Economic Rigor

Just been looking into the financial report behind Spotless. Found two interesting items that happened in late November 2013, before it was floated. We have this (on page 14) paid $301.5 million in a return of capital to shareholders on the 22nd of November 2013 (0.477 per share) We have this (on page 15) paid $148.5 million in dividends to shareholders on the 22nd of November 2013 (0.2359 per share) All this before float mind you. That's a cash out of $450 million to PE shareholders. (Private Equity Partners) Then you have the sale $1.60 offer price, 596,000,000 shares offered - Revenue of $953.6 million to PE shareholders (Private Equity Partners) Grand total to PE of $1.4 billion PEP spent $723 million in taking it private in 2012, assume 10% restructuring costs a year ($71.3*2 = $142.6 million) So Net Investment = $865.6 million over two years Net Return to PEP = $534.4 million ROE per year (compounding) : 27.2% a year. Not bad when yo...

Jb Hi Fi came up on my ROC tracker last night. Yep, the share price had lost over 10% of its value over a 12 day period, which I thought was a little over the top. So what if Dick Smith had a good year. Jb Hi-Fi is still kicking a lot of goals...Return on Equity over 40% and meeting its cost of Capital of 20%. I calculated a price target based on its free cash flow and i have a target of $19.55, which is above the current price of $16.75. (by 17% no less) The technical indicators look sound as well; the Bollinger Bands, Scholastic O and RSI look compelling. Could be a buy in my book (though as always, please seek your own financial advice before making such a decision)

Been looking through some logistics stocks and for mine, Qube logistics looks undervalued. Currently at $2.27 but my price target is a solid $3.39 based on a fairly low cost of equity of 7% (it has a 7.1% ROE in 2013). While it has a fairly high debt of around $700 million in total so it is looking at Debt to Equity ratio close to 0.7, it is not in the scray zone as yet. But we will see...the Financial full year report is out in August. Might be worth while to thow some dollars in to see what happens. Not: Not a recommendation to invest/not invest in Qube. If pain persists, please see your investment professional.

Its all about the variance. So far this season.... NRL - Variance between the win percentages of all 16 teams is 0.0148 AFL - Variance between the win percentages of all 18 team is 0.037 So by this rational, the NRL is at least twice as competitive as the AFL, with less teams. So much for the draft levelling things up. It's about the Salary Cap stupid.

Have started getting into Sports Statistics recently, probably due to my World Cup series of posts as well as my following of Nate Silvers fivethirtyeight.com statistics blog (see my link list if you would like to view) Anyway, being also an avid NRL fan, I was wondering if we could use statistics to work out the most improved/least improved teams of the 2014 NRL season so far. So I have calculated the last 3 year average win percentage of each team in the NRL an have used that as the baseline of what the win percentage should be in 2014. I have then compared that average with what the current win percentage is to get an idea of the percentage "improvement" or "detriment" of each team is. And the improvers are :- 1. Parramatta: 99.3% improvement 2. Penrith: 66.4% improvement 3. Gold Coast Titans : 25% improvement 4. Sydney Roosters : 18% improvement 5. New Zealand Warriors : 15% improvement 5. West Tigers : 15% improvement 7. Bulldogs : 8% improvement ...

Yep, its time for the all important Market Risk Premium for 30 June 2014. This is the risk premium that goes into all the valuations for stocks from the annual reports. Using the same methodology as always...we have the capital return for the market over the trading days of the year to be 11.13% Add the average dividend yield over that period of 4.51% and you have a total market return being 15.64% (a bit down from March) Average 10 year bond yield is now 3.63% and you have the Market risk premium of 12.01% (down from March). So, still high but on the decline. I wonder if this is the beginning of the long awaited correction. It would not surprise.

Based on my spreadsheets from yesterday, I was curious if Public education was growing. It is growing, up around 5% since 1999, but in a lot of states it is going backwards. Check this out