Recent Posts

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Shares / Re: Investment Wisdom from Others
« Last post by galumay on June 04, 2020, 01:21:25 PM »
https://www.longriverinv.com/blog/the-practice-of-value-investing-by-li-lu

Particularly good in defining speculating v investing
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Shares / EMB
« Last post by galumay on June 02, 2020, 02:28:37 PM »
I finally managed to secure a parcel of EMB, Embelton Limited, a specialist flooring and metal fabrication business. It must be one of the most tightly held businesses on the ASX, 88% of the shares are held by the top 20 shareholders, it hardly ever trades and so getting in is not easy. I was lucky enough to pick up 674 shares at $10 today. EMB should probably be a private company, they have some pretty unusual numbers in the modern world, the business has been around since 1924, its NTA (net tangible assets) are about $8 per share, its equity is nearly entirely retained profits - only $1.5m of shareholder equity, retained earnings account for about $16m of the equity!

There are only about 2.2m shares on issue, and only 157 shareholders!

Its worth reading a couple of the half yearly and annual reports, beautiful in their simplicity, short, concise and clear. No need for acccounting degrees or maths speciality to read and understand this business.

I have followed the business for about 3 years and have never been able to buy shares at a price I was comfortable with, but $10 is a price I would happily buy many mre than the 674 that were available.

EMB is a cyclical business following the fortunes of the housing market to a fair extent in Australia, although they do have some diversification in their industrial/corporate flooring and the engineering sector. My investment is a very long term investment in the business that i expect will generate very satisfactory returns over the long term from the dividends and some steady growth in the share price, all the while comforted by thought that the business could be wound up tomorrow and I would get most of my capital back.

What could go wrong with my thesis is that the fortunes of the business could slowly decline over time as the market for their type of products shrinks and margins get squeezed by currency movements and increased costs. It would be prudent to keep an eye on the longer term trends in these metrics so as not to get trapped if this is the direction the business goes, as exiting a position would be at least as difficult as making one!

Founded in 1925, Embelton operates in two main industries; Flooring and Acoustic and Vibration Isolation, with manufacturing operations in metal fabrication.

Headquartered in Melbourne, Australia, Embelton employs over 100 permanent staff along with hundreds of contractors across three countries and seven capital cities. Embelton also has key distribution relationships in Asia and the South Pacific.

Embelton works with leading acoustical consultants, structural design engineers, architects, builders and installers to design and supply solutions for acoustic isolation, vibration control and flooring. As a result, Embelton’s product portfolio showcases many major projects across Australia, Asia, Europe and the Middle East.

Further, Embelton is one of Australia’s largest wholesale distributors of flooring, sold through an extensive network of flooring retailers.

With a reputation for delivering quality products, service and expertise, Embelton offers a unique capability for our clients from design to finished installation.

G P EMBELTON & CO PTY LTD
Distribution of flooring, noise control equipment and industrial products and materials
Flooring and Consumer Products: Industrial and Construction Products:
 • Wooden parquetry flooring •
• Prefinished and natural strip flooring •
• Timber, Bamboo, Laminate and Hybrid Flooring •
Structural noise and vibration isolation systems Anti-vibration mountings - springs and rubber Seismic restraints for resiliently mounted equipment
• Rubber and sports flooring
• Adhesives and finishes
• Other flooring accessories
• Compressed cork sheets, blocks and rolls
• Recycled and natural rubber sheets
• Spandex cork jointing
• Other jointing media
• Tube and Pipe bending
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General Discussion / Re: Decision Journal
« Last post by galumay on March 18, 2020, 01:34:46 PM »
So the world has changed, probably half our net worth has disappeared in the 2020 share market crash on the back of concerns about corona virus colliding with a vast bubble in world equity markets and basically zero fixed interest markets.

I have always considered our offset account as being our dry powder for such a drawdown, but its a damn difficult decision to implement, as I discussed with Tony recently,

Agree with your thoughts on using debt, I have been trying to think about what could go wrong with that strategy, first risk is CV outcome has maximum impact and this follows thru to falling dividends such that interest is not covered, and capital gains fail to materialise within the remaining 4 year term of the IO loan. So potentially we are left having to make interest and capital repayments on the loan going forward. By then I will be over 60 and if I had to come out of my lazy semi-retirement to get a job to manage those payments it may be difficult to get work. Also if things had played out in that way our super would still be significantly less than planned. So I think the worst case scenario is that we would be putting ourselves under financial stress right at the time of our lives when we would want it least of all!
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Shares / Re: LBL
« Last post by galumay on February 22, 2020, 02:19:50 PM »
HY report disappointed the market as growth slowed, I think that the business was being over valued  and the drop in price reflects this. I am still very happy to hold and its still a very profitable position for me. ANother business where patience is required to see the transformation out and the growth of the tech and services divisions.
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Shares / Re: EGN
« Last post by galumay on February 22, 2020, 02:17:03 PM »
Half yearly report was steady without any real growth overall, I think patience will be required to see the story play out but I think its still probably that the transformation of EGN continues and value will be created. Probably wont accumulate until more signs of management execution being successful.
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Shares / Re: CXZ
« Last post by galumay on February 22, 2020, 02:13:13 PM »
Very strong HY results released this week, CXZ up nearly 40% on the news. If they can pick up some more customers it can develop into a very good business. Cash flow conversion is great, straight to the bottom line. I will add some more now in the dips. Currently 26c
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Thoughts and Ideas / valuation
« Last post by galumay on February 17, 2020, 09:19:59 PM »
When we buy a stock, we always think in terms of buying the whole enterprise because it enables us to think as businessmen rather than stock speculators. So let's just take a company that has marvelous prospects, that paying you nothing now where you buy it at a valuation of$500 billion...For example, let's assume that there's only going to be a one- year delay before the business starts paying out to you and you want to get a 10% return. Ifyou paid $500 billion, then $55 billion in cash is the amount that it's going to have to be able to disgorge to you year after year after year. To do that, it has to make perhaps $80 billion, or close to it, pretax. Look around at the universe of businesses in this world and see how many are earning $80 billion pretax - or $70 billion or $60 or $50 or $40 or even $30 billion. You won't find any.
Whether a business sells nails or telecom equipment, if more money is going out than coming in, on a present value basis, it is worthless. As Warren Buffett says, "Value is destroyed, not created, by any business that loses money over its lifetime, no matter how high its interim valuation may get."
He continues:
There's plenty of magic in short term in rising PIE multiples and the games people play with accounting and so on. But in the end, you can't get more out ofa business berween now and its extinction than the business makes. And actually you'll make something less depending on who your business managers are, how often there's turnover in the security and how much you pay the investment manager and so on.
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