Illusion of sporting keepsakes - ROGER MONTGOMERY · 2016-06-15 · Illusion of sporting keepsakes...
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WEALTH THE WEEKEND AUSTRALIAN, JUNE 11-12, 2016 theaustralian.com.au/wealth 35 V0 - AUSE01Z01MA Illusion of sporting keepsakes In 2012 a pair of Muhammad Ali’s fight-worn and signed boxing gloves was sold for $US1.1 million, which made it the eighth-most ex- pensive piece of sporting history in the world. The buyer, UFC co-owner Lor- enzo Fertitta, might be thinking the value of his investment has just skyrocketed. Sorry to disappoint, Mr Fertitta, but apparently it doesn’t work like that. Ask pretty much anyone about sporting memorabilia and they’ll gleefully tell you the same thing, “it’ll be worth big money when they die!” “I’ve been selling sports mem- orabilia for 25 years and I think that’s a fallacy,” Max Williamson of Melbourne-based auction house Mossgreen says, adding that he’s received calls from people this week asking if now is the time to sell their Ali memorabilia. It’s apparently one of a few ram- pant misconceptions and misun- derstandings about buying and selling sporting memorabilia. Waiting for the grim reaper be- fore selling a sporting hero’s gear might seem like a savvy, if insensi- tive, tactic, but according to the ex- perts it doesn’t work … Although you can understand the theory when misty-eyed fans pay tribute to a once-great but recently forgot- ten champion. Time to strike! It was clearly a contributing fac- tor when a private seller put Richie Benaud’s baggy green Test cap on the market just five months after the cricket legend died in April last year. The cap brought in $42,700, which kept the vendor happy and compares with a whopping $400,000 in 2012 for the baggy green of another late, great bats- man — Donald Bradman. Meanwhile the baggy Test cap worn by Brian Lara, one of the game’s alive-and-well champions, was sold in 2014 for a measly $3660. Here we have a key problem with trying to invest in sporting memorabilia: it’s a popularity con- test, which means valuations are rooted in emotion: “It’s not gener- ally considered an investment, it’s a hobby,” Williamson says. “When people go to a fund- raising event and they or their company pay $10,000 for a signed Olympic flag or something and later bring it into us … We’d offer it at $500. Most people who buy those things know it’s a donation, but some don’t. Some will pay that sort of money and think it’s really worth that.” That’ll unfortunately hit home for more than a few readers who have found themselves, usually after a wine or two, bidding for a signed football jumper or cricket bat at a fancy gala night and later stumbling home with it tucked proudly under their arm, usually mumbling something about it being worth a fortune one day. But here’s the biggest problem with “investing” in sporting mem- orabilia: the athletes have long and often controversial retirements. Anything to do with cyclist Lance Armstrong’s career is worth around 90 per cent less today than it was before his spectacular fall from grace, according to JustCol- lecting.com, while golfer Tiger Woods’s memorabilia has dropped about 45 per cent in value since 2009 as a result of his infidelity and subsequent oncourse form slump. Closer to home, 2012 Brownlow medallist Jobe Watson’s personal brand and, by extension, memor- abilia, has taken a hit as a result of the 2012 Essendon doping scandal. Watson and 11 of his AFL team- mates are serving a one-year sus- pension and the question of whether he will be stripped of his Brownlow hangs on a final appeal in a Swiss court. Matt Moore, owner of Ultimate Sporting Memorabilia, says inter- est in memorabilia of Essendon stars such as James Hird and Wat- son remains but the market will have shrunk significantly. “The Brownlow hasn’t been taken off him (Watson) yet and that’s still in limbo. If the AFL were to take it off him the memorabilia on the market may be affected. But you’re going to get the avid Essen- don fans that aren’t going to care,” Moore says. There’s the split. A mad Essen- don fan will still be interested in a signed Jobe Watson Brownlow replica, whereas an investor would stay well clear, of the medal or indeed anything else a sport’s play- ers might once have worn in the spotlight. Memorabilia is a popularity contest and should be seen as a hobby, not an investment CHRIS KOHLER HOW SCANDALS AFFECT SPORTING MEMORABILIA 0 -10 -20 -30 -40 -50 -60 -70 -80 -90 Tiger Woods Sport: Golf Scandal: Infidelity Sport: Athletics Scandal: Drugs Sport: Baseball Scandal: Drugs Sport: Cycling Scandal: Drugs Sport: NFL Scandal: Murder accusation OJ Simpson Marion Jones Mark McGwire Lance Armstrong Source: JustCollecting.com With the death of The Greatest, selling a signed pair of Muhammad Ali’s gloves might seem shrewd but experts disagree ‘Bond ladder’ a sound bet as numbers swirl As incipient as it may appear to many, now is the moment astute global investors begin to think ahead as to how and where they wish to trade and spread their investment allocations next year. For those who did not make pre-emptive portfolio adjustments in February for the events about to unfold in Britain with the upcoming June 23 Brexit vote, scrambling to reposition at this point is indeed far too late. After all, market cycles don’t die because of old age, they die because of macro imbalances or systemic geopolitical shocks — as would a Brexit “Leave” decision possibly trigger. All being considered, after foreign exchange — the trading of any two currency pairings — equities are the second most unpredictable asset class to predicate with precision, at least when forecasting two quarters out. But, for Australian ultra- high-net-worth global investors, the more important portfolio consideration to tactically rebalance today is found within fixed income sub-allocations. As capital preservation remains almost universally the number one priority for Australian UHNWs — with numerous holdings of $500 million in fixed income instruments — what is thought to be the best way to approach US, eurozone, emerging market and Australian domestic fixed income becomes a hot topic of conversation with their advisers around this time of year. And beyond a linear prediction about the trajectory of US or domestic Australian interest rate policies, far more is reviewed and considered when balancing fixed income portfolios larger than “seven figures”. Remembering that almost all global fixed income is benchmarked against US interest rate policy, it is important to know that the following is currently being discussed within sophisticated investor circles: • US interest rate duration exposure, typically, one, three, five or 10 years, is at an highest high. • This is due to a rapid expansion in the amount of debt outstanding post-GFC combined with a significant extension of maturities for US Treasuries and corporate bond debt, combined with a reduction in bond coupons. • It is estimated that if a 1 per cent upward shock to interest rates surprised markets, that would translate into over $US1 trillion in capital losses to bond holders. • If this did happen, this loss estimate would be large relative to the $US600bn in credit losses realised to date from non-agency mortgage-backed securities since 2006 and over twice the inflation-adjusted losses experienced in the tumultuous 1994 bond market sell-off. So the logical question remains, approaching such tumultuous and volatile months ahead and then going further to think forward towards next year, why would UHNW, or any Australian investment community for that matter, continue to allocate so significantly towards fixed income markets and do so in effective ways? The answer may be found in the fact that the hunt for income has been intensifying, globally, as the pool of international government bonds yielding below zero has reached a record high this month, driven in some large part by negative interest rate policies in Japan and Europe. Global investors have been forced to pile into long-term debt in order to receive positive incomes while remaining mindful of a broader volatile conditions. In response to these concerns, one strategic approach being considered by many heading towards 2017 is referred to as a “Bond Ladder”. Laddering refers to a portfolio of bonds whose maturities are spread out over a certain period of time, such that a portion of the portfolio will mature each year. The ladder structure remains in place over time by reinvesting proceeds from maturing bonds into new bonds with maturities at the longer end of the specified range, which preserves the average duration and income stream of the portfolio. Ladders can be implemented as a pure “buy and hold” but in practical terms, continue to require constant adviser supervision and should, in reality, only be implemented by those seeking fixed income consistency over the medium to longer term — not simply as a kneejerk response to the current suboptimal conditions. However, even with the predictable cash flows, semi- annual coupon payments and transparent maturity schedules that laddering provides, global investors must remain vigilant to surprise hikes by US Federal Reserve chair Janet Yellen or indeed the inverse with unexpected cuts to Australia rates by our Reserve Bank. One thing has become clear, though — during this period of unconventional global monetary policies, “buy and hold” may be one thing, but “set and forgetting” is absolutely not an option in this post-GFC epoch. The good news for the Australian economy is that the national income shock that has plagued the nominal growth data is now tapering as commodity prices appear to have stabilised, and with this our RBA may well remain wedded to interest rates closer to current levels. The savviest global investors are not only planning ahead for 2017, they are factoring in scenarios that will unfold closer to 2027 and one of the most practical ways to implement these views is to construct and commit to a bond ladder today. Larkin Group is an ultra high net worth wealth team focusing on high yielding global investments. stirling.larkin@larkingroup. com.au STIRLING LARKIN GLOBAL INVESTOR Quality reading: latest crop of IPOs call for a sceptical eye Is it just me, or is there a discern- ible lack of quality in the compan- ies seeking to come to market with an initial public offering? In the past, when we have seen this — along with little value in evidence among incumbent listed quality companies — we have ob- served it is generally not a great time to be loading up on equities. There has been enormous in- terest this week in the pending IPO of music streaming service Guvera. The negative commen- tary around this float has been so intense it has prompted the ASX to take the unusual step of extend- ing its review of the offer, while the Australian Shareholders Associ- ation has put out a de facto warning note. But there are many more IPOs deserving of a sceptical eye. One reported forthcoming float is Booktopia. Presumably, like many companies before it, Booktopia — founded by “un- assuming, middle-aged dads” Simon Nash and Steve Traurig — will be described along the lines of a leading Australian retailer of books and e-books. Putting aside the question of whether a leading online book retailer can be Australian-based, it is worth considering the present economics of online book retail- ing, the competitive landscape in which this business resides, and its prospects. If the company has been loss-making recently it could possibly be due to reinvestment in the business. The problem is that when playing a competitive game, it is not relevant whether your reinvestment is large relative to the size of your business. The investment required to be competitive has to be appropriate relative to the size of your rivals. And when they include Amazon, Apple’s iTunes, BBC Shop, the Amazon-owned The Book De- pository and Google you need very deep pockets indeed. According to the Smart Com- pany Awards website, Booktopia generated revenue of $40 million in 2014 with 98 staff. In 2015, rev- enue grew nearly 30 per cent to $51.9m with 103 staff. If growth continues at that pace, revenue will be $70m in 2016. So if the rumours of a $150m float are correct, the company will list on roughly two times revenue. Predictably the promoters of the IPO will address the iTune, Amazon threat by pointing to the strong “growth” of revenue. But shareholders cannot take revenue to the grocery store. As an old friend and restaurant owner once told me: “Revenue is vanity, profit is sanity.” Investors should also be cautious if an acquisition has been made recently. Pre-float acquisitions are a warning sign to me that the busi- ness was unable to organically to be the dominant player in the industry, or alternatively to the scale that would permit an exit through an IPO. If an acquisition has occurred, be sure to adjust the numbers to exclude the revenue and profit of the acquisition. And be cautious if debt was used to fund the acquisition be- cause if funds raised through the IPO are being used to pay down that debt, you are effectively pay- ing for the acquisition as well as any selldown by the owners, who otherwise may not have built the business to a scale in order to exit. One has to wonder if the founders and their advisers considered or explored a trade sale. If they did but have chosen the IPO route to selling, it suggests that either trade buyers weren’t interested in the business or the price — or both. Bookselling is a tough gig. In 2011, Australia’s largest book retailer, REDgroup, went into vol- untary administration with repor- ted debts of $170m. By midyear, 2000 staff had lost their jobs as 114 Angus & Robertson and 26 Bor- ders stores were shut down — and don’t forget these two chains rep- resented more than 20 per cent of the nation’s retail book sales. That year, Australian Publishers As- sociation chief executive Maree McCaskill reportedly warned “the book industry is in the midst of a prolonged, retail slump”. Another prediction I will make is that analysts and promoters will put a rational-sounding “valuation” on the business by looking at the average multiple of much larger online operators such as Amazon and TradeMe, or even REA Group or Carsales. They will then discount the multiple of these “winners” back somewhat because of size, lack of profit or short operating history to arrive at a multiple that seems rational and may allow investors to believe they’re getting a discount. In truth, if you don’t believe a business has a future — it will be interesting to see if Booktopia’s founders are selling down at all — there is only one rational valu- ation: it is the same valuation you should attribute to any company not making a profit. Roger Montgomery is founder and chief investment officer of the Montgomery Fund. www.montinvest.com ROGER MONTGOMERY The RBA may well remain wedded to interest rates closer to current levels ‘Most people who buy those things know it’s a donation, but some don’t. Some think it’s really worth that’ MAX WILLIAMSON MOSSGREEN AUCTIONS Shareholders cannot take revenue to the grocery store ‘Buy and hold’ may be one thing, but ‘set and forget’ is absolutely not an option in this post-GFC epoch. STIRLING LARKING DONATE TODAY ceosleepout.org.au/TheAustralian proudly supported by 23 JUNE 2016 The Australian is proud to support Vinnies CEO Sleepout, so on June 18 and 19, ffty cents will be donated to our Vinnies’ CEO Sleepout drive for every copy of The Weekend Australian sold. HELP FIGHT HOMELESSNESS In partnership with
Transcript of Illusion of sporting keepsakes - ROGER MONTGOMERY · 2016-06-15 · Illusion of sporting keepsakes...
WEALTHTHE WEEKEND AUSTRALIAN, JUNE 11-12, 2016
theaustralian.com.au/wealth 35V0 - AUSE01Z01MA
Illusion of sporting keepsakes
In 2012 a pair of Muhammad Ali’sfight-worn and signed boxinggloves was sold for $US1.1 million,which made it the eighth-most ex-pensive piece of sporting history inthe world.
The buyer, UFC co-owner Lor-enzo Fertitta, might be thinkingthe value of his investment has justskyrocketed.
Sorry to disappoint, Mr Fertitta,but apparently it doesn’t work likethat.
Ask pretty much anyone aboutsporting memorabilia and they’llgleefully tell you the same thing,“it’ll be worth big money whenthey die!”
“I’ve been selling sports mem-orabilia for 25 years and I thinkthat’s a fallacy,” Max Williamsonof Melbourne-based auctionhouse Mossgreen says, adding thathe’s received calls from people thisweek asking if now is the time tosell their Ali memorabilia.
It’s apparently one of a few ram-pant misconceptions and misun-derstandings about buying andselling sporting memorabilia.
Waiting for the grim reaper be-fore selling a sporting hero’s gearmight seem like a savvy, if insensi-tive, tactic, but according to the ex-perts it doesn’t work … Althoughyou can understand the theorywhen misty-eyed fans pay tributeto a once-great but recently forgot-ten champion. Time to strike!
It was clearly a contributing fac-tor when a private seller put RichieBenaud’s baggy green Test cap onthe market just five months afterthe cricket legend died in April last
year. The cap brought in $42,700,which kept the vendor happy andcompares with a whopping$400,000 in 2012 for the baggygreen of another late, great bats-man — Donald Bradman.
Meanwhile the baggy Test capworn by Brian Lara, one of thegame’s alive-and-well champions,was sold in 2014 for a measly$3660.
Here we have a key problemwith trying to invest in sportingmemorabilia: it’s a popularity con-test, which means valuations arerooted in emotion: “It’s not gener-ally considered an investment, it’sa hobby,” Williamson says.
“When people go to a fund-raising event and they or theircompany pay $10,000 for a signedOlympic flag or something andlater bring it into us … We’d offer itat $500. Most people who buythose things know it’s a donation,but some don’t. Some will pay thatsort of money and think it’s reallyworth that.”
That’ll unfortunately hit homefor more than a few readers whohave found themselves, usuallyafter a wine or two, bidding for asigned football jumper or cricketbat at a fancy gala night and laterstumbling home with it tuckedproudly under their arm, usuallymumbling something about it
being worth a fortune one day.But here’s the biggest problem
with “investing” in sporting mem-orabilia: the athletes have long and
often controversial retirements.Anything to do with cyclist
Lance Armstrong’s career is wortharound 90 per cent less today than
it was before his spectacular fallfrom grace, according to JustCol-lecting.com, while golfer TigerWoods’s memorabilia has droppedabout 45 per cent in value since2009 as a result of his infidelity andsubsequent oncourse form slump.
Closer to home, 2012 Brownlowmedallist Jobe Watson’s personalbrand and, by extension, memor-abilia, has taken a hit as a result ofthe 2012 Essendon doping scandal.Watson and 11 of his AFL team-mates are serving a one-year sus-pension and the question ofwhether he will be stripped of hisBrownlow hangs on a final appealin a Swiss court.
Matt Moore, owner of UltimateSporting Memorabilia, says inter-
est in memorabilia of Essendonstars such as James Hird and Wat-son remains but the market willhave shrunk significantly.
“The Brownlow hasn’t beentaken off him (Watson) yet andthat’s still in limbo. If the AFL wereto take it off him the memorabiliaon the market may be affected. Butyou’re going to get the avid Essen-don fans that aren’t going to care,”Moore says.
There’s the split. A mad Essen-don fan will still be interested in asigned Jobe Watson Brownlowreplica, whereas an investor wouldstay well clear, of the medal orindeed anything else a sport’s play-ers might once have worn in thespotlight.
Memorabilia is a popularity contest and should be seen as a hobby, not an investment
CHRIS KOHLER
HOW SCANDALS AFFECT SPORTING MEMORABILIA0
-10
-20
-30
-40
-50
-60
-70
-80
-90Tiger
Woods
Sport: Golf
Scandal: Infidelity
Sport: Athletics
Scandal: Drugs
Sport: Baseball
Scandal: Drugs
Sport: Cycling
Scandal: Drugs
Sport: NFL
Scandal: Murder
accusation
OJSimpson
Marion Jones
MarkMcGwire
Lance Armstrong
Source: JustCollecting.com
With the death of The Greatest, selling a signed pair of Muhammad Ali’s gloves might seem shrewd but experts disagree
‘Bond ladder’ a sound bet as numbers swirl
As incipient as it may appear to many, now is the moment astute global investors begin to think ahead as to how and where they wish to trade and spread their investment allocations next year.
For those who did not makepre-emptive portfolio adjustments in February for the events about to unfold in Britain with the upcoming June 23 Brexit vote, scrambling to reposition at this point is indeed far too late.
After all, market cycles don’tdie because of old age, they die because of macro imbalances or systemic geopolitical shocks — as would a Brexit “Leave” decision possibly trigger.
All being considered, after foreign exchange — the trading of any two currency pairings — equities are the second most unpredictable asset class to predicate with precision, at least when forecasting two quarters out. But, for Australian ultra-high-net-worth global investors, the more important portfolio consideration to tactically rebalance today is found within fixed income sub-allocations.
As capital preservation remains almost universally the number one priority for Australian UHNWs — with numerous holdings of $500 million in fixed income instruments — what is thought to be the best way to approach US, eurozone, emerging market and Australian domestic fixed income becomes a hot topic of conversation with their advisers around this time of year.
And beyond a linear prediction about the trajectory of US or domestic Australian interest rate policies, far more is reviewed and considered when balancing fixed income portfolios larger than “seven figures”.
Remembering that almost allglobal fixed income is benchmarked against US interest rate policy, it is important to know that the following is currently being discussed within sophisticated investor circles:
• US interest rate duration exposure, typically, one, three, five or 10 years, is at an highest high.
• This is due to a rapid expansion in the amount of debt outstanding post-GFC combined with a significant extension of maturities for US Treasuries and corporate bond debt, combined with a reduction in bond coupons.
• It is estimated that if a 1 percent upward shock to interest rates surprised markets, that would translate into over $US1 trillion in capital losses to bond holders.
• If this did happen, this lossestimate would be large relative to the $US600bn in credit losses realised to date from non-agency mortgage-backed securities since 2006 and over twice the inflation-adjusted losses experienced in the tumultuous 1994 bond market sell-off.
So the logical question remains, approaching such tumultuous and volatile months
ahead and then going further to think forward towards next year, why would UHNW, or any Australian investment community for that matter, continue to allocate so significantly towards fixed income markets and do so in effective ways?
The answer may be found inthe fact that the hunt for income has been intensifying, globally, as the pool of international government bonds yielding below zero has reached a record high this month, driven in some large part by negative interest rate policies in Japan and Europe.
Global investors have been forced to pile into long-term debt in order to receive positive incomes while remaining mindful of a broader volatile conditions. In response to these concerns, one strategic approach being considered by many heading towards 2017 is referred to as a “Bond Ladder”.
Laddering refers to a portfolioof bonds whose maturities are spread out over a certain period of time, such that a portion of the portfolio will mature each year.
The ladder structure remains
in place over time by reinvesting proceeds from maturing bonds into new bonds with maturities atthe longer end of the specified range, which preserves the average duration and income stream of the portfolio.
Ladders can be implementedas a pure “buy and hold” but in practical terms, continue to require constant adviser supervision and should, in reality, only be implemented by those seeking fixed income consistency over the medium to longer term — not simply as a kneejerk response to the current suboptimal conditions.
However, even with the predictable cash flows, semi-annual coupon payments and transparent maturity schedules that laddering provides, global investors must remain vigilant to surprise hikes by US Federal Reserve chair Janet Yellen or indeed the inverse with unexpected cuts to Australia rates by our Reserve Bank.
One thing has become clear,though — during this period of unconventional global monetary policies, “buy and hold” may be one thing, but “set and forgetting” is absolutely not an option in this post-GFC epoch.
The good news for the Australian economy is that the national income shock that has plagued the nominal growth data is now tapering as commodity prices appear to have stabilised, and with this our RBA may well remain wedded to interest rates closer to current levels.
The savviest global investorsare not only planning ahead for 2017, they are factoring in scenarios that will unfold closer to 2027 and one of the most practical ways to implement these views is to construct and commit to a bond ladder today.
Larkin Group is an ultra high net worth wealth team focusing on high yielding global investments.
stirling.larkin@larkingroup. com.au
STIRLING LARKINGLOBAL INVESTOR
Quality reading: latest crop of IPOs call for a sceptical eye
Is it just me, or is there a discern-ible lack of quality in the compan-ies seeking to come to market withan initial public offering?
In the past, when we have seenthis — along with little value inevidence among incumbent listedquality companies — we have ob-served it is generally not a greattime to be loading up on equities.
There has been enormous in-terest this week in the pendingIPO of music streaming serviceGuvera. The negative commen-tary around this float has been sointense it has prompted the ASXto take the unusual step of extend-ing its review of the offer, while theAustralian Shareholders Associ-ation has put out a de factowarning note.
But there are many more IPOsdeserving of a sceptical eye.
One reported forthcoming
float is Booktopia. Presumably,like many companies before it,Booktopia — founded by “un-assuming, middle-aged dads”Simon Nash and Steve Traurig —will be described along the lines ofa leading Australian retailer ofbooks and e-books.
Putting aside the question ofwhether a leading online bookretailer can be Australian-based, itis worth considering the presenteconomics of online book retail-ing, the competitive landscape inwhich this business resides, andits prospects. If the company hasbeen loss-making recently it couldpossibly be due to reinvestment inthe business. The problem is thatwhen playing a competitive game,it is not relevant whether yourreinvestment is large relative tothe size of your business.
The investment required to becompetitive has to be appropriaterelative to the size of your rivals.And when they include Amazon,
Apple’s iTunes, BBC Shop, theAmazon-owned The Book De-pository and Google you needvery deep pockets indeed.
According to the Smart Com-pany Awards website, Booktopiagenerated revenue of $40 millionin 2014 with 98 staff. In 2015, rev-enue grew nearly 30 per cent to$51.9m with 103 staff.
If growth continues at thatpace, revenue will be $70m in2016. So if the rumours of a $150mfloat are correct, the company willlist on roughly two times revenue.
Predictably the promoters ofthe IPO will address the iTune,Amazon threat by pointing to thestrong “growth” of revenue.
But shareholders cannot takerevenue to the grocery store. As anold friend and restaurant owneronce told me: “Revenue is vanity,profit is sanity.” Investors shouldalso be cautious if an acquisitionhas been made recently.
Pre-float acquisitions are a
warning sign to me that the busi-ness was unable to organically tobe the dominant player in the
industry, or alternatively to thescale that would permit an exitthrough an IPO. If an acquisitionhas occurred, be sure to adjust thenumbers to exclude the revenueand profit of the acquisition.
And be cautious if debt wasused to fund the acquisition be-cause if funds raised through theIPO are being used to pay downthat debt, you are effectively pay-ing for the acquisition as well asany selldown by the owners, whootherwise may not have built thebusiness to a scale in order to exit.
One has to wonder if thefounders and their advisersconsidered or explored a tradesale. If they did but have chosenthe IPO route to selling, it suggeststhat either trade buyers weren’tinterested in the business or theprice — or both.
Bookselling is a tough gig. In 2011, Australia’s largest book
retailer, REDgroup, went into vol-untary administration with repor-ted debts of $170m. By midyear,2000 staff had lost their jobs as 114Angus & Robertson and 26 Bor-ders stores were shut down — anddon’t forget these two chains rep-resented more than 20 per cent ofthe nation’s retail book sales. Thatyear, Australian Publishers As-sociation chief executive MareeMcCaskill reportedly warned “thebook industry is in the midst of aprolonged, retail slump”.
Another prediction I will makeis that analysts and promoterswill put a rational-sounding
“valuation” on the business bylooking at the average multiple ofmuch larger online operators suchas Amazon and TradeMe, or evenREA Group or Carsales.
They will then discount themultiple of these “winners” backsomewhat because of size, lack ofprofit or short operating history toarrive at a multiple that seemsrational and may allow investorsto believe they’re getting adiscount.
In truth, if you don’t believe abusiness has a future — it will beinteresting to see if Booktopia’sfounders are selling down at all —there is only one rational valu-ation: it is the same valuation youshould attribute to any companynot making a profit.
Roger Montgomery is founder and chief investment officer of the Montgomery Fund.
www.montinvest.com
ROGER MONTGOMERY
The RBA may well remain wedded to interestrates closer to current levels
‘Most people who buy those things know it’s a donation, but somedon’t. Some think it’s really worth that’
MAX WILLIAMSON MOSSGREEN AUCTIONS
Shareholders cannot take revenue to the grocery store
‘Buy and hold’ may be one thing, but ‘set and forget’ is absolutely not an option in this post-GFC epoch.STIRLING LARKING
DONATE TODAY ceosleepout.org.au/TheAustralian
proudly supported by23 JUNE 2016
The Australian is proud to support Vinnies CEO Sleepout, so on June 18 and 19, fifty cents will be donated to our Vinnies’ CEO Sleepout drive for every copy of The Weekend Australian sold.
HELP FIGHT HOMELESSNESS
In partnership with
