Medusa Share Discussion Threads

[cp42kx07] 24/12/2016 09:13

I have updated the MML figures in post 36868 to include a comparison to all 96 of the PM companies in tables 1 & 2 on chip’s gold thread:

symbol, Greenblatt Magic Formula score (value stocks)
MML.AX, 65% (1st/96)

symbol, Piotroski F-score (value stocks, good is 8+)
MML.AX, 8.78 (6th/96)

symbol, Slater score (small growth stocks)
MML.AX, 64% (8th/96)

symbol, Levermann score (value stocks)
MML.AX, 4.86 (2nd/96)

symbol, Beneish M-score (earnings manipulation test, good is less than -2.22)
MML.AX, -3.36 (20th/96)

symbol, US screener score (“growth at a reasonable price” stocks)
MML.AX, 82% (1st/96)

The only change (for MML) is a drop of one place in the M-score.

It looks as though most of the additional 30 companies have ended up near the bottom of the list, perhaps because the original list (table 2) contains larger producers and the additional companies are smaller explorers and hence unlikely to perform well in metrics rankings. Still it does seem rather surprising that they have done so badly.

Regardless, the results are very positive for MML.


CP

[cp42kx07] 22/12/2016 22:04

The following are the MML-relevant figures from some recent posts that I made on chip’s gold thread:

symbol, Greenblatt Magic Formula score (value stocks)
MML.AX, 65% (1st/66)

symbol, Piotroski F-score (value stocks, good is 8+)
MML.AX, 8.78 (6th/66)

symbol, Slater score (small growth stocks)
MML.AX, 64% (8th/66)

symbol, Levermann score (value stocks)
MML.AX, 4.86 (2nd/66)

symbol, Beneish M-score (earnings manipulation test, good is less than -2.22)
MML.AX, -3.36 (19th/66)

symbol, US screener score (“growth at a reasonable price” stocks)
MML.AX, 82% (1st/66)

Looking through these results it’s perhaps not so hard to understand why Ruffer have increased their stake.


CP

[stevea171] 22/12/2016 10:19

Ruffer (UK) announces it has bought another 2 million shares here. Stake goes from 9.6% to 10.6%.
This follows a 2.15 million increase announced in mid November, so overall 4.15 million shares added in the past few months.

I assume they have a direct line to the company and get frequent off the record briefings, as well as a visit in September by the new CEO and Board members in London, so in light of that are they averaging down?

[roguetreader] 21/12/2016 12:11

CP
Thanks, I spotted the post on Chip's thread and may well take a look at the book.
RT

[cp42kx07] 21/12/2016 11:50

roguetreader

FYI I have copied the original post to chip's gold thread and updated the information in a follow-up post to provide further interesting strategies from WWoWS.

I suspect that the only way to really get to grips with the information (if it seems of interest to you) would be to read the entire book! I found it fascinating.


CP

[nielsc] 20/12/2016 23:42

Atlantic,The DJI is sitting at an average P/E of 27. Regardless of the hope of a possible economic recover, which looks slim I think these valuations are too high. Not sure why anyone should show humility at pointing out that the stock market is looking toppy?Of course it may stay toppy for a while, but I reckon a correction has to come.Cheers,Niels

[atlantic57] 20/12/2016 15:07

nielsc

Those who voted to remain in the eu have been labelled remoaners.
All those who bet long on gold and miners ahead of the Trump election are currently
being crushed.

i don't know when and if it will turn but many of these pundits who were completely wrong seem reluctant to accept that they were wrong.

i don't know anything about zero hedge but i do know that the dow is currently rocketing up.Some humility from these characters would be helpful.

[stevea171] 19/12/2016 23:35

iltl. That's pretty much my position too. I hope a rising gold price next year or a gold price reset at $2000 or higher will rescue this company from its poor management.

Price rise continues tonight as order book turn around continues from yesterday:

48 buyers for 883,674 units 37 sellers for 387,739 units

Merry Xmas to all and here's to better times here in 2017.

[stevea171] 19/12/2016 10:35

Finally sellers here are drying up. Last night buyers outnumbered sellers by a good margin so the price moved up.

The selling here has been relentless for weeks with a huge imbalance on the order book so price has been falling continuously since the US election on 8/11 along with the fall in gold and in the absence of any company news of any significance.

Let's all hope that when this company does next update shareholders it is not more of 5 years' (?) worth of negative surprises .... though I'm not holding my breath.

[chipperfrd] 16/12/2016 20:31

CP,

Thank you for the very comprehensive response on the VC1 valuation method. I am waiting for the book - but have offered it on my family Xmas list - so I have to wait.

I am actually taking a break from BBs until the New Year at least, but I could hardly let your post go unanswered!

There was no interest on this BB to my first effort, so probably better to address any further posts on VC1 to my comparison BB: where the first iteration is already in the header.

Thank you again.
Chip

[roguetreader] 16/12/2016 17:32

CP

Thanks for the post I think I'm going to need to read it a number of times to get the full picture - lots of info!!!
cheers
RT

[cp42kx07] 16/12/2016 16:40

Hi chip

Congratulations on the VC analysis table (no mean feat as I well know!) which provides yet another intriguing perspective on the PM sector. I had intended to provide you with some input on this before now but I am still working my way through O'Shaughnessy’s WWoWS (4th edition) and whatever supplementary material that I can find. Apologies if what follows is too late to be of use and I must emphasise that these are only interim thoughts (hopefully final ones in a couple of weeks). I am sure that much of what follows will be familiar to you but it may be of interest to others.

Firstly some background. For perhaps 7 or 8 years I have been pursuing what could be called a “qualitative value investing” approach to the PM sector, mainly based on my views on QE. I would have to admit that this has not proved especially successful (don’t bet against the bank!) but I have also been unimpressed by the results achieved by experienced investor acquaintances using qualitative techniques across all sectors and exchanges. Likewise, by the the under-performance of active fund managers (when compared to the indices). “Passive investing” is sometimes proposed as the answer to this problem but once one accepts the concept of such a mechanistic approach it must surely make sense to try to improve on the underlying mechanism itself rather than be constrained to a single factor (market cap).

Next some general (non-PM specific) information on quantitative investing. What O’Shaughnessy (also Greenblatt, Piotroski et al.) has sought to achieve over the past 20 years is a quantitative analysis of the performance of stocks based on a range of individual and composite factors backtested with historical data (principally 1964 - 2009, some 1927 - 2009). A number of datasets are used but the main reference one is “All Stocks” which is defined as (US) stocks with a market cap greater than $200m (2008, inflation / deflation adjusted). Numerous statistical results are supplied for each backtested individual / composite factor but I shall only show geometric mean (GM), Sharpe ratio Rf = 5% (SR5) (higher is better), minimum annual expected return (minR) (arithmetic mean minus 2 std i.e. 95% confidence) and maximum annual expected return (maxR) (arithmetic mean plus 2 std i.e. 95% confidence) here.

The results are fascinating. This are just a small selection relating to “positive̶1; factors:

S&P: GM 9.46%, SR5 0.30, minR -19.46%, maxR 40.88% (1964 - 2009)
All Stocks - VC3 50: GM 18.64%, SR5 0.74, minR -16.10%, maxR 57.36% (1964 - 2009)
All Stocks - VC2 50: GM 18.61%, SR5 0.76, minR -15.13%, maxR 56.06% (1964 - 2009)
All Stocks - EQC 25: GM 17.92%, SR5 0.58, minR -23.50%, maxR 65.17% (1964 - 2009)
All Stocks - EBITDA / EV: GM 16.58%, SR5 0.65, minR -17.01%, maxR 53.84% (1964 - 2009)
All Stocks - Price / Earnings: GM 16.25%, SR5 0.61, minR -18.68%, maxR 55.14% (1964 - 2009)
All Stocks - Price Momentum 6m: GM 14.11%, SR5 0.37, minR -31.48%, maxR 66.68% (1927 - 2009)

All Stocks - VC3 50: composite (price / earnings (low); price / sales (low); ebitda / ev (high); price / cashflow (low); buyback yield (high)) top 50
All Stocks - VC2 50: composite as VC3 50 but substituting shareholder yield (high) for buyback yield (high)
All Stocks - EQC 25: composite (total accruals / total assets (low); % change net operating assets (low); total accruals / av assets (low); depreciation expense / capital expense (high)) top 25
All Stocks - EBITDA / EV: ebitda / ev (high) decile 1
All Stocks - Price / Earnings: price earnings (low) decile 1
All Stocks - Price Momentum 6m: % change price 6m (high) decile 1

I have not included the calculation method for composite factors but this is readily available elsewhere (or I can provide it on request).

Incidentally, an interesting corollary of O’Shaughnessy’s analysis is the emergence of a considerable number of “negative̶1; factors (ones that indicate you should avoid stocks):

accruals / price (high)
buyback yield (low)
cashflow / debt (low)
depreciation expense / capital expense (low)
ebitda / ev (low)
ev / cashflow (high)
ev / sales (high)
external financing (high)
price momentum 12 months (low)
price momentum 6 months (low)
price volatility (high)
price / book (high)
price / cashflow (high)
price / earnings (high)
price / free cashflow (high)
price / sales (high)
shareholder yield (low)
total accruals / av assets (high)
total accruals / total assets (high)
trading volume $ av 6 months (high)
% change cashflow (low)
% change debt (high)
% change net operating assets (high)
% change sales (high)
EQC (low)
FSC (low)
VC1 / VC2 / VC3 (low)

As an example, based on the average results over 46 years, $10,000 invested in the S&P for say 5 years would have increased to $15,714 whereas the same amount invested using VC3 50 would have increased to $23,505 (with considerably better Sharpe Rf = 5% and Sortino MAR = 10% ratios).

Clearly one also has to consider issues of portfolio complexity, trading / stamp duty costs etc but there is no doubt in my mind (caveat - so far!) that the information and supporting data presented by O’Shaughnessy are compelling. Furthermore, I have only reached p445 and I suspect that the best is yet to come (e.g. multifactor strategies).

After all this general information, how applicable is O’Shaughnessy’s analysis to the PM sector? A couple of points occur to me:

1. O’Shaughnessy generally analyses stocks with market caps greater than $200m (although a couple of his composite factors are based on stocks with market caps greater than $50m). This is not to say that the both the positive and negative factors that he highlights are inapplicable but just that they have not been backtested on smaller stocks. At some point in the near future I shall be subscribing to a professional quality stock screener and at that point I shall backtest the stocks in your table.

2. O’Shaughnessy does provide some thoughts on how his factors perform at sector level. For our purposes the most relevant sector is Materials (240 stocks, industries involved in discovering, developing or processing raw materials, i.e. mining, chemicals, steel, timber, paper etc) of which PMs comprise only a small part. Based on the best quintile the 5 best strategies for this sector are: VC3 (GM 16.48% SR5 0.53), VC2 (GM 16.48% SR5 0.53), EBITDA / EV (GM 16.01% SR5 0.50), VC1 (GM 15.72% SR5 0.49) & Shareholder Yield (GM 15.36% SR5 0.54) and the 5 worst ones: Return on Equity (GM 9.63% SR5 0.22), % change EPS (GM 10.37% SR5 0.24), % change price 12m (GM 10.92% SR5 0.26), Return on Assets (GM 11.14% SR5 0.29), Market Cap (GM 11.35% SR5 0.28). Given the nature of many of the companies that are in your table (lack of dividends / buybacks) the most relevant factors are probably restricted to VC1 and its individual components.

3. Whilst the positive factors may usefully highlight potential winners I suspect that the negative factors are likely to highlight even more losers in the small cap PM sub-sector and this is a task that will be made much easier with a stock screener.

Enough for now - I must get back to my “whatdunnit221; (WWoWS) but I shall report back (if you are interested) once I have managed to complete my research.


CP

[jimbowen30] 16/12/2016 14:10

Have posted this on a few threads. Avi Gilbert seems to have a pretty good track record. Although he thinks PMs could go lower over the next week or so he believes we are close to the low.

sentiment towards precious metals is now getting pretty negative now and every man and his dog is predicting gold sub $1000/Oz just like at the end of 2015. We all know what happened then. IMHO, we are getting very close to the capitulation phase. My gut feeling is gold could retest the $1045 low from earlier this year but that is likely to be it. Any sub $1000/Oz would be very brief. So the downside is 10%-15% max but upside is over 100% and more for the quality miners. As my time horizon is 3-5 years I'll just ride it out. My biggest fear is actually not having the funds to pick up bargains IF gold does get closer to $1000/Oz. The bigger picture is rising US debt and the interest on this debt is going to cause a lot of unintended consequences. It might be a few years before people lose confidence in the dollar, central banks and their crazy policies but it will happen.

[rrr] 16/12/2016 11:21

Thanks Niels. I was asking this the other day and would also be interested to hear more about how all this works and why miners aren't being more proactive in looking for better prices.

rrr

[nielsc] 16/12/2016 10:09

polaris,

Not sure it is quite as simple as that.

" the SGE's new price settles for 1-kilo gold bars meeting its own standard, set in consultation with the LBMA last July, requiring a fineness of not less than 99.99%."

So the miner will have to pay a refiner to get their gold into four nines gold.

I think miners generally just sell their dore bars to a refiner and that is it done. It could be that the refiners pay the COMEX price and then sell into the SGE and take the profit. You would expect refiners to start offering higher prices to get more gold so they can sell more at a profit.

Would be interested to hear a fuller explanation of how it works.

How the Comex is acquiring gold must be getting difficult. No doubt they have trapped miners with hedged positions to deliver their gold to the COMEX.

Cheers,
Niels

[polaris] 16/12/2016 08:19

Also, didn't expect to see the 40c level tested quite so soon after i finished closing out. If gold continues this downward trend (COMEX price) then we could see new multi-year lows here. The HY trading numbers in early Feb, which we know will be low due to the back-end FY loading, could lead to the final capitulation selling here.

I'll be sat on the sidelines with my accounts set-up (can't trade at the moment as moving back to the UK in a few days and must be back resident before i can reopen my trading accounts, due to tax issues where i live now...) I should be ready to go around the end of 2nd week in January.

regards all,

Paul

[polaris] 16/12/2016 08:15

Surely the gold miners will just switch to the SGE fix then? The only reason they used the COMEX price was that was the only game in town at the time. SGE is a physical platform and gold miners deal in physical no? ;-)

regards,

Paul

[nielsc] 15/12/2016 23:59

Gold and silver discount on the comex is around $50 an $2 now against the sge respectively. Highest yet. The bigger this gap grows the more it indicates the system is broken. Cheers,Niels

[nielsc] 15/12/2016 22:35

Jim,

They are dumping big style. End game is on. They have enough gold and don't want be holding worthless paper.



Cheers,
Niels

[jimbowen30] 15/12/2016 17:29

Well you can see why China aren't buying any for US treasuries and continue to accumulate physical bullion. Something like 35% of US treasures are owned by foreigners now.

[atlantic57] 15/12/2016 17:07

Cheers Jim
I suspect one of Trumps tactics will be to say to China you write off part of the
Debt we owe you,otherwise will hit you with trade tariffs of say 40%.

I have no idea what is going to happen under Trump but one thing is clear nor does anyone else.