I have long ago formed the view that the word "analyst", in the context of stockbroking, is a total misnomer... stockbroking do no real analysing of businesses, especially insofar as it relates to their ability - or inability, as the case may be - to create shareholder value. They have no idea about observing the evolution of the enterprise or of truly understanding the drivers of intrinsic value over time.
Because if they did, they would soon come to the view that there are only a few tens of listed companies - out of the 2,000-odd that are listed on the ASX - that fit the mould of companies that have the ability to organically create wealth for their owners.
And of course, it would be highly un-commercial of them to advise their clients to simply follow just a small group of companies very closely (and to ignore the majority of companies). For that would be very bad for their employers' business, and therefore for the bonuses of the analysts employed by stockbrokers.
No, the job of the analyst is not to think like a prospective business owner; rather, it is to generate as much noise as possible and the comment on as much minutiae as possible and to put out as many research reports as possible, because that's what generates activity. And activity equals brokerage. And brokerage equals profits.
If a stockbroking analyst ever came one day and advised his employer's clients that they should just invest in high-quality, durable, well-managed, industry-leading companies with deep commercial moats, and that all other stocks should be ignored... that analyst would soon find him- or herself looking for a job in a different industry!
Onto the more meaningful topic of what business(es) IFL might buy in the foreseeable future, the important thing to me - given my instinctive sense of acute trepidation when companies seek to grow by acquisition - is that the board is disciplined in not over-paying. IFL executives are, in my observation, testimony to the sort of acquisition discipline that is a minimum requirement for being an industry consolidator (witness them walking away from HUB24, as you mentioned).
My own view is the the company will continue to look for acquisitions - like it has historically - in the unlisted space, where vendors have different strategic motivations to the owners of similar businesses that are listed; and hence pricing expectations are far more moderate.
I did, however, take a look at OVH some time back, co-incidentally, with a view to investing in the company on its own merit. While it did look interesting in its own right, I suspect it might be out of IFL's cross-hairs until the OVH - DVA merger is fully consummated and emerges without any major hitches.
IFL Price at posting:
$8.72 Sentiment: Buy Disclosure: Held
(20min delay)
