ASX Stocks to Buy and Hold Forever: Your Ultimate Long-Term Investment

Summary

Dans cette discussion, l'accent est mis sur l'investissement dans le marché boursier australien et les critères clés pour identifier les actions à long terme. L'interviewé explique qu'il a élaboré une liste d'entreprises potentielles en se concentrant sur la croissance à long terme, les avantages concurrentiels, les rendements sur le capital et la stabilité financière. Il discute également des secteurs à exclure, comme les banques et les mines, en raison de leurs limitations de croissance. Parmi les entreprises retenues figurent l'aéroport international d'Auckland et Propel Funeral Partners, deux sociétés défensives offrant des opportunités de croissance stables.

Takeaways

• 🌐 L'ASX (Australian Securities Exchange) a moins d'options en termes de valeurs car le marché est plus réduit et les entreprises y ont des limites de croissance à long terme.
• 📉 Les entreprises australiennes ont tendance à ne pas durer aussi longtemps que celles américaines, avec une étude montrant que la durée de vie moyenne d'une entreprise est d'environ 20 ans.
• 🚫 L'auteur a exclu plusieurs secteurs de son analyse, notamment les banques et les minières, en raison de leurs perspectives de croissance limitées et de la dépendance à long terme.
• 🏦 Les banques australiennes ont connu une période de croissance exceptionnelle due à une bulle immobilière, mais l'auteur est sceptique sur leur capacité à maintenir cette croissance à long terme.
• 💊 Les entreprises pharmaceutiques et les minières sont considérées comme des investissements à risque en raison de l'expiration des brevets et des gisements miniers.
• 🌱 L'auteur privilégie les entreprises avec un potentiel de croissance à long terme, une position dominante sur le marché et une capacité à augmenter les dividendes.
• 🛡️ Les entreprises défensives, comme les aéroports ou les services funéraires, sont vues comme des investissements attractifs à long terme en raison de leur stabilité et de leur croissance modérée.
• 💹 L'auteur met l'accent sur la nécessité pour les investisseurs de penser en termes de croissance des bénéfices et de la rentabilité des investissements plutôt que de se concentrer uniquement sur les dividendes.
• 🧮 Bien que l'analyse financière détaillée et les modèles de flux de trésorerie soient importants, l'auteur suggère que les investisseurs individuels peuvent simplifier leur processus d'investissement en se concentrant sur les entreprises de qualité et en restant investis sur le long terme.
• 💼 L'expérience de l'auteur en tant que gestionnaire de portefeuille a influencé son approche personnelle de l'investissement, privilégiant une analyse simplifiée et une confiance dans les entreprises de qualité plutôt que dans les modèles complexes.

Q & A

Quels critères ont été utilisés pour élaborer la liste des actions sur le ASX ?

Les critères étaient de choisir des stocks faisant partie de l'ASX 300, ayant une longue trajectoire de croissance, des avantages concurrentiels, des rendements élevés sur le capital, des bilans solides, ne dépendant pas de gestionnaires exceptionnels, et étant peu susceptibles d'être perturbés par l'innovation technologique.

Pourquoi les entreprises minières ont-elles été exclues de la liste ?

Les mines ont des dates d'expiration, ce qui rend difficile d'assurer leur pérennité à long terme. De plus, les entreprises minières, en particulier les grandes, ont besoin d'investir d'importantes sommes pour augmenter leurs bénéfices, ce qui peut limiter leur croissance potentielle.

Quelle est la position de l'orateur sur les dividendes ?

L'orateur préfère les actions dont les dividendes augmentent constamment plutôt que les actions à dividendes élevés. Il estime que les dividendes proviennent des bénéfices et que les entreprises capables de croître leurs bénéfices auront également des dividendes croissants.

Pourquoi les banques ont-elles été exclues de la liste ?

L'orateur considère que les banques ont bénéficié d'une période atypique de croissance due à une bulle immobilière et d'une expansion du crédit, qui ne se reproduira pas. Il est sceptique sur leur capacité à maintenir une croissance saine des bénéfices à long terme.

Quels sont les deux exemples d'entreprises mentionnés dans la liste ?

Les deux exemples sont l'Aéroport International d'Auckland et Propel Funeral Partners. L'aéroport a un monopole et des barrières réglementaires, tandis que Propel est une entreprise de funérailles qui consolide un secteur fragmenté.

Quelle est la perspective de l'orateur sur la valeur juste d'une entreprise ?

L'orateur est sceptique sur l'idée d'une valeur juste d'une entreprise. Il préfère penser en termes de scénarios avec des plages de prix plutôt que de fixer une valeur précise.

Comment l'investissement personnel de l'orateur diffère-t-il de son approche professionnelle ?

L'orateur est plus conservateur dans ses investissements personnels, cherchant des entreprises défensives avec des marges d'avantage qui peuvent encore croître. Il a appris à faire confiance à des raccourcis et à ne pas s'appuyer autant sur les modèles complexes qu'il utilisait dans son rôle de gestionnaire de portefeuille.

Quelle est la recommandation de l'orateur pour les investisseurs cherchant à construire leur portefeuille ?

L'orateur suggère que les investisseurs devraient d'abord évaluer leur appétit pour le risque et leur horizon temporel. Il recommande d'acheter des actions de qualité et de les garder pendant longtemps, ce qui simplifie grandement le processus d'investissement.

Pourquoi l'orateur croit-il que les entreprises défensives sont intéressantes à long terme ?

L'orateur mentionne que les entreprises défensives, comme les produits à barbe et les produits de première nécessité, ont été les meilleures performances sur le marché américain au cours des 100 dernières années, démontrant qu'une croissance spectaculaire n'est pas nécessaire pour une performance investie spectaculaire à long terme.

Quelle est la différence entre la construction d'un portefeuille pour un fonds géré et pour un investisseur individuel ?

Pour un fonds géré, le processus est structuré et dépendant de modèles et de discussions d'équipe, tandis que pour un investisseur individuel, il peut être plus flexible et moins dépendant de la modélisation formelle, avec plus d'emphase sur la compréhension des fondamentaux d'une entreprise.

Outlines

00:00

🌐 Évaluation des entreprises pour investissement à long terme

Le paragraphe discute des critères utilisés pour sélectionner des entreprises sur le marché boursier ASX pour un investissement à long terme. Il souligne les limitations de croissance en Australie par rapport à un marché plus vaste comme les États-Unis et la nécessité de choisir des entreprises avec une longue espérance de vie et une capacité à outperformer. Les exclusions, comme les entreprises pharmaceutiques et minières avec des actifs expirant, sont abordées. L'importance de ne pas seulement survivre mais aussi de dépasser les performances est également discutée.

05:01

🏦 Critères exclusifs pour les entreprises australiennes

Le narrateur explique les secteurs exclus de sa liste d'investissement, notamment les banques et les minières, en raison de la croissance limitée et des défis spécifiques à long terme. Il met en avant la nécessité pour les entreprises de disposer d'une grande taille et d'une diversification de portefeuille pour assurer une croissance durable. Les dividendes sont également abordés, soulignant la préférence pour des entreprises capables de croissance des dividendes plutôt que de simples actions à rendement élevé.

10:03

🛫 Sélection d'entreprises avec potentiel de croissance durable

Le paragraphe présente les caractéristiques communes des entreprises sélectionnées pour la liste d'investissement, telles que leur appartenance à l'ASX 300, une longue trajectoire de croissance, des avantages concurrentiels, de bons rendements du capital, des bilans solides, une indépendance par rapport à la gestion et une résilience face à la disruption technologique. L'accent est mis sur la recherche d'une croissance durable plutôt que de la croissance spectaculaire.

15:05

🏔 Investissement dans des entreprises défensives avec potentiel de croissance

Le narrateur choisit deux entreprises de la liste pour illustrer les critères de sélection : l'Aéroport International d'Auckland, avec son monopole et sa croissance potentielle liée au tourisme, et Propel Funeral Partners, un groupe de pompes funèbres bénéficiant d'une croissance naturelle et d'une consolidation du marché. Ces entreprises sont considérées comme des investissements défensifs à long terme avec une croissance raisonnable.

20:06

🧭 Considérations pour les investisseurs sur la gestion de portefeuille

Le paragraphe se concentre sur la manière dont un investisseur devrait abordé la sélection d'entreprises en fonction de son appétit pour le risque et de son horizon temporel. Il souligne l'importance de la capacité à résister aux fluctuations du marché et la préférence pour des entreprises avec un potentiel de croissance durable. Le narrateur partage également ses propres expériences en tant qu'investisseur individuel et en tant que gestionnaire de portefeuille, mettant en évidence les différences dans l'approche et les outils utilisés.

Keywords

💡ASX

ASX fait référence à la bourse d'Australie (Australian Securities Exchange), où sont négociés les actions des entreprises australiennes et internationales. Dans le script, l'ASX est mentionnée comme le lieu où les actions sont étudiées pour élaborer une liste de sociétés potentiellement performantes sur le long terme.

💡Longévité

La longévité d'une entreprise fait référence à sa capacité à survivre et à prospérer sur le long terme. Dans le script, l'auteur discute de la nécessité de choisir des entreprises qui ont une probabilité élevée de durer plus de 50 ans, ce qui est crucial pour les investisseurs à long terme.

💡Croissance

La croissance est un concept clé dans le script, abordant la nécessité pour les entreprises de pouvoir augmenter leurs bénéfices constamment au fil du temps. L'auteur mentionne que la croissance des bénéfices est essentielle pour la croissance des actions.

💡Sélection d'actions

La sélection d'actions est le processus d'exclusion et d'inclusion de différentes entreprises basé sur divers critères pour former une liste d'investissement. Dans le script, l'auteur explique comment il a élaboré ses propres critères pour sélectionner des actions potentiellement performantes.

💡Portefeuille diversifié

Un portefeuille diversifié signifie que les investissements sont répartis dans plusieurs actifs ou secteurs pour réduire le risque. L'auteur mentionne l'importance pour les entreprises d'avoir un portefeuille diversifié pour assurer leur survie et leur croissance sur le long terme.

💡Rentabilité

La rentabilité des investissements est un aspect crucial pour les investisseurs. Dans le script, l'auteur discute de la rentabilité des entreprises en termes de retour sur le capital investi, ce qui est un indicateur clé de la qualité d'une entreprise.

💡Dividende

Les dividendes sont les paiements effectués par une entreprise à ses actionnaires en échange de leurs investissements. L'auteur aborde la perspective des dividendes comme un moyen de croissance future plutôt que simplement comme un rendement immédiat.

💡Marges

Les marges sont une mesure de la performance financière d'une entreprise, indiquant le pourcentage de bénéfice sur les ventes. Dans le script, l'auteur mentionne l'importance des marges élevées comme un signe d'une entreprise de qualité qui peut potentiellement augmenter ses bénéfices à l'avenir.

💡Compétitivité

La compétitivité fait référence à la capacité d'une entreprise à rester compétitive dans son secteur d'activité. Dans le script, l'auteur souligne l'importance d'avoir des avantages concurrentiels pour assurer la pérennité et la croissance des entreprises.

💡Industries défensives

Les industries défensives sont celles qui ont tendance à résister mieux aux récessions économiques. Dans le script, l'auteur mentionne les industries défensives, comme les funérailles, en tant que secteurs qui peuvent offrir des opportunités d'investissement intéressantes sur le long terme.

Highlights

The criteria for narrowing down the list of shares on the ASX include company longevity and outperformance.

The limitations in Australia's market size and the average company lifespan influence investment strategy.

Exclusion of certain sectors like pharmaceuticals and mining due to their limited lifespans.

Banks were excluded from the list due to concerns about future growth and the end of the property boom.

The importance of a company's ability to grow earnings consistently over a long period.

Dividends are considered in the context of overall returns and the potential for future growth.

Seven criteria were established for selecting shares, including being part of the ASX 300 and having a long runway for growth.

Economic moats and competitive edges are essential for long-term business sustainability.

High returns on capital and strong balance sheets are preferred for long-term investment.

Companies should not rely on exceptional managers for performance, indicating a robust business model.

Investors should consider their risk appetite and time horizon when selecting shares.

The power of compounding is highlighted, emphasizing the importance of long-term investment.

Defensive companies with monopolistic characteristics, like Auckland International Airport, are highlighted.

Funeral services companies, like Propel Funeral Partners, benefit from consistent volume growth.

The discussion on the importance of not needing high growth for spectacular long-term investment returns.

The difference between professional portfolio management and individual investing approaches.

The skepticism towards discounted cash flow (DCF) analysis for individual investors.

Emphasis on scenario analysis over precise valuations for individual investment decisions.

Transcripts

all right so I'm sure everyone wants to

hear about the list but where do you get

started because there's obviously a lot

of shares that trade on the ASX so I

guess what criteria did you use how did

you narrow that down to get to the list

in the article well obviously in

somewhere like the US you have a lot

more options um the US is a much bigger

place it's got a bigger population you

can get more growth as a company in the

long term in a place like the US versus

Australia there are limitation in

Australia um and the other limitation is

is that frankly that companies often

don't last that long I think there was

studies in out of the US that the

average company lasts about 20 years so

that doesn't um you know a lot of

companies won't make it to 50 plus years

so you've got to really be confident

that they'll make it that far as well

and it's not only about longevity you

also you don't just want a company

that's going to last you want one that

outperforms enes otherwise why hold it

so that's some of what I was thinking

through when I made the criteria to come

up with a list and then you know one one

way is obviously to exclude things and

you did talk about whether it's

particular Industries what what what

were the exclusions you put in there I

guess just to eliminate certain shares

that are trading in Australia from the

list or I guess from consider even to go

on the list yeah well think about for

instance we don't have a lot here but

pharmaceutical companies have drugs that

expire miners have mines that expire if

you've got a miner that has expires in

10 or 20 years how can you be confident

that they're going to be around in 50

plus years that needs to be in your

thoughts as well um it helps if they are

larger and they've got a diversified

portfolio like a BHP but I I really

knocked out a number of sectors as part

of my thinking number one

controversially I knocked out the banks

um every Australian is like groaning

right now as their portfolios are filled

with

banks it's mainly around growth um you

need to be able to grow earnings

consistently over a long period of time

now the banks have been able to do that

historically but I think it's been a bit

of an anomaly you've had 40 Years of a

credit boom which has been fueled by an

incredible property boom that is really

dying down as we speak

and earnings uh share prices follow

earnings and if you can't grow earnings

in a decent way you're not going to be

able to grow your share price in a

decent way so for instance CBA which

everybody loves seemingly has GR

earnings by 2% per year over the past 10

years that's not a lot the reason it's

done very well is because its multiple

has expanded significantly that is the

only reason the share prices done

decently over the past 5 to 10 years is

not through

earnings

and going forwards I can't see that

changing a lot you're really not going

to get much growth out of the bank

and you've got to ask yourself are there

multiples going to expand to give you a

return that's going to be decent over

the very longer term and I just don't

see that happening over the next 10 20

30 years I think a lot of their growth

is in the

past the

miners are a bit of a struggle because

their minds do have those expiry dates

now you do have larger

conglomerates but overall um miners as

part of the ASX have underperformed the

all ordinaries and it's because they

have to spend a lot of that money and if

you look at the bigger guys like BHP and

Rio they need to spend a humongous

amount just to just to move the dial

these days because they're so big so

it's not only about the mining industry

itself it's about um it's about size as

well size can be a limiting factor

there's only so much you can grow when

you're so big so there a couple of the

Bigg exclusions that were

controversial yeah maybe if we if we

think about if we think about an

investor going out and buying some of

these shares and we will get into the

shares in a second you know how do you

think about over this 50-year period did

you think about dividends in terms of

ways that over that time period that you

could actually you know get some cash

flows to spend over 50 years most people

will have started working and then

retired or were you really just looking

or agnostic to dividends and just sort

of looking at I guess overall returns so

both capital appreciation and and

dividends the latter so it was more

about overall returns I have a different

perspective on dividends than most

probably in

that I don't want High dividend yielding

stocks now I want stocks that will be

able to grow dividends going forwards

and dividends come out of earnings so if

a company can grow earnings per each

year for by 10% over the next perom over

the next 20 years they're going to pay

out potentially 60 70% of that you're

going to get very decent dividend growth

as part of that and that will give you a

larger dividend going forwards in the

out years as well as a better Total

return yeah it it's interesting I I

actually wrote an article this morning

on BHP the earnings came out and I wrote

why I would never buy it

and yeah I was going through and talking

about some of the same stuff you were

that yeah so you stole my idea I I I did

steal your idea I believe it's called

collaboration when you work together um

but uh but yeah if you look at like

bhp's dividend it almost looks random if

you go back 10 years it's high it's low

it's really low it's high it's yeah just

interesting to to think about that but

people are on here because of course

they want to see where you end it up

so I guess overall are there

characteristics that when you came up

with this list that a lot of the list

members

shared yeah look I came up with seven

criteria I'll go through them quickly

and um they're my criteria You can

disagree or agree with it uh number one

criteria was the stocks had to be part

of the ASX 300 the reason I did that was

that I wanted to establish companies

with a track record and

you could counter argue that with saying

that smaller companies have more room to

grow and that's understandable I can see

that argument but for this list I I I I

said the ASX

300 this one was an important one the

second criteria a long Runway of growth

opportunities that kicks out a lot of

Australian

companies um there are a lot of mature

companies here uh there are a lot that

only operate in Australia and Australia

is a relative relatively mature market

so it leaned towards more global

companies as a consequence of that

because that gives you that long run way

of growth that you can potentially go 50

plus years with the third criteria was

that they had to have economic mods that

is competitive edges and competitive

edges gives you the ability to last over

a long period of time if you don't have

a Competitive Edge you won't last as a

business so that was important

good Returns on capital is another

criteria High Returns on Capital whether

you're measure by return on Equity or

return on invested capital is normally

the sign of a good quality company and

and one that can grow earnings over the

long term they also had to sound balance

sheets which I think is important um

Studies have shown that uh High

indebtedness amongst companies leads

them to underperform over the short

medium longer term

they also and this will cause a bit of

controversy in that I don't want

companies that rely on exceptional

managers to

perform the reason is is that um you

really want a a a company that's going

to be able to grow with or without a

good manager that's a kind of sign of a

good quality company as well good

managers help of course but you don't

want them to be the be all and end all

and

lastly in our Modern Age you want

companies that are unlikely to be

disrupted

and you know that's really important and

becoming more and more important as we

go into Ai and other things um with

companies so they're the they're the

criteria I come up with they may not be

perfect but that's that's what I come up

with okay and 16 companies major list

now we're not going to go through them

all because obviously we we can't have a

Hour podcast here but we will put a link

to James's article in the show notes so

go read what James said you get all 16

companies but maybe if you could pick a

couple out and we can go through them

we've heard the criteria but it

interesting to see how this these

companies that you select fit into

that yeah look I'll I'll mention one

first up is ockland international

airport is is one and airports in

general are exceptional

assets and they make for good companies

over the long term why is that because

normally they've got monopolies and

monopolies give pricing power and

long-term pricing power and Orland

International has that

and they have regulatory barriers that

ensure that monopolistic characteristic

as well and over the long term you've

got to be confident in New Zealand's

future particularly with regards to

tourism and visitors coming in and and I

think that you know I have a degree of

confidence in that over a long period of

time

and there some of the reasons why

ockland International Airport makes the

list it's it's relatively defensive but

the assets are fantastic you've got a

fair bit of growth there I think over

the longer term and I just think it's

one of the best to own um in general you

know Sydney airport was a great asset as

well we don't have that anymore and this

is this is the other one to go to in

terms of airports the ASX another stock

um well I'll pick a less known one uh

Propel funeral Partners again funerals

may not sound exciting but you get it

depends whose funeral it is right at the

end of the day that's true you get uh 1

to 2% volume growth which in English

means growing number of people dying

each year which helps funeral services

companies importantly in this industry

there's a lot of fragmentation that is

you've got a lot of mum and pup uh

Funeral Directors out there and these

larger companies like Propel are

consolidating that industry and that can

be a very interesting and profitable

arrangement for them because as you

consolidate you get more pricing power

as well so if you get that volume growth

plus prices increasing by more than

inflation you get decent Revenue growth

of of uh mid to high single digigit

Revenue growth plus you get the

acquisition growth on top and you get

you know increasing margins hopefully

over the medium term that is a pretty

compelling story for having earnings

growth that's decent over a long period

of time for these guys and again it's a

defensive industry but a lot of my

research recently has kind of shown that

defensives are pretty good over the long

term if you look at the

US to tobacco and Consumer Staples have

been the best performing sectors over

the past 100

years and you don't have to have

spectacular growth to make a spectacular

investment and um for instance you know

you've had a lot of research from the

respected Henry Bess and binder on you

know the stocks that have returned the

most over the last 100 years Altria the

Tobacco Company in the US tops the list

it's gone up 16% per anom over the past

I think it's 99 years um that doesn't

sound a lot but that adds up to a lot of

money I think it's $1 as turned into

over 6 million us something like that

over that period the magic of

compounding over that period so you

don't have to have spectacular growth

companies to make a story work for you

over the long term they're two pretty

defensive companies one larger one

smaller yeah I was think it's

interesting I used to own invocare I

actually used to own Sydney airport too

and then they were both taken private

which I wasn't Happ happy about invocare

was another or is another funeral

operator that used to be publicly traded

but yeah I always thought with funerals

like it's not exactly a time that a lot

of people are out there bargain hunting

um and arguing about prices it's

obviously hopefully not a reoccurring

thing you aren't burying too many people

so yeah it's an interesting interesting

business all right

so these companies obviously are

Standalone businesses and you talked

about some of the the characteristics

but how do you think an investor should

think about what is right for them so

whether they're looking at that entire

list of 16 or just in general looking at

companies in the share market H well we

like to say in the financial industry

that it depends on your risk

requirements right um it really depends

on your appetite for risk and your time

Horizon

this podcast has been about a very long

time Horizon much more than most people

would think um but real wealth is built

over the very long term if you look at

Buffett the amount of money that he

earned in the first 50 years of

investing was a trickle of what he's

earned since that's the power of

compounding now you may not like it

because you might be gone by the time it

compounds but that's the way it works

um the other thing is is your risk

appetite um you've got to want to get

into the share market first of all you

want to um be able to sit on stocks even

when there is a large downturn and that

is really important you've got to be

able to know

yourself um to be able to own these

stocks that is the key to owning stocks

longer term you've got got to be able to

sit through them through thick and thin

and how do you know whether you're going

to do that well if you're young you may

not know but if you're older how you

reacted to

2021 how you reacted to 2008 gives you a

pretty good clue about how you handle

risk and you want to own stocks that

you're you're sure that you'll be able

to hang on to for that longer term

otherwise there's not much Point yeah

and is this the approach that you take

you know in your in your personal

Investments you're looking for similar

or perhaps the same name similar

companies to these as a long-term

investor I do I probably I'm on the

conservative conservative end of the

spectrum so I will look for more

probably defensive companies with Moes

that can that can still grow um they're

the ones that I that I like over the

longer term I I have a longterm Horizon

I I I look at stocks at at 10 plus years

that's probably unusual in this case

it's 50 years so it's even even further

um and and that's the way I like it and

the way I like to think about it is if

you own an Orland international airport

or another you know the the list

includes the Lottery Corporation and

other other companies like that I like

to think that in 10 years these guys are

going to be I'm I'm very confident that

these guys are going to be earning more

money potentially a fair bit more money

and if that

happens and you get a downturn in the

interim you can kind of think well you

know these guys earnings are probably

going to be 30% higher in 3 4 5 years or

whatever it is and that's going to make

the stock look pretty cheap in in a

downturn so that probably gives you some

Solace that you can sit through it a bit

better and one last I guess we'll call

this a bonus question so you used to be

a portfolio manager so you used to run a

fund and you did this for a living how

different is the way that you approached

investing

professionally versus how you were doing

it even at the time and now how you do

it individually for your own

portfolio it's very

different you have

um investment management is very process

driven so you screen for stocks you

analyze them in a certain way you put

models together in a certain way you

discuss them with your team in a certain

way

um and you set up a portfolio in a

certain way and that will depend on the

investment philosophy of of the firm um

that process is um you don't have that

as an individual investor as much you

can pick and choose what you do uh in

terms of that and for instance you know

I I did a lot of modeling as a portfolio

manager and I think largely and that

it's most

useless uh I think

dcf's you know discounted cash flow

analysis is is is pretty useless you can

do a bit with it um but uh it's not

something that I would solely rely on so

you do a lot of detail work on that and

I've leared that what I trust is

something different and I kind of go

with with with shortcuts that I know

that helped me as an individual investor

and I just think that um as an investor

you can make your life a lot easier if

you buy decent stocks and hold them for

a long time you know that that that to

me is the simple way to do it yeah and I

don't know if You' agree I've always

thought about a discounted cash flow

like it's important that people

understand them like doesn't mean you

need to build one but you understand

like what this process is you know

you're projecting out these cash flows

you need some sort of discount rate but

yeah I don't I don't personally know any

individual investors that are sitting

out there and building the

DCF models like an analyst does and I

always tell people when you're reading

our analyst reports like the important

thing is like look at the assumptions

that they're making in this so whether

that's Revenue growth whether that's

margin like those are the things to

think about you don't have to build that

model no I I would urge that you you're

familiar with financials and that you

can you've got a reasonable assumption

as to what a company can grow Revenue by

what its margins might be in the future

and what its earnings and return on

Capital might be in the future you can

get a rough gauge of that you can do

some do some um bull Park analysis out

of that and I think that it's good to

think in what I've learned it's very

good to think in scenarios um and that

is you know what happens if it does

really well what happens if it does okay

what if if it doesn't do as good and put

some possibilities on that and try to

try to think about it in that way

because another thing that's bit

controversial is I actually don't think

that there's a fair value for a company

I I just don't I my portfolio management

experience as well as individual

investor experience just suggest that

saying that something is worth $112 like

cide analysts do and I used to be a cide

analyst as well I think is is junk um I

just think that you have scenarios

around prices and you've got to think

about what's reasonable and what's not

um but I think having an exact science

of price targets and what something may

be worth I just I just don't believe in

that yeah and I think that's what people

don't see that a lot of those scenario

analysis even when analyst is putting a

fair value on something a lot of that

happens to come up with the fair value

yes and like I understand why you can't

present stuff in ranges because that

just confuses people and they want to

know yeah this share is worth

$13 but no analyst would also sit there

and say okay well if it's worth $13 you

should buy it for

$12.50 like everyone says obviously that

margin of safety concept and that sort

of accounts for those various scenarios

yeah people love Precision but I don't

think it's that precise yeah yeah no

exactly so I think we'll leave it there

but that was a good discussion if you

keep doing this we're going to have to

keep having you back on so watch out but

everyone check out James's article there

is uh there is a link in the show notes

and thank you very much for joining us

thanks m

[Music]

this video has been prepared for clients

of morning star austral Asia proprietary

limited and or New Zealand wholesale

clients of Morning Star research limited

any general advice has been provided

without reference to your financial

objectives situation or needs you should

consider the advice in light of these

matters in any relevant product

disclosure statement before making any

decision to invest to obtain advice for

your own situation contact a financial

advisor