Macquarie Airports (MAP) - Flying High

Macquarie Airports (MAP) reported excellent results today and is on target for a bumper year ahead. Just want to touch on a few key items that make this stock worth considering.

1. Sales of Rome and Birmingham airports and refinancing of Sydney and Brussels have generated substantial cash surpluses. The company is now positioned to take advantage of opportunities in 2008. Given the recent and most likely ongoing market turbulence, many discounted investment opportunities should come up.

2. Management has been effective meeting all targets recently and for the last few years. Always a good sign that they will deliver on what they say.

3. Asset backing attributable to investments per stapled security as at June 30, 2007, was $4.92 - The stock is currently trading at a discount to this at around $4.16.

4. Dividend Yield is great at over 5.8% and will most likely increase in the long term.

5. On a personal note - have you flown lately? Planes all over the world are packed. Airlines are spending on new planes (see Boeing's growth) and capacity is increasing. Airports will be direct beneficiaries of this.

Off course, while they are a number of good points to this stock, a terrorist attack or an American/Global recession could severely affect this stock. Then again this would affect every stock!

I currently own MAP and will buy some more on dips. I suggest you look into it further and I rate this stock a STRONG BUY for the long term investor.


Andy

Stock Selection - 5 things to look at

Here is another investing 101 post based on some news articles I read over the weekend. When reviewing a stock here are the 5 key things I think you should look at when starting to make the investment decision.

1. Quality of earnings and cash flows. This is the “Fundamental analysis”. Look at the historical performance and future forecasts. Based on the business conditions and market factors is this realistic? Also, a good track record normally indicates good future performance – all other factors being equal. This may go against conventional theory, but I have seen it too often too ignore.

2. Growth potential : First you need to understand where the company makes its money (revenue) – is it going to grow the revenue streams? Also, look at the costs – are these growing less than revenue. Operating margin is a good figure for this. Also, is it an industry where it can acquire other companies or be a target? Look at growth from both an international and domestic perspective.

3. Competitor Analysis – Look at the performance of the company’s competitors? You shouldn’t buy if the company is not in the top 2-3 of its industry. Also if the company is dominated by one much larger rival, then this is not a good sign.

4. Quality of company management. Hard for an outsider or non-analyst to determine this. The best thing is to read the company executive profiles on their web sites or annual reports to see their background and skill sets. Also, the best way to judge management effectiveness is to look at how they have grown the company. There are also figures like return on equity (ROE) that can be used as a proxy to judge management effectiveness.

5. Macro Factors – Look at the overall economy and other political factors (this one is important if investing in developing economies). If the overall economy is doing poorly it is unlikely the companies in it are going to do well. However, if the rest of the world is doing well and the company generates most of its revenue overseas then this may be not be such a key factor. The opposite of this logic also applies.

A stock that grades well across all the five points isn't necessarily a sure thing, but it's a very good start. Also there is probably a detailed analysis you can do under each point, but at least now you have the overall framework.

In future posts I will try and look at each one a bit more closely and provide some examples of stocks I review using the above starting criteria.


If you have any more factors to look at, disagree or want to elaborate on the above, feel free to comment.

Take care and good luck investing.

Andy

Woolies Reports..

Woolworths (WOW) reported it's full year earnings and as usual delivered a solid result. Details can be found at the link below, but in summary the company increased second-half profit 27 percent to A$598.4 million ($496 million) after winning grocery market share from Coles Group Ltd. and cutting costs through infrastructure upgrades. This was slightly ahead of analysts estimates.

So my perspective in plain English about the future prospects are :

1. Woolworths is currently and will continue to be a beneficiary of a weak Coles, It will take Westfarmers/Coles a long time to catch up and make the necessary investments to catch up.
2. Of late, the stock hasn't moved much after a long run-up, though it is still a great balanced stock with growth prospects (My prediction is $32 by year end). I expect market turbulence over the next few weeks and this is a good stock to weather that.
3. Is poised to leverage of the growing wealth of the average Australian and increase discretionary spending. It has coverage across a number of consumer sectors so should be able to handle weakness in one or more of the groups.
4. No matter what people still have to buy basic groceries!


Fundamentals of WOW are good and while it may look a bit pricey, I think it is a stock for the long term. Once the coles deal is sorted out, it will worth revisiting. I am planning to continue on holding my current position.


Andy.

http://www.bloomberg.com/apps/news?pid=20601081&sid=afC83VKrEp.Q&refer=australia

BHP - Worth buying?

Found a good article/video interview with BHP's 2 CEO's. Link is below.

Overall BHP I think is a solid long term buy (I don't directly own this stock, but through my superannuation I am sure one of my mutual funds do). I am going to look to buy for my personal stock portfolio if the stocks drops to the $31 range.

The biggest reason to buy is CHINDIA - The China and India factor. They should provide the markets for BHP to grow. BHP has shown improved cost management (and increased dividends) in the recent results. Management is stable and the CEO handover looks to have been well planned. Also with the recent drop in world markets, some companies could become takeover targets for BHP.

You should do your own homework before buying the stock, but this is one worth looking at and keeping for the long term.

http://www.abc.net.au/insidebusiness/content/2007/s2015311.htm

Andy.

The week ahead and a review of IAG vs QBE.

The US stock market finished up strongly at the end of the week, so expect a strong start to the Aussie Market. But should you buy or hold? Will the market last?

I have been in the Australian market for the last 5 years. I am not a professional investor nor work in the financial sectors. I base my information on what I read, doing my own homework and talking to fellow like minded investors. However, I hope to share my ideas with you in plain english and to hear your comments to increase my knowledge!

Most of my stories are based on personal experience so I can speak with some "real" experience. Take, IAG - Insurance Australia Group. I have owned this stock for about 3 years. Got in around $4 and participated in the their dividend re-investment plan. It had done okay for me, getting to 6.50 at one point. However of late, it has struggled. It hasn't reported any profit growth for the last 2 years! Yet I still persisted with it as it is a brand name and the share price was very stable. This was a mistake.

Why? Because it's competitor QBE, a Globe Life and Accident Insurance Company, has done everything right. Profit growth beating expectations and the share price has almost doubled in the last 3 years. However, I was sticker scared saying the QBE share price was nearly $20, while IAG was $5. Yet today QBE is a far better run company and I should have switched to it. Better to buy 100 Shares of QBE than 400 of IAG.

Anyway, IAG dropped 7% on Friday and I will see how it fares on Monday. Just waiting for the right time to make the switch.

Back to overall market...I think you should wait and watch. I am currently working in the US and I can tell that the feeling here is still cautious. The US summer holidays offically finish on Labor day (Oct 3)...and a rally is normally associated with that time of the year. I would take this opportunity to sell some stocks or potentially trade in and out. However if you are a longer term investor...keep up the dollar cost avergaing approach to invest regularly.

Good Aussie Investing Blogs

Hi all,

I am trying to find some good and ACTIVE aussie investment blogs. If you do of some, please let me know and reference/link to this site. The more we reference each other's site the better for all of us! I have seen this successfully done on a number of US blogs. As long as we show common courtesy and do not copy content, it is a win-win situation for everyone.

Andy

Here is one I found and left a comment for:

http://ausinvestor.typepad.com/growyouregg/

First Post

This site is about discussing investments and personal finance issues within the Australian market. This includes investing in shares to tips on saving money. While Australia will always be home for me, I do travel the world for work and am currently in the U.S.A. While there are a number of good web logs for investing in the US (like investorpoint.blogspot.com, to which I post), there are not that many for Australia.

So hopefully this site will provide some interesting ideas, useful resources and exchange of views. All opinions on this site are mine and should not be constituted as professional advice. So whatever you see and read, please do your own homework before investing!

Good luck!

Andy