Big boy;305370 wrote:Raj K;305341 wrote:Big boy;305339 wrote:Johan De Silva;305286 wrote:Big boy;305275 wrote:Remember to-days SP is a correct valuation by all the Global Investors.
Yes but lets test this. I've mentioned Action in the PE thread and news that the lower earning consumer is struggling and that companies are less able to pass inflation onto these consumers. This is new news out this weeks earnings of companies like McDonalds. . Based on this I don't think Tesco is worth a P/E of 12 and better off with M&S on a P/E of 14. You could argue the P/E reflects this already...doh!
Clearly we have seen net buying but once all the FMs have finished buying what happens to the inflated share price. It’s no good having the best Company in the World but at the wrong price. Also who buys when 99% of investors hold.
It’s doesn't matter about interest rates or fundamentals.
if you were interested in buying the local fish and chip business how would you work out what a good price is to pay for it. Somewhere at a very basic level you will need to look at how much cash the thing produces and is it likely to continue. Why is it ok to ignore fundamentals of a business because it is listed and has a daily price?
i get your IT thing using the NAV as the reference marker for value but how do you do that with an individual stock if you ignore the fundamentals entirely ? No book value, no free cash flow?
I simply let the Global investors work out the correct price for the fish and chip shop. They will identify the best but will overpay.
Remember FMs will go into great detail and understanding the F&C shops and then decide the correct SP.
We all appreciate that most FMs have difficulty in adding value compared with other FMs and not sure any PI will be able to add any value.
Suppose he would only buy if the seller of fish and chips is destressed seller in a poor market.
The world knows the way to get rich is to own assets and that's what anyone with means will do. The way to get richer is to buy assets lower. It seems odd here but private equity have done it for years.
More recently everyone is buying growing earnings i.e. "quality earnings".
Ideally we want both and that is near impossible unless we go down the cap size imho.
The world is not quite right really. Those with the means will thrive...but that's a separate topic and one that won't ever change.
Back to TESCO...it currently earns not much more than cash so needs rate cuts or growth. It is certainly no Action/3i Group. Most UK stocks like TESCO lack growth so the only way to outperform is be like BB or private equity or at index level buy when historically low.