Stagecoach Share Discussion Threads

[mazarin] 10/9/2009 09:06

Thanks Bootie - the chart indeed does tend to confirm my instinct that currently SGC is in a rising trend, but what I prefer to hear and see are the real-time factors which drive the fundamentals forward. Souter and his team have a way of pulling 'something out of the bag' every now again and its that hopefully which I suspect is behind the current upward trend - long may it continue..!

[junior21] 10/9/2009 08:00

cheers bootie, first stop 175p

[bootie64] 09/9/2009 23:05

Link to chart kindly produced by Fingers on his £1 thread
Is the trend our friend - I belive so

[jtcod] 08/9/2009 18:27

I think it's just people waking up to simple undervaluation Maz. The NEX situation may have prompted analysts and fund managers to re-visit SGC and look at the potential benefits for a deal. Many have probably come away thinking the deal would be good but at this price it's good value anyway.

What drew me to the company, was that when I compared them to their competitors it was pretty clear to me that they were the only company in the sector with both the financial strength and size to lead consolidation in the industry. When you look at it that way, SGC's management were/are in a powerful situation. They have options as to the direction they take. They were also selling for just 3.5x their 5yr average operating cash flow. For a business with licensed monopolies in a time of recession, that seems crazy to me.

Mr Market made a mistake imo. He discounted the stock too far based upon a short term event: A dispute over contract interpretation regarding compensation at SWT. All other divisions were/are still doing very well. NEX just shone a light on SGC and the fundamentals did the rest imo.

[armistead34] 08/9/2009 18:07

Well,that's 1.50 resistance gone. Wait and see what the support level is.

[mazarin] 08/9/2009 18:00

Apart from the rather over-exaggerated dip following Ex-div, this has picked up and recently more than resumed its rising trend, established since mid June. So apart from the Dept of Transport 'nods' to SGC received ahead of Nat Express sell-off. Does anyone have views or ideas as to what else is driving this North.

Not that I'm complaining, of course, I'm just glad to be on-board and trying to get an idea where we're going, following another good day.

[jtcod] 07/9/2009 23:53

Current 'Interest rate/bond rate of return' in effect makes 8.5 seem cheap in fact.

Low interest rates make traditional value assessments seem cheap because of the low returns on offer in other asset classes. Interest rates at lowest point for 300yrs. At the very time valuations on offer are cheaper than average, they should be higher than average.

We have all been able to buy good companies with pretty reliable cash flow, long term growth potential and good market positions at well below 7x for some time now. All the better imo.

[this_is_me] 07/9/2009 23:19

Do you think it makes a difference that in present circumstances a P/E of 8.5 is seen as relatively expensive.

[jtcod] 07/9/2009 20:53

I agree with you, 'valuation' is not an exact science. However, that is not a reason not to persevere in using it as the barometer by which buy/sell decisions are made. Without it we have nothing else of any substance by which to guide us in these decisions. I don't mean to be rude but you seem to be making buy/sell decisions more upon short terms fluctuations in price, which is far less exact a barometer than intrinsic value.

One piece of information that has proved the 'anchor' for me in relation to valuation is something Ben Graham said. He said that 'a company with level earnings (as in ex-growth) is still worth 8.5x earnings'. Therefore a company growing at say 5 or 10% would be worth more based upon the superior compounded cashflow returns.

Obviously many low value companies cannot even reliably 'maintain' existing earnings and therefore those companies (unless the current year is a blip) would not qualify for investment anyway. I throw out many different types of company purely because their earnings just cannot be relied upon and never will be. They are impossible to value unless they are an 'asset play'. If I can build and maintain a portfolio of stocks that can reliably return positive growing cashflow based upon the nature of their business and market position and if those stocks can be bought at or below a PE of say 7, then making a profit becomes much easier. The selling decision isn't easy but the majority of stocks should at least over time give me an easy decision to take a profit.

Without 'assessed fair value' (however in-exact) at the points of buy and sell, an investor is going to find it very hard indeed to make meaningful returns over time imo.

[this_is_me] 07/9/2009 11:53

One of the problems is that 'intrensic value (sic)' or 'intensic value(sic)' is as fixed as JTCod's spelling/typing of the same and is a judgement call not a matter of maths. If it was possible to just calculate intrinsic value without using judgement we would not make nearly as much money in the stockmarket. It is only our superior judgement and courage that give us the edge over the so called professionals.

My guides in selling is 'Only sell when the share price is going down' The problem is that share prices do not go up in straight lines so it is hard to know when the peak has been reached. Where I have made large profits (eg. when I had more than 10 bagged PDG recently) I will sell half if I am suspicious that the share price may have peaked.

[jtcod] 05/9/2009 09:24

We all have our equivalents Joe. You are not alone. ;-)

[joe say] 05/9/2009 09:18

JT - I accept the merits of your argument - its simply I find it hard to put into practice on certain stocks.

Quite often despite all the evidence saying that you need to remain totally impartial, I find that I can not help "falling" for certain companies, whilst remaining neutral on others.

This leads me to hold onto the former grouping (for as you say further gains) whilst trading the other grouping more sucessfully (ie onto the next). This company for example is one where I have done precisely that twice now - ie bought in, made my gain, moved on.

My main challenge now is to be harder on those stocks that I get wrong, and I suspect I'm not alone here. Time and time again I hear/read that appropriate stop losses are the key, but for those stocks I fall for, I still can't bail out. Right now for example I'm holding HMS and LLOY !!!

[jtcod] 05/9/2009 09:00

Joe
If the company story is still strong then holding on for further gains even from a level of current intrensic value is a perfectly reasonable decision but if you take the profit in order to move to another stock at significant discount to current intrensic value, have you really lost out?

I don't claim any glory for this approach to investing. This enlightenment was published by Benjamin Graham in the early 1930's (Book: Security Analysis. Follow up book: Intelligent Investor) based upon research and testing of market data going back to 1875. He continued to test and teach his theory until 1976 when he died. His record throughout this time was more than 20% compound. i.e. The portfolio doubled every 4 years or less. Do that for 20,30,40 yrs and you make a lot of money. 'Margin of safety investment is the only strategy I know of that has stood the test of time and works from £1 to £1bn. In other words it's scalable too.

[joe say] 05/9/2009 08:43

Interesting discussion on timing sales and one I struggle with too.

I hear what JT Cod says but never really applied that as I believe that quite often stocks that rise to their deemed intrinsic value tend to overshoot this mark (as others join the bus). Thus, I've always tended to stay onto the next stop.

However I do acknowledge that the trouble sometimes is the driver takes the wrong route !

I'll give JT's theory a go and see if it works (and attempt to quash those feelings no doubt we all get when we see the share price carrying on north, post exit).

[jtcod] 05/9/2009 08:28

I don't lose any sleep over consideration's that are impossible to conquer. As Buffett says, the Hall of Fame for market timers is still empty.

It's nice to dream of perfect timing and some times with luck it happens but it's a waste of time chasing those kind of rainbows.

Imo get the research right, buy significantly below intrinsic value, wait, sell at or near intrinsic value, find the next stock.

If it's done properly the winners outnumber the losers and the portfolio rises over time. That's a more achievable aim.

[this_is_me] 04/9/2009 23:38

It is often said that the only lesson from history is that people do not learn fron history. It does good to look back at times to learn from what went right in the past and what didn't. There are plenty of better investors that me. I am just glad to have made money and to learn from others. I find knowing when to sell is an even more difficult skill than when to buy.

[jtcod] 04/9/2009 18:56

Nice timing and commendable patience wellsi.

[wellsi] 04/9/2009 18:45

If we are being nostalgic, in at 18p, out at 282, back in during Jan at 115p
Although a much more modest holding than JTCod. I would love these to reach £3 but even £2 which looks possible in the short to medium term would suit me.

[jtcod] 04/9/2009 14:54

Good luck with your timing on this one then this_is_me.

I bought 1.296m shares from 18p down to 12.5p (average 15.4p) back in Oct 2002. Sold @ 80.5p in Oct 2003. Wish I had held on till the peak also but I guess thats being greedy. ;-)

[this_is_me] 04/9/2009 14:24

Cod I hadn't thought of the USA takeover quite in that light. I bought SGC when it floated and held them for a number of years until they peaked, making a lot of money. I missed the last surge in price so I was considering whether, following the drop and consolidation it was a good time to buy back in. I think that I will wait until the dust settles before I think of investing the porfits from selling NEX yesterday here.

[mazarin] 04/9/2009 10:43

Lifted for info here from Nat Express thread by abc...

"DfT assurances key for Stagecoach
By Robert Wright, Transport Correspondent

September 4 2009 03:00 | Last updated: September 4 2009 03:00

"............The words were bland but they represented a coup for Stagecoach. The fourth and fifth paragraphs of yesterday's statement from the bus and rail operator that wants to take over National Express's UK rail and local bus businesses contained two commitments from the Department for Transport.

The first said the DfT would press ahead with its planned takeover of National Express's loss-making East Coast rail franchise if the takeover went ahead. The second said that it would not enforce its right to terminate other franchises held by National Express or Stagecoach in retaliation for its early surrender of the eight-year East Coast contract.

Without these undertakings, Stagecoach had faced the risk that, if it took over NatEx's rail arm, it might be forced to pay the DfT most of the unaffordable £1.4bn NatEx had promised to pay until 2015 to run the franchise. It had also faced the equally unpalatable risk that, if it sought to abandon the contract as NatEx planned to do, the DfT could try to terminate not only NatEx's East Anglia and c2c franchises but Stagecoach's South West Trains and East Midlands contracts. Earlier this week, the government insisted it could give no advance commitments about its stance on such issues......................."



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[jtcod] 04/9/2009 09:10

This is me
If you check out the US takeover, you will learn two things:

1) It was a mistake from the start made by an exec who didn't understand the difference between a transport company and a travel company. (chalk and cheese)
2) It wasn't the brainchild of Mr S. He just had to come back and clear up the mess, which he did superbly.

A travel company has the worst of all investment characteristics. Zero pricing power, zero customer loyalty and fickle volumes.

A transport company has the best of investment characteristics. 100% pricing power, Licensed monopolies, consistent volumes.

Your questions will be answered when the company can answer them.

[leadersoffice] 04/9/2009 09:10

I agree Essential. This gives SGC an excellent chance to accelerate its grip on the UK Bus & Train Market which makes us a very serious player, assuming it was to be given the green light. For the last few years experts have been talking about consolidation in this sector. Little did we realise NEX would run into trouble. There loss is SGC gain.
Hardly worth shorting in any case. This is a med long term hold imho

[essentialinvestor] 04/9/2009 09:01

Your comparing apples with pears IMO.
Its highly likely to present a fantastic opportunity for further growth.

I agree that short term it creates some uncertainity re funding,
but the Market can sense the long term potential here.

[this_is_me] 04/9/2009 07:59

So how much have they agreed to pay, will the deal go through and how are they going to get the money are the key questions. Makes the shares a much greater risk.

The big takeover in the USA turned out to be a disaster that cost a lot to sort out with bits having to be closed etc.