blindly where theior financial planner told them to put money ( even though it may not be the best spot ).

Time will tell on whether other incentive schemes will be scrapped and whether or not it hurts Genesys Wealth Advisers and Retireinvest.

Good Luck Investing

Banking Sector News

There are two things australians bet their house on and love investing in. This is real estate and banking stocks. Real estate has taken a hit the past few years and it looks like banking stocks may be in for a poor run as well.

Commonwealth Bank of Australia Ltd's (ASX:CBA) Ralph Norris, has given a scary assessment of the Australasian banking sector. In his address to a Financial Services Institute of Australasia meeting on 20 November 2006, Norris suggested that thin margins in New Zealand may become a feature of the industry in coming years and that banking groups need to prepare for a potential erosion in domestic margins to between 170 and 180 basis points over the coming five years. According to Brian Johnson, of JP Morgan, Australian banking stocks are currently relatively expensive. Shares in the CBA, National Australia Bank, Westpac Banking and the ANZ Bank all lost ground on the Australian sharemarket on 20 November.

The problem is that banks are considered safe investments and rightly so because they have enjoyed continued growth and profitability. I have to feel that banks won't stand to lose margins and they will introduce fees elsewhere. I guess we have to wait and see. But historically banks are overpriced and I would just keep an eye on them at this point in time. They need to drop 10-15% before coming back into a bargain price range.

Good Luck Investing.

Brambles are worth a look

According to reports Brambles Industries Ltd will buy back stock after its unification. Its Australian and UK-listed companies will be merged in December 2006. It is then expected to buy back up to $US2.5 billion ($A3.3 billion) of stock.

Looking at the company it is one to be in for the future. At the current PE of 13 makes this a bargain for a solid business who has a good history for growth and stable cashflow.

I would rate this company as fully valued at the moment but when taking into account the history of the company and the continued growth in the future it is a fair price. This is a problem we sometimes run into with good companies - they don't come at bargain based prices, so we need to take any opportunites where they are available.

Good Luck Investing

Ord River Resources - Can they be trusted ?

Ord River Resources have announced a major copper find in Western Australia with a supposed potential to become one of the biggest in history. But lets have a look at the report as there has been a number of recent over inflated reports by various companies on their exploration findings. For starters no drilling has been undertaken, and the major announcement was based merely on surface sampling of rock chips. The share price of the company rose 65% to a high of $A1.10 on 20 November 2006, before closing at $A0.96

Once again we see a company speculating without any real proof. Personally if you like speculation jump aboard. But if you want to invest rather than gamble you really should steer clear until the results are conclusive.

Good Luck Investing.

Wednesday, November 15, 2006

Last Few days

Sorry about the lack of updates the last couple of days but my wife has been in hospital. She is due to deliver our first child in the next 2 weeks so the updates may be sporadic over this time.

Interestingly the shares I proposed may be undervalued have done the following in the last 3 days :

BSL Up 8%
AIE Up 3%
ITD Steady
AVE Steady
SFC Up 3%
OST Up 4%
RHD Up 2%
FEA Up 5%
CKL Up 5%

Thats not a bad run in only 3 days.

I expect them to rise by even more in the future.

Good Luck.

Sunday, November 12, 2006

Shares that might be undervalued

I have just run a scan of the ASX market which might be of some interest to those trying to find undervalued shares.

The scan assumes that the average P/E is 16, the average P/B is 2.4 and the average PEG is 1.60.

This is based ont he values available on the All Ords from Friday.

The scan consists of all companies which are 10% lower in each of the above categories ( PE is 14.4, PB is 2.16 and PEG is 1.44 or lower)

I then added a ROE of at least 10%(making money for shareholders), a profit higher than 0 (making money), and an annual return greater than 0 (meaning they are not in a dowtrend for the last year).

This leaves us with only 9 shares in the market.

 ASX Code 
 Company Name 
 P/E Ratio 
 P/Book ratio 
 P/E Growth ratio 
 Return on Equity 
 Net profit 
 1 yr. Avg. annual return 
  AIE  A.I. Limited  10.55  1.95  0.85  16.0%  4,334,152  66.0%
  ITD  ITL Limited  12.02  1.36  0.73  11.2%  3,257,385  62.5%
  AVE  Aevum Limited  13.11  1.41  0.86  10.4%  13,369,000  45.9%
  SFC  Schaffer Corporation Limited  10.30  1.85  1.07  17.5%  8,144,000  30.4%
  OST  OneSteel Limited  13.62  1.73  0.76  11.9%  187,500,000  27.2%
  RHD  Ross Human Directions Limited  8.90  1.36  0.51  14.3%  5,045,000  15.7%
  FEA  Forest Enterprises Australia Limited  7.61  0.90  0.78  11.3%  20,978,302  14.8%
  CKL  Colorpak Limited  8.23  0.92  1.05  11.1%  4,501,000  13.6%
  BSL  Bluescope Steel Limited  10.85  1.73  0.89  14.9%  337,600,000  8.7%

This is a starting point for analysing the companies. I have given the basis for the chance of finding some companies at a good value. From here you need to look at each of the companies and compare them to the sector averages, the competitors and you need to read the financial analysis on each company. Assess the likely future opportunities this company may have and why theya re a good or bad bet for the future.

For instance Bluescope Steel Ltd came up in the list but they actually have a higher PEG than the sector. Also they are facing increased costs for their material due to commodity prices rising in the last few years. A further threat is that they are competing with new steel mills popping up all over Asia (some of their own are there) and these new mills are running on newer technology which offers their competitors a major advantage in productivity terms.

For these reasons I would think carefully about Bluescope Steel Ltd and its potential to grow and increase its profit.

On the other hand Aevum Limited is responsible for returement living and aged care facilities. The baby boomers are moving into this age bracket and there may be an increase for the facilities run by Aveum Ltd. It has been grwoing each year, they have a great profit margin and their is a definite chance of major growth in the years to come. They are significantly under PE, PEG and PB for the sector and even thought they have shot up from $1.65 to $2.25 in the last 2 months they still appear to be undervalued.

Hope this helps a few people understand how I look at my stocks and come up with some selections.

Good Luck Investing.

Friday, November 10, 2006

Interest Rates Are Up (Again)

Interest rates were lifted again today by 0.25%. There was almost a
concensus that this would happen, yet the market drops by 21 points (at
lunch). The market has known this was going to happen for a while and a
bigger issue would have been if the reserve bank had not raised interest

The increase, coming after increases in May and August, brings official
interest rates to their highest level since February 2001.

For those holding variable-rate mortgages with a typical 25-year loan of
$200,000 , the repayment cost is likely to rise by about $33 a month. Those
with $300,000 mortgages can expect to pay about $50 more per month.
Considering the increase has been 0.75% this year that means people are
paying approx $100 more a month then they were a year ago. It is the
eighth consecutive rise without a drop.

Businesses have warned that higher rates could chill spending, especially
as we approach the vital Christmas shopping season.

This will impact earnings on consumer discretionary stocks and those stocks
which have high debt (debt / equity of 30% or more).

Good Luck investing.

According to the sydneymorning herald

"Harvey Norman's acceptance of an offer for Rebel Sport has left it with enough cash to make another acquisition. The Australian furniture and electronic goods retail franchise operator has agreed to sell Rebel to private equity group, Archer Capital, for $A4.60 a share. The profit on the transaction will be $A195 million. Harvey Norman chairman, Gerry Harvey, said on 9 November 2006 that one possible target was the failed Retravision business in New South Wales."

Gerry Harvey is a very insightful manager that has made his money by making the right investments at the right time. He he thinks he can get retravision at a cheap price I believe he can turn it around and make it into a good business alongside Harvey Norman. Gerry Harvey is definitly one of the top managers in Australia well worth his salary package (unlike some others).

Harvey Norman still loooks overpriced at this stage on a PE of 17 and PEG of 2.

Good Luck investing.

Rinker Results

Rinker has posted an interim 2006-07 net profit of US$410.4m ($A531.85m) after tax. The increase of 12% was accompanied by a revised forecast for the full-year earnings per share, which is estimated be at the bottom of the range of $US.84 to $US0.90.

The reason is the slowdown in residential building activity in the US, where Rinker gains some 80% of its turnover. On a positive note though the interim dividend was up $A0.02 to reach $A0.16. Experts still believe that the figures are good enough to force a rise in the takeover offer made for Rinker by Mexican cement company Cemex, which has bid $A16.8bn.

On 9 November 2006, Rinker stock closed level at $A18.61

Good Luck investing.

Thursday, November 09, 2006

My Analysis of Funtastic Ltd and its Purcahse

Funtastic Lts's strategic alliance looks a very good purchase but the other news is not so good.

The new alliance will offer a competitive advantage and growth opportunities to the company and it did not overpay for Judius. This is shown by the value only being 5.4 of EBITA.

The bad news is they came out with a revised earnings guidance which is down by 25% on market expectations.

But lets look at the numbers :

Revenue new estimate of around 353 - 362. This comes within my esitmate.
Unfortunately the Net profit is going to fall from 21 million to 12-15 million.

They are implementing a cost saving resturucture that will save 5 million a year. Right here I have to ask WHY wasn't this implemented earlier ? This shows poor management skills. It also shows that they are not focused on returning the best results for shareholders. If this had been implemented 3 years ago they could have provided an extra 15 Million for shareholders.

While I am bagging them out a bit above I still like the prospects of the company. They need to get control of spending and make these acquisitions work for them before the stock price will start to move positive.

I expect it to open lower today based on the trading update and it may be a buying opportunity if it drops much lower as even at this level the stock is very cheap.

Good luck Trading.

Wednesday, November 08, 2006

Funtastic announces major Purchase

Funtastic has entered an agreement to purchase Judius from ABC Learning Centeres for $44.6 million

I am not sure whether this is the news which caused the trading halt. Interestingly ABC Learning Ltd (ASX:ABS) did not entere a trading halt at all during the timeframe.

At this stage I am assuming this is the news and I believe it will be benfeficial to Funtastic. Did they overpay ? I will look into this later. Right now I thought I would post the news.

Good Luck Trading

Tuesday, November 07, 2006

Funtastic Trading halt

Funtastic Ltd has gone into a trading halt today.

I have no idea on what this may be but at their undervalued price I would speculate it may have an offer from a private equity firm.

There is no word anywhere on it yet so we will ahev to wait and see.

Good Luck.

Sunday, November 05, 2006

Melbourne Cup Tips

Its that time of year again when we invest in another alternate form of income. Its the Melbourne Cup.

If you treat it like investing a bit of money can be made out of the races. I have to admit it is another of my passiosn as it also contains the challenging aspects of picking the right investment. The only difference between horse racing and trading is that in horse racing you know if you were right within a couple of mins.

The Melbourne cup is the race that we all like to have a bet on. It is the premier race in Australia and there is always many opinions on who should win. I like a few horses in this race and here are the reasons :

YEATS - Good Jockey, Good Form, Fitness looks good in trackwork. This should be the horse to beat. I know international horses rarely win the Melbourne cup but this horse can do it.

DIZZELLE - Had spectacular run in the caulfield cup. Can make the distance. It will be at good odds.

POP ROCK - Great Caulfield run with best sectionals. Was very unlucky in the run and should have a better chance in Melbourne cup. Will like the extra distance. ACTIVATION - Nice horse and is in good form.

TAWQEET - Only throwing him in as he is fav. I don't think he will win but may be in the placings. Good Luck if you bet ...

I could have written forever on why these horses are the best but you will read the reasons everywhere in the next couple of days.

My order of perference is :

YEATS to win by a head over POP ROCK closely follwed third by DIZZELLE with TAWQEET coming in fourth.

Remember don't bet over your head .. bet with it. If you have a gambling problem please call for help as you should never gable (invest) with more than you can afford.

Good luck.

Debt And Equity

When looking at any company you need to evaluate its debt levels. To me this is one of the most important aspects of fundamental analysis as a company with too much debt intriduces a lot of risk to the share price and in extreme cases it can lead to bankruptcy.

When looking at the debt levels of the company there are several things to examine. These include:

  1. Debt to Equity ratio
  2. Return on Captial vs Return on Equity
  3. Interest Cover
  4. Cash at Bank vs Interest Payments

The debt to equity ratio is a good indicator on whether a company is carrying excessive debt. You need to understnd the debt requirements for the industry as certain industries require high amounts of debt. To make sure you judge the debt to equity ratio properly you should compare it to the industry standard. if it is higher then the industry standard then you may need to take a good look at the reasons why it is high and maybe pass ont his share.

Debt is used by management to leverage the gains for Return on Equity. The ROE should always be higher than the ROC. If it is not then management is not using debt well and it is costing the company money. If you find any share where the ROC continually exceeds ROE then that means you have incompetent managmeent and you should not touch this share until management is changed or starts to work out what they are doing wrong.

Interest cover must be examind for any company that has debt. It tells us how many times the earnings cover interest payments. I would be looking for at least 8-10 times to be in a safe level. Any lower than this and the company is flirting with danger.

The last thing that should be examined is the cash at the bank. If the company needs to pay out 1 million a month in interest and there is only 4 million in the bank you can be a bit worried. Anything higher that shows interest payments are higher than 20% of the cash at the bank can be a issue and may lead to danger in the future. 20% is fairly high and would want to be your maximum. There is always a risk to the company that people won't pay on time or won't pay at all so you need to make sure the company can survive a while in a sudden downturn.

Well thats what I look at when examining debt in a company.

Friday, November 03, 2006

Westpac makes a 14% increase in profit

Westpac Banking Corporation Ltd has reported a 2005/06 annual profit, up 14%, result of $A3.07 billion. CEO David Morgan noted that they had been able to achieve the highest growth rate in lending among its competitors. He argued this was being accomplished without sacrificing margins, but analysts and investors remain somewhat unconvinced. Morgan said an accrual
mistake costing $A34m in its credit card business had accounted for four basis points of a decline in net interest margin from 2.45% to 2.29%.

A good sign was that the BT Financial Group wealth creation subsidiary improved its profit to $A339m.

Westpac Banking Corporation Ltd has been one of the better banks to invest within the last few years. At this point I do not know enough on which banks are offering value as they all appear to be overpriced on fundamental terms. Westpac included. The reason is that investors recognise the continued growth which has occured in all banks for the last decade. This means yu need to pay a premium to buy in. Sometimes ( and most of the time) this premium is justified. What we really need to do is monitor the banks and get in where they have a decline of 10% or more. Another way is to sell Puts at lower levels so that you are getting your 10% discount and be ready to purcashe if needed.

Good Luck Investing.

News Corp Ltd planning to buy more assets

According to reports News Corporation limited is chasing assets in the Austrlaian print and media group FPC. Owner Michael Hannan has not yet commented officially, but sources claim News Corporation Ltd is ready to pay $A170m for a 49% stake in the community newspapers division, and has sought preliminary regulatory approval. Rival bidders for the magazines business include the Seven Network's Pacific Magazines and the Sensis subsidiary of telco Telstra.

This could turn into a bidding nightmare pushing the prices over the value level. News Corporation has a habit of paying too much when acquiring assets (in my opinion). With the current environment it appears that media stocks are overvalued significantly and I think in a few years time the majority of media stocks which are rallying on takeover talks will be lower
then where they are today.

Of course I could be wrong as there is an argument that previous legilsation may have kept them at a discount price to their true worth. Time will tell.

Good Luck investing.

TFS Limited Announces Expected Sales Figures for FY07

TFS Limited (ASX:TFC) has announced that sales are ahead of expectation. They anticipate sales of approximately 375 hectares of Indian sandalwood in FY07. This would represent an increase of nearly 15% over the 326.5 hectares of sales concluded in FY06 and compares to previous guidance for FY07.

This has allowed the company to purcahse further land for sales in the
future. It has purchased a property "Kingston Rest", an operating hay and cattle farm some 66 kilometres south of Kununurra. The property comprises 2,400 hectares of freehold land, 1,200 hectares of pastoral leasehold land and a 3,200 hectare dam with a current capacity of 65 gigalitres. At least 1,900 hectares of the land has been identified as being suitable for the growth of Indian Sanderwood.

This company is unique in the product it sells and it should not be affected by any glut in the wood chip business.

Personally I own TFC having bought in at around 38c. It has done well and shortly after this announcement the share is up to 47.5c. At this price it is still below value as the current talks in government on the treatment of tax deducations from timber investments is keeping the share at a low PE level. This stock has the potential to be over 60 - 70c within the next few months. A PE of 13 would value it at 98c. Considering the market PE is approx 16 this is still a very cheap share.

Good Luck investing.

Brazin takeover priced at $1.81

Brazin released an annoucnement of a takeover for $1.81

This is a significan't increase on my buy price of $1.40 At this stage I
see this as a good price to seel BRZ as consumer discretionaries are going
to be having a tough time in the next few years. Brazin Ltd is a good
company but at a 29% profit it is well worth taking the offer and moving
into other areas which are undervalued. 1.81 would put BRZ at a PE of 13
which would be less that the average market. At PE of 15 valued the
company at approx $2.04. While we are selling the company at an
undervalued price I still feel this is a good option in the short term due
to the trading environment.

Good Luck investing

Speculation on Brazin news

A report in the australian financial review this morning had the following
information on the Brazin Ltd trading halt.

"Shares in Australian multi-brand retailer, Brazin, entered a trading halt
on 2 November 2006. Rumours are circulating that entrepreneur, Brett
Blundy, intends to buy out minority Brazin shareholders for approximately
$A68 million. Industry sources say that Blundy is capable of privatising
the operation without private equity backing. However, investors have not
ruled out speculation that Brazin is planning a major asset sale. Todd
Guyott, of Foresight Capital, says investors were originally attracted to
Brazin's multi-brand and multi-format business model, but he claims that
model has left the investors exposed to discretionary consumer spending"

Both of these speculations sound good for minority shareholders and at this
stage I would expect BRZ to climb after the news is announced.

Good Luck investing.

Thursday, November 02, 2006

BRZ Trading Halt

Brazin Ltd (ASX:BRZ) has gone into a trading halt this morning. The announcement hints at a major transaction which has occured.

As they have been having their review and there is major private equity purchases occuring on the market this could be a good sign for the company. I have long held the belief this company has more value in its parts than it is as a whole and it is probably worth selling some of its holdings ( providing they sell the right ones).

I'll take a look at the information later today and keep you updated on how I think it will impact the company.

Good Luck Investing ...

Wednesday, November 01, 2006

Market update (value)

I have been trawling the market for the last few days looking for fundmanetally sound companies at a good price. Unfortunately I can not find any what so ever.

Looking back at some of our deals I see CKL, TFC, MCW, MMA, MOC, ASU are all are strong to name but a few.

Of those I have looked at there are still 2 which are around the suggested purchase prices. These are FUN and BRZ. BRZ could go anywhere and it is probably wise to wait and see what is happening with it. FUN is still a great long term stock and is worthwhile as the fundamental reasons to own it still exist (lots of people having babies).

Anyway to me the market looks severly overpriced and there is not much value to be found. Be careful as the interest rate rise (which should come) could deflate the market a bit. What would be worse is if the interest rate rise does not come ... The market expects a rise and if it doesn't come it would be mjor bad news as it means the economy is starting to slow too rapidly.

Lets wait and see ...

Good Luck investing.