At Farnam we are constantly looking for businesses that display the following characteristics: great fundamentals (high ROE, solid growth trajectory, low debt levels etc.), a shareholder friendly management team and a purchase price that gives our assumptions considerable margin for error. Pandora is one such opportunity that we believe displays these characteristics.
A few weeks ago Shine Corporate – Australia’s second listed law firm – entered voluntary suspension from trading on the ASX pending the outcome of a review of their work in progress (WIP) recoverability.
The outcome of this trading halt was a $17.5m in WIP provision and lower than expected fee to file ratio to the tune of a further $10.5m. This effectively slashed the previous guidance by over 50% to about 26% causing the share price to drop 73.5% to $0.53.
“If you don’t make mistakes, you can’t make decisions.” – Warren Buffett
In the last 12 months we have seen some spectacular falls from grace in the ASX-listed education sector.
Vocation Limited (VET) reached their peak of $3.30 in September 2014 and before entering voluntary administration in December 2015 you could buy as many shares as you like for just 12 cents. They had been listed on the ASX for just two years.
New Zealand-based Intueri Education (IQE) listed on the ASX in May 2014 at $2.36 has seen a steady decline to under 50 cents. It was so low that when they announced
When you are making a decision about buying a business there is no doubt you would want to know everything there is to know about the business to be able to make an informed decision. The same should be true of investing because, after all, investing is just buying a part of a real business.
But where do you begin? Sometimes the amount of information can be overwhelming if not collected and analysed intelligently.
At Farnam, part of our core investment decision making process is a checklist so we can ask the same questions of every company we analyse. No business will ever pass every checklist item, but after completing it, we have a very good idea of whether or not it is worthy of our investment.