"Buyback is VALUE accretive when shares are purchased at a discount to a company’s underlying intrinsic value. "
Yes, that's what I'm saying.
The only difference is that I believe intrinsic value is predicated on earnings and cash flows, and not on the somewhat arbitrary accounting standards tell me.
"...you are missing the crucial understanding which enables you to make money. It is incremental (and future ) returns which drive share prices, not historical and especially not current returns! "
Mmm. Crucial understanding gong AWOL.
Now let's see here. Given I was buying shares in BOL at prices between 11x and 13c between 5 and 12 September 2017, I'm kind of happy about my ability to make money based on that sort of crucial understanding deficiency.
Strangely enough, my particular understanding deficiency has, at its core, a focus on prospective, as opposed to current, financial performance. Which is exactly what your exhortation prescribes.
But, there's more: the fact of the matter is that precedent is a very useful tool (nay, an essential one) to help one inform predictions about the future.
For example, when it required $600m of assets to generate $25m of NPAT in the past, the likelihood of $200m of assets producing the same financial outcome is - I strongly suspect, given the nature of the business -lower (significantly lower, at that).
I can't see how it is possible for one to forecast the future without looking at the past.
"The irony in your focus on earnings is that earnings are such poor predictors of value for cyclical companies....you are using the wrong mental model when looking at BOL."
Like I said, if my "wrong mental model" causes me to almost double the value of my capital in a time period measured in months, then I'm not sure I should be rushing to "fix" my mental model any time soon.
Should I?
"Based on the company’s recent announcement, their gearing at February will like be around 2 -2.5x ND/EBITDA. Arguably too low at the bottom of the cycle particularly given BOL’s asset backing. Once under 2.5x, BOL is permitted to buyback stock which they will likely commence in February if the share price hasn’t already doubled. "
When the animal spirits stalk talking so glibly about debt - the thing that nearly brought BOL to its knees, and caused it to spend almost three years in bank-imposed self-administration - then I start thinking that the zigging herd is on the move again, and my instincts tell me that it is almost time to start zagging.
"...the point was to highlight that market value is > current accounting value (and BOL’s current share price) and you’ve completely missed that. "
I think you are starting to trip over some valuation constructs that might be a bridge too far for you. "Market value" and "Share price" are mutually inclusive.
Definitionally so.
As for "accounting value", well that only has any bearing on intrinsic value of the enterprise to the extent that "accounting value" relates to financial performance, at various points in the business cycle (unless you're saying that the Capital Asset Pricing Model stuff, which is taught as an integral part of the Chartered Financial Analyst qualification, is a load of bunkum).
"You are looking at the down part of the cycle.....and looking at it historically. The market is forward looking. "
I'm looking at the down part? Like the following, for example:
"So I think the worst is over for them and, the operating leverage in this business is pronounced, meaning that small increases in utilisation rates will be amplified significantly at the profit line."
"...second level or higher thinking is required in this game."
Oh, is that what is required to succeed?
So do you mean, like buying shares at discounts to their intrinsic value and selling them when they are fully valued? That sort of higher order thinking?
BOL Price at posting:
20.0¢ Sentiment: Buy Disclosure: Held
(20min delay)
