M2 Telecommunications (MTU.AX) delivered strong results across their businesses in 2009-2010. With underlying EPS up 72% to 16.7cents on the back of the People Telecom acquisition and organic growth. 2011 forecasts were strong with underlying EPS targeted in the 20.7-22c range.
With the current price of $1.80 you’re buying earnings growth of 28% for a P/E multiple of 8.4, which is an appropriate multiple for a no-growth company. In others words, current buyers are getting all M2’s growth for free. Alternatively the market believes M2 is not going to grow in the future …

Ceres Power and Ceramic Fuel Cells are the two leading competitors in small scale combined heat and power (CHP) products. Both are targeting the residential market in Europe and have partnerships with German manufacturers and European gas suppliers. Both use technology based on Solid Oxide Fuel Cells (SOFCs) and if you believe their respective marketing both are the leading company in this niche area. So who is the leader and who is the pretender?

For a few years now I’ve been perplexed by how intelligent people can believe in the efficient market hypothesis and the capital asset pricing model. My ideas are still percolating, though I believe focus is one of the main dividers in our beliefs. I spend my days looking at individual trees, looking for market inefficiencies and focusing on them. While believers of EMH and CAPM spend their days looking at the forest. They don’t see the individual trees and market inefficiencies as the forest obscures the mis-pricing.
Whose right and whose wrong? Come on, you know I don’t buy …

Thanks to Peter for pointing Advanced Share’s profit upgrade.
Great news. Quality, focused board. Owner focused company driven by founding owner.

Final dividend upped from an anticipated 1.25 to 1.8c after a 75% jump in pretax profit to $2.2M for 2010.

Sales up, increased trading, new clients, cost focus with a verifiable claim of expanding margins. Confident of future growth and profitability.

Investors should have already run their ruler over BP. There are a lot of good investors already long, are you among them? I’m not. I see BP as good value right now, but am prepared to wait and see if I get outrageously good value. An easy pitch with bases loaded.

The Australian stock market historically returns around 13%, comprised of roughly 10% capital growth and 3% dividends. The current yield on Telstra inverts those returns, with over a 10% after tax dividend and 3% growth.

Telecommunications is a capital intensive business. Telstra are fighting increasing competition, increasing interest rates, decreasing returns on their defined benefits fund and an insane government at a time of generational change in their business. Projecting consistent earnings into the future for a company faced with so many issues is hazardous. However, Telstra do have a very strong brand and have invested heavily in their transformation project.

With the markets down over 3%, XJO currently down 3.1%, Penrice Soda (PSH) is showing strength up 2.6% or 1 cent to 40 cents. A non-executive director, Andrew Fletcher, bought 50,000 shares last week at $0.395, increasing his holding by 73%. I take recent strength and insider buying as two signs that a bottom is forming in Penrice.

I mentioned short selling yesterday and to my great delight the first piece I stumbled across this morning are these excellent notes by Cameron Wright of Jim Chanos’ speech “The Power of Negative Thinking” at the CFA Institute’s Annual Conference. Cameron also posted these excellent notes of Seth Klarman Discussion with Jason Zweig at the CFA Institute Annual Conference.

Eleven months ago I compared Hunter Hall Limited (HHL.AX) with Platinum Asset Management (PTM.AX) and found that HHL was a third of the relative price of PTM. Here’s my graph from then. Rechecking their statistics now, sees HHL at half the cost of the PTM, so the gap has closed, but HHL is still relatively attractive.

No-one was ever fired for buying an Intuitive Surgical robot.