Aristocrat VS Ainsworth...Worth a punt?

Been casting the old ruler over the two poker machine companies listed on the ASX200...Ainsworth vs Aristocrat. It seems market opinion is definitely with Aristocrat for some reason over the last 6 months. Not sure why.


Ainsworth has no debt, is easily meeting its cost of equity and has a higher dividend yield. Also has free cash flow accounted to equity. I have a price target of around $3.10 - $3.37 which is a premium to the current price of $2.81


Contrast that to our friends at Aristocrat who are not making positive cash flow to equity at the moment as it is busy paying off debt. Add a lowly return on equity and I'd tell you which company I would buy. I won't even put a price target on companies with no positive cash flow to equity.


Still..up to you guys as always. Not a recommendation to invest not invest in either of these stocks.

Sydney House Prices...in a bubble since 2013 and at least 13% overvalued

I've been looking for a house over the last 8 months and have just been amazed by the prices that even quite modest houses now command. So are we in bubble territory.


Well if you look at the differential between the Weighted Average House Price index across the 8 capital cities of Australia and compare it to the Sydney House price index and there is no doubt we are in bubble conditions

In fact, based on this, I calculate that Sydney house prices are around 13% over valued.

Invocare - Should you put your money in dead people?

Here I am, once again (Go American Idol child!), looking for share buys. Have been watching Invocare for a bit (IVC). Business is death :-) But good death...investments in funeral homes and cemeteries. Great business when you think the baby boomers are all heading for the exit room soon!


But the financials look good as well. A whopping 30% ROE vs a cost of equity of 14.7%. Plenty of free cash flow, with a sustainable growth ratio of almost 13.8% I wonder why more people aren't into this stock. Price targets are way beyond the current $13.00 share price.


Maybe death isn't such a glamorous business. But, being part of life, we will all go there at some stage. Why not make some money on the journey? But I could be wrong.


Note: Not a recommendation to buy/not buy shares in Invocare. Please consult your financial advisor.

Is Premier Investments (PMV) that premium??

Been having a look at some investment opportunities as per normal...Premier investments...what is going on?? Has been going through the roof on some pretty ordinary fundamentals.


6% ROE...ordinary. Very expensive cost of equity (at a staggering 23%)...dividend yield is ok (at around 5%) but still not worthy of such a valuation.


In fact using my FCFE valuation(with a growth rate of 11% based on guidance), I get a price target of around $3.50 to $3.89...way lower than the current share price of around $11.


So what is going on? All I can think of is no one is selling their shares for some reason. And that is probably true. 4 groups of shareholders hold around 68% of the stock. Average volumes of turnover are 0.17% of the outstanding shares, compared to, say Myer, at 0.87%


"Stay true to Lew" I guess :-)


Note: Not a recommendation to buy/not to buy shares in Premier Investments. If pain persists, see your financial advisor.

New Policy Option for Government - Negative gearing of property to only apply to new housing

While I know it is hardly a new idea, to restrict negative gearing to the first sale only of properties built in the last 3 years could be the silver bullet to solve the Housing crisis and also help the government's budget position.


Negative gearing takes up a large amount of government revenue in tax forgone. And unfortunately, a lot of investors are buying old stock for investment, rather than putting money into new development to increase the stock and encourage construction etc.


By limiting negative gearing deductions to only new stock, the investment money will be being put into green fields development, thus reducing demand on existing stock and should hopefully free up this housing for owner occupiers.


To get it across the line, you would have to grandfather it in I feel..i.e make it only apply to new sales. If I already have an investment property, I should still be able to negative gear it.


Good idea/bad idea?