Hardboy
19 Sep 2017
Re: Fibonacci I think the word "Fundamental" looks a bit out of place in this message.
Johandesilva
18 Sep 2017
Re: Fibonacci ...because I have no idea if Fibonacci actually works, its new to me and to support the good posts here. A 20% drop feels unlikely from a fundamentals point of view particularity the P/E, but at the same time there is no rush.Something more like 1250p would be my first batch.
Our Haven
18 Sep 2017
Re: Fibonacci I see you are trying to replicate a black box. Why not just invest in the funds that use these tools? All the best.
Johandesilva
18 Sep 2017
Fibonacci The MACD reverse almost got me to buy in this week but my family pointed to the Fibonacci. A bounce is possible but according to the Fibonacci the absolute bottom is 1100p. Any more of a fall on the scale would require the WPP to take an almighty serious fundamental hit, so should this get to 1100p buy allot.
Bill1703
17 Sep 2017
Re: Gearing "... You've then got about £9bn of debt, less £2bn of valuable "stuff", leaving about £7bn..."Grey - nothing wrong with looking at a company as a businessman... and IMHO, the accountant's perspective can often be deeply misleading. The accountant will probably tell you where you have been - rarely will he be able to tell you where you're going...But I do question some of your figures. As of recent H1 figures, there was some £7.7bn of gross debt and equivalent, not sure where your £9bn comes from... and nearly £3bn of cash, so net debt of £4.8bn, rather than your £7bn.And as always, I would compare debt levels first and foremost to cash flow and cash conversion, which is excellent at WPP... some £1.8bn net operating CF, and around £1.5bn free CF (both last FY). So they could pay down debt very rapidly, if they wanted... just over 3x ND / FCF is relatively low, below the market (and FTSE 100 peer group) average."I like low borrowings and a high NTA... I loathe the idea of Goodwill..."Again, a common conservative view... but for me, looking for high NTA gives you a narrow field of investment view. Lots of businesses run very successfully on minimal NTA, including some of the biggest, brightest companies on the planet (we are very much in an asset-light world, these days). FWIW I find asset values next to useless when it comes to valuing stocks, whether tangible or other... though this of course varies from sector to sector. But there is so much latitude in both accounting policy and practice that values are just as likely to mislead as to reassure...So I am pretty agnostic when it comes to goodwill... I don't put much store in tangible asset values either! But I know what you mean... best advice? Ignore it, assume it is worthless... either way, it won't give much of a clue as to whether it's a dud business, or one that will keep on churning out the cash (and hence dividends, etc), year in, year out...Of course, it is current accounting rules which are to blame for the preponderance of Goodwill.. in the "old days", it was more commonly written off upfront (e.g. on acquisition), but nowadays you have to put it on the balance sheet and then amortise it over some largely random period, even when you know it will just sit there as an asset of questionable value. On balance, I prefer the "old school" approach... and it gave you a 'cleaner' P&L, one which better reflected the real cash generative capacity of the business.
Greyinvestor
17 Sep 2017
Goodwill I forgot to say that I loathe the idea of Goodwill. It's prone to all sorts of mischief......especially in the software industry.......
Greyinvestor
17 Sep 2017
Gearing Hi Bill, good to hear your views, which are always accurate.I'm afraid that I look at everything as a dumb businessman rather than an accountant. So my maths, which is probably quite wrong, looks at businesses as if I were running them.A quick glance at WPP tells me that current assets and current liabilities are more or less the same. You've then got about £9bn of debt, less £2bn of valuable 'stuff', leaving about £7bn.So I then work out my multiples based on what the company likely to make in a year, maybe £1.7bn. So from my point of view the business has borrowings of about 4* net profit.Sorry, not the way a professional thinks. Being a deeply conservative bloke, I like low borrowings and a high NTA.Having said all of the above, I've still made a chunky purchase. Why? Because I like the P/E.My only reservation is that way that Buffet and his mates are carving into FMCG companies and their advertising campaigns. But I think that this will be offset by developing markets.A weak Buy for me, but a strong Hold. Good value in today's highly valued markets.Despite being conservative I made a chunky purchase of RDW this week. Good value and a good balance sheet. That's what I like......
Bill1703
17 Sep 2017
Re: The future "... as a result has become highly geared.... the book value is grossly inflated by goodwill.."Far from highly geared IMHO, Grey... net debt / EBItDa running below 1.9x, only slightly above the market average. And interest cover (EBIT) is up at 12x (last FY) - actually above the market average, and perfectly comfortable for me.The company's target leverage range of 1.5-2.0x is pretty sensible, I would say, if anything on the prudent side. The free cash flow generation remains very strong, and always has been.And I wouldn't worry too much about book value with this one ... there are no real assets of any residual worth, at all! These are all people and relationship businesses... your brand "value" only exists as long as you have the former in place. When one or other of them go (and when they do, they tend to go together), you are left with nothing - as Bell Pottinger demonstrates vividly!So slightly surprised you have bought in here, Grey? You seem to be setting yourself up for disappointment... I see no likely prospect of them "rebuilding" the balance sheet, albeit they may cut back on buy-backs as long as leverage is towards their upper limit. And if book value is your thing... this one ain't, as far as I can see?
Uncle Doug
16 Sep 2017
Re: First purchase Was thinking about maybe getting a few shares. Had a quick butchers at the "What We Do" section of the WPP website - a strong candidate for Pseuds Corner. That and the last 3 years SP record was enough to put me off. Then I thought .... it's only money - so I had a cheeky punt. I'm in.
Greyinvestor
16 Sep 2017
The future I've bought into WPP, but in my view the company has now entered the period when it needs to retain earnings and rebuild the balance sheet. It has run up a load of debt on acquisitions, and as a result has become highly geared. This exposes it to a fair bit of risk. I think that the de-rating is justified. The business was overvalued before. The book value is grossly inflated by goodwill. A Weak Buy/Hold for me.
Hardboy
15 Sep 2017
Re: Interestin' piece in the FT ... LK "that is of small consolation when one loses a lot in minutes "It seems markets were waiting for your purchase before they decided it was time for a correction. Maybe it's about time Kim Jong Il tried to improve his image in the West with an advertising campaign.
Greyinvestor
15 Sep 2017
First purchase Chunky first purchase for me today @ £13.63.......
gamesinvestor
15 Sep 2017
Re: Interestin' piece in the FT ... ""you pay more for quality""LK -- so you are at 9 out of your top 10 then7 + RB + WPPI must admit to have added close to 1% of my wad in RB at 67XX -- but I can't get my heed around WPP.I'm sooo glad I dumped AZN and GSK, GKN and BATS a while back at what look like rather generous prices as of today.Games
LK Hyman
15 Sep 2017
Re: Interestin' piece in the FT ... Hardboy,"you pay more for quality"How true, how very true, m8. Though that is of small consolation when one loses a lot in minutes for reasons which were as plain on the nose of my face immediately before I bought!I wonder if they give shareholder discounts?LKH on the flybridge
Hardboy
14 Sep 2017
Re: Interestin' piece in the FT ... Welcome aboard LK, I hope it will be 2 successful investments you made today - in the long run. I was always a big fan of RB - in fact I've owned Durex via 3 different plcs now - but in recent years whenever I've looked at it, it has seemed a bit over priced for relatively low growth, but you pay more for quality. Good look.
