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 …

James Montier is my current favourite author. As I won’t have much time to post here until later in the year I can recommend no-one more heartily than James Montier.

Theoretically, discounted cash flow (DCF) is the correct way of valuing an asset. However, as Yogi Berra noted, “In theory there is no difference between theory and practice. In practice there is.” The implementation of a DCF is riddled with problems. First off, we can’t forecast, which kind of puts the kibosh on the whole exercise. Even if we choose to ignore this inconvenient truth, problems with …

Skillful individual investors exploit market inefficiencies to earn abnormal profits.

Taking 3% bets on your best ideas gets you no where. Concentrate to accumulate.

It’s that time of the year again. How did you investments perform in 2009?

I’ve been catching up with The Aleph blog today. Merkel is a fantastic writer. I even enjoy his book reviews, which are often peppered with many investing nuggets.
To a guy in search of how to fold momentum into a value approach this following insight gives me something to work on. Patience… again.
My favorite example is that as a value investor, I am almost always early.  I buy and sell too soon, and leave profits on the table.  Adding a momentum overlay can aid the value investor by delaying purchases of …

October 1982 TV debut of Peter Lynch.
Buy What You Know
“Average investor is out there in some industry…and they’re going to see those industries turn and they’re not going to buy those stocks…they have a big edge… they are months ahead of me”
Common mistake..buying a stock as it has fallen from X to two thirds or half of X. Beware bottom fishing
Peter Lynch nails the edge most amateur investors enjoy, but seldom capitalise on. Most people have an edge in the industry they work in. Funny thing is most of the money is controlled by people who …

Three great points; another reason to concentrate on EV instead of market cap, cash is more a risk than an asset and show us the money. Stop hording our cash! Graham recommending putting the dividend payout to a vote each year and management having to justify any capital expenditures. I implemented capital investment management in, gosh at least a dozen companies, and truth be told not one really had a tight grasp of or even a good process for managing their major expenditures.

I can’t help but drift into a pirate accent when I maul the pronunciation of CAGR. I’ll try to slip CAGR in during my first ever podcast. Compound annual growth is one of the cornerstone concepts of investing and wealth. I first mentioned it in this post, my worst investment in 2008, but have never explained it.

Benjamin Graham’s Lost Magic Formula and other Checklists.