Buy at a discount.
1. Stock trading at a discount of 9.5% to Net Assets
2. Company is about to announce its first dividend
3. Current price weakness a buying opportunity
MFF's Investment Philosophy
1. Outstanding companies typically earn very high returns on invested capital.
2. The best medium to longer term investments are in companies that have sustained
competitive advantages which allow them to sustain returns on invested capital well
above their cost of capital
3. Competitive capitalism means such companies are rare.
4. They are periodically under priced: - Bill Miller "psychological impacts" such as
asymmetric risk aversion, investing with the crowd - investors seeking shorter term
returns - periodic company specific, industry or broader market downturns
5. Focus on "best" investments with initial aim "do not lose money" as basis of achieving
6. Focus on "Agency Risk" - contrast reinvestment of capital at high returns, returns of
surplus capital and value destroy empire building.
To date MFF have invested in the companies listed below.
MFF Investment Securities A$m market value ( as at 31 May 2007)
At present the company is trading at a share price of 0.93c, which is a 9.5% discount to the current asset backing of $1.02 per share. This provides the opportunity to buy this stock at a considerable discount. The company is also expecting to announce it's first dividend in the next couple of weeks and buying now will entitle you to this.
The share price has experienced some weakness recently, which can be attributed to some investors who bought MFF in the IPO for the MFG entitlement. Thus, we have seen concerted selling ex MFG entitlement. This selling will cease. We have also seen some investors waiting to see portfolio composition, others concerned about AUD appreciation.
As this selling slows and the dividend is announced I would expect to see the share price recover. The company currently has one third of the portfolio in cash, which means they have the ability to take advantage of the current market correction and of the strong Australian dollar.
This is a good long-term story with excellent exposure to the international market with a fund manager who takes a value approach in selecting the companies.
If you are interested in taking advantage of this opportunity, please contact your advisor on 07 4771 4577.